UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 20 -F
(Mark One)
☐
OR
☑
For the fiscal year ended December 31, 2019
OR
☐
For the transition period from to
OR
☐
Date of event requiring this shell company report
Commission file number
Barclays Bank PLC
1 - 10257
BARCLAYS BANK PLC
ENGLAND
(Jurisdiction of Incorporation or Organization)
1 CHURCHILL PLACE, LONDON E14 5HP, ENGLAND
(Address of Principal Executive Offices)
GARTH WRIGHT, +44 (0)20 7116 3170, GARTH.WRIGHT@BARCLAYS.COM
1 CHURCHILL PLACE, LONDON E14 5HP, ENGLAND
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
As a wholly - owned subsidiary of Barclays PLC, which is a reporting company under the Securities Exchange Act of 1934, Barclays Bank PLC meets
the conditions set forth in General Instruction I(1)(a) and (b) of Form 10 - K, as applied to annual reports on Form 20 - F, and is therefore filing this
Form 20 - F with a reduced disclosure format.
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange
On Which Registered
2.650% Fixed Rate Senior Notes due 2021
BCS21E
New York Stock Exchange
Floating Rate Notes due 2021
BCS21D
New York Stock Exchange
5.140% Lower Tier 2 Notes due October 2020
BCS/20
New York Stock Exchange
iPath
®
SM
DJP
NYSE Arca
iPath
®
SM
JJA
NYSE Arca
iPath
®
SM
JJU
NYSE Arca
iPath
®
SM
NIB
NYSE Arca
iPath
®
SM
JO
NYSE Arca
iPath
®
SM
JJC
NYSE Arca
iPath
®
SM
BAL
NYSE Arca
iPath
®
SM
JJE
NYSE Arca
iPath
®
SM
JJG
NYSE Arca
iPath
®
SM
JJM
NYSE Arca
iPath
®
SM
LD
NYSE Arca
iPath
®
SM
COW
NYSE Arca
iPath
®
SM
JJN
NYSE Arca
iPath
®
SM
PGM
NYSE Arca
iPath
®
SM
JJP
NYSE Arca
iPath
®
SM
JJS
NYSE Arca
iPath
®
SM
SGG
NYSE Arca
iPath
®
SM
JJT
NYSE Arca
iPath
®
SM
GAZ
NYSE Arca
iPath
®
®
GSP
NYSE Arca
iPath
®
Series B S&P GSCI Crude Oil Return Index ETN
OIL
NYSE Arca
iPath
®
BCM
NYSE Arca
iPath
®
OLEM
NYSE Arca
iPath
®
GRN
NYSE Arca
iPath
®
GBUG
NYSE Arca
iPath
®
SBUG
NYSE Arca
Barclays ETN+ Shiller CAPE
TM
CAPE
NYSE Arca
Barclays ETN+ FI Enhanced Europe 50 ETN Series C
FFEU
NYSE Arca
Barclays ETN+ FI Enhanced Global High Yield ETN Series B
FIYY
NYSE Arca
Barclays ETN+ FI Enhanced Europe 50 ETN Series B
FLEU
NYSE Arca
iPath
®
TM
VXX
CBOE BZX Exchange
iPath
®
TM
VXZ
CBOE BZX Exchange
iPath
®
IMLP
CBOE BZX Exchange
iPath
®
XVZ
CBOE BZX Exchange
Barclays ETN+ Select MLP ETN
ATMP
CBOE BZX Exchange
Barclays ETN+ S&P VEQTOR™ ETN
VQT
CBOE BZX Exchange
Barclays Women in Leadership ETN
WIL
CBOE BZX Exchange
Barclays Return on Disability ETN
RODI
CBOE BZX Exchange
iPath
®
STPP
CBOE BZX Exchange
iPath
®
FLAT
CBOE BZX Exchange
iPath
®
DTUL
CBOE BZX Exchange
iPath
®
DTUS
CBOE BZX Exchange
iPath
®
DFVL
CBOE BZX Exchange
iPath
®
DFVS
CBOE BZX Exchange
iPath
®
DTYL
CBOE BZX Exchange
iPath
®
DTYS
CBOE BZX Exchange
iPath
®
DLBS
CBOE BZX Exchange
Barclays Inverse US Treasury Composite ETN
TAPR
CBOE BZX Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the
annual report.
£1 ordinary shares
2,342,558,515
£1 preference shares
1,000
€100 preference shares
31,856
$100 preference shares
58,133
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
☐
☑
If this report is an annual or transition rep ort, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act 1934.
Yes
☐
☑
Note – Checking the box above will not relieve any registrant required to file reports pursua nt to Section 13 or 15(d) of the Securities Exchange Act
of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Ac t of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes
☑
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files).
Yes
☑
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non - accelerated filer, or an emerging growth
company. See definition of “large accelerated filer”, “accelerated filer” and “emerging growth company” in Rule 12b - 2 of the Exchange Act:
Large Accelerated Filer
☐
Accelerated Filer
☐
Non - Accelerated Filer
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Emerging growth company
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If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has
elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to
Section 13(a) of the Exchange Act.
☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its
Accounting Standards Codification after April 5, 2012.
*Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP
☐
International Financial Reporting Standards as issued by the International Accounting Standards Board
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Other
☐
*If “Other” has been checked in response to the previous question, indicate by chec k mark which financial statement item the registrant has
elected to follow:
Item 17
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Item 18
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If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b - 2 of the Exchange Act).
Yes
☐
☑
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes
☐
☐
SEC Form 20 -F Cross reference information
Form 20 -F item number
Page and caption references
in this document*
1
Identity of Directors, Senior Management and Advisers
Not applicable
2
Offer Statistics and Expected Timetable
Not applicable
3
Key Information
A. Selected financial data
Omitted
B. Capitalization and indebtedness
Not applicable
C. Reason for the offer and use of proceeds
Not applicable
D. Risk factors
25 - 36
4
Information on the Company
A. History and development of the company
Omitted
B. Business overview
i (Market and other data), 88 - 94, 110 - 111
(Note 2), 211
C. Organizational structure
182 - 187 (Notes 33 and 34), 208 - 210
D. Property, plants and equipment
154 - 156 (Note 20)
4A
Unresolved staff comments
Not applicable
5
Operating and Financial Review and Prospects
A. Operating results
28 - 36, 39 - 43, 78, 84 - 94, 127 - 136 (Note 13),
211
B. Liquidity and capital resources
Omitted
C. Research and development, patents and licenses, etc.
Omitted
D. Trend information
28 - 36, 211
E. Off-balance sheet arrangements
Omitted
F. Tabular disclosure of contractual obligations
Omitted
G. Safe harbor
i (Forward - looking statements)
6
Directors, Senior Management and Employees
A. Directors and senior management
Omitted
B. Compensation
Omitted
C. Board practices
8 - 9, 13 - 14, 17
D. Employees
Omitted
E. Share ownership
Omitted
7
Major Shareholders and Related Party Transactions
A. Major shareholders
Omitted
B. Related party transactions
C. Interests of experts and counsel
Omitted
Not applicable
8
Financial Information
A. Consolidated statements and other financial information
96 - 196,
B. Significant changes
Not applicable
9
The Offer and Listing
A. Offer and listing details
Not applicable
B. Plan of distribution
Not applicable
C. Markets
Not applicable
D. Selling shareholders
Not applicable
E. Dilution
Not applicable
F. Expenses of the issue
Not applicable
10
Additional Information
A. Share capital
Not applicable
B. Memorandum and Articles of Association
197 - 200
C. Material contracts
Not applicable
D. Exchange controls
204
E. Taxation
201 - 204
F. Dividends and paying assets
Not applicable
G. Statement by experts
Not applicable
H. Documents on display
204
I. Subsidiary information
182 - 183 (Note 33), 208 - 210
11
Quantitative and Qualitative Disclosure about Market Risk
22 - 94, 129 - 150 (Notes 13 - 16)
12
Description of Securities Other than Equity Securities
A. Debt Securities
Not applicable
B. Warrants and Rights
Not applicable
C. Other Securities
Not applicable
D. American Depositary Shares
Not applicable
13
Defaults, Dividends Arrearages and Delinquencies
Not applicable
14
Material Modifications to the Rights of Security Holders and Use of Proceeds
Not applicable
15
Controls and Procedures
A. Disclosure controls and procedures
205
B. Management’s annual report on internal control over financial reporting
14
C. Attestation report of the registered public accounting firm
Not applicable
D. Changes in internal control over financial reporting
14
16A
Audit Committee Financial Expert
Omitted
16B
Code of Ethics
Omitted
16C
Principal Accountant Fees and Services
18 - 19, 196 (Note 40), 205
16D
Exemptions from the Listing Standards for Audit Committees
Not applicable
16E
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
16
16F
Change in Registrant’s Certifying Accountant
Not applicable
16G
Corporate Governance
3 - 15
17
Financial Statements
Not applicable (See Item 8)
18
Financial Statements
Not applicable (See Item 8)
19
Exhibits
Exhibit Index
* Certain items are indicated as omitted as Barclays Bank PLC is a wholly owned subsidiary of Barclays PLC, which is a reporting company under
the Securities Exchange Act of 1934, and meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10 - K, as applied to annual
reports on Form 20 - F, and is therefore filing this Form 20 - F with a reduced disclosure format.
Notes
The term Barclays Bank Group refers to Barclays Bank PLC together with its subsidiaries. Unless otherwise stated, the income statement analysis
compares the year ended 31 December 2019 to the corresponding twelve months of 2018 and balance sheet analysis as at 31 December 2019
with comparatives relating to 31 December 2018. The abbreviations ‘£m’ and ‘£bn’ represent millions and thousands of millions of Pounds Sterling
respectively; the abbreviations ‘$m’ and ‘$bn’ represent millions and thousands of millions of US Dollars respectively; and the abbreviations ‘€m’
and ‘€bn’ represent millions and thousands of millions of Euros res pectively.
Forward -looking statements
This document contains certain forward - looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as
amended, and Section 27A of the US Securities Act of 1933, as amended, with respect to the Barclays Bank Group. Barclays cautions readers that
no forward - looking statement is a guarantee of future performance and that actual results or other financial condition or performance measures
could differ materially from those contained in the forward - looking statements. These forward - looking statements can be identified by the fact that
they do not relate only to historical or current facts. Forward - looking statements sometimes use words such as ‘may’, ‘will’, ‘seek’, ‘continue’, ‘aim’,
‘anticipate’, ‘target’, ‘projected’, ‘expect’, ‘estimate’, ‘intend’, ‘plan’, ‘goal’, ‘believe’, ‘achieve’ or other words of similar meaning. Forward - looking
statements can be made in writing but also may be made verbally by members of the management of the Barclays Bank Group (including, without
limitation, during management presentations to financial analysts) in connection with this document. Examples of forward - looking statements
include, among others, statements or guidance regarding or relating to the B arclays Bank Group’s future financial position, income growth, assets,
impairment charges, provisions, business strategy, capital, leverage and other regulatory ratios, payment of dividends (including dividend payout
ratios and expected payment strategies), projected levels of growth in the banking and financial markets, projected costs or savings, any
commitments and targets, estimates of capital expenditures, plans and objectives for future operations, projected employee numbers, IFRS impacts
and other statements that are not historical fact. By their nature, forward - looking statements involve risk and uncertainty because they relate to
future events and circumstances. The forward - looking statements speak only as at the date on which they are made and such statements may be
affected by changes in legislation, the development of standards and interpretations under IFRS, including evolving practices with regard to the
interpretation and application of accounting and regulatory standards, the outcome of curren t and future legal proceedings and regulatory
investigations, future levels of conduct provisions, the policies and actions of governmental and regulatory authorities, geopolitical risks and the
impact of competition. In addition, factors including (but no t limited to) the following may have an effect: capital, leverage and other regulatory
rules applicable to past, current and future periods; UK, US, Eurozone and global macroeconomic and business conditions; the effects of any
volatility in credit markets; market related risks such as changes in interest rates and foreign exchange rates; effects of changes in valuation of
credit market exposures; changes in valuation of issued securities; volatility in capital markets; changes in credit ratings of any entity within the
Barclays Bank Group or any securities issued by such entities; instability as a result of the exit by the UK from the European Union and the
disruption that may subsequently result in the UK and globally; and the success of future acquisitions, disposals and other strategic transactions. A
number of these influences and factors are beyond the Barclays Bank Group’s control. As a result, the Barclays Bank Group’s actual financial
position, future results, dividend payments, capital, leverage or o ther regulatory ratios or other financial and non - financial metrics or performance
measures may differ materially from the statements or guidance set forth in the Barclays Bank Grou p’s forward - looking statements.
Subject to our obligations under the applicable laws and regulations of any relevant jurisdiction, (including, without limitation, the UK and the US),
in relation to disclosure and ongoing information, we undertake no obligation to update publicly or revise any forward - looking statements, whether
as a result of new information, future events or otherwise.
Market and other data
This document contains information, including statistical data, about certain Barclays markets and its competitive position. Except as otherwise
indicated, this information is taken or derived from Datastream and other external sources. Barclays cannot guarantee the accuracy of information
taken from external sources, or that, in respect of internal estimates, a third party using different methods would obtain the same estimates as
Barclays.
Uses of Internet addresses
This document contains inactive textual addresses to internet websites operated by us and third parties. Reference to such websites is made for
information purposes only, and information found at such websites is not incorporated by reference into this document.
Governance
C ontents
Barclays Bank PLC 2019 Annual Report on Form 20-F 1
Our corporate governance processes and the role they play in supporting the delivery of our strategy.
Governance
Page
◾
Chairman’s introduction
2
◾
Corporate Governance Statement
3
◾
Directors’ report
16
◾
Our people our culture
21
Governance
Chairman’s introduction
Barclays Bank PLC 2019 Annual Report on Form 20-F 2
The 2019 corporate governance report ("Governance Report") for Barclays Bank PLC ("BBPLC" or the "Company”) provides an overview of how the
BBPLC governance framework operates and of the Board’s key areas of focus during the year.
Following the structural reform to realign the Barclays Group and ring - fence the Group's UK consumer banking business, BBPLC became the non-
ring - fenced bank in April 2018. Initially, BBPLC and its parent company, BPLC, had different (and non - overlapping) board and board committee
members. However, as we moved into 2019, following a further review of the corporate governance structure of BBPLC and BPLC and reflecting the
outcomes of discussions with the Group's regulators, a decision was taken to consolidate and streamline the memb ership of the BBPLC and BPLC
boards, such that membership of our Board now comprises a subset of that of the BPLC Board, with all members of the BPLC board, except the
Senior Independent Director, the Chairman of BBUKPLC and one Non - Executive Director, now also serving on the board of BBPLC.
This has significantly increased coordination and efficiency, and reduced complexity and duplication. This revised structure vests oversight over the
activities of BBPLC in a board the members of which also have direct accountability to BPLC’s shareholders through their separate responsibilities
as members of the BPLC board.
As a result of this consolidation, during 2019 the former Board members of BBPLC all stepped down and a new Board, including myself, took office.
We thank those Board members who left us this year for their valued contribution.
Strategy
During 2019, the Board spent considerable time overseeing the development of the Company's strategy that is being shaped by the increasingly
sophisticated needs of our clients and technological evolution across our industry, in order to fulfil Barclays' common purpose of "Creating
Opportunities to Rise".
Governance
This year, as required under the Companies (Miscellaneous Reporting) Regulations 2018 (the "2018 Regulations"), we have included on page 7, a
statement of the Company's corporate governance arrangements. In addition, the Governance Report reflects the enhanced requirements to report
on the Company’s engagement with employees, suppliers, customer s and others in a business relationship with the Company, which are now in
force pursuant to the 2018 Regulations. These new requirements have prompted us to look afresh at the governance principles that underpin our
corporate governance arrangements. You can read more about these principles and how we apply them in our Corporate Governance Statement,
where you can also find out more about the work of the Board and our Board Committees during 2019.
I would like to thank fellow Board members and our colleag ues for their support and hard work throughout 2019.
Nigel Higgins
Chairman – Barclays Bank Group
12 February 2020
Governance
Corporate Governance Statement
Barclays Bank PLC 2019 Annual Report on Form 20-F 3
The Board aspires to have high standards of corporate governance and, in accordance with the 2018 Regulations, has during the year considered
which corporate governance arrangements would be most appropriate to apply.
The Board has chosen not to adopt an d report against the 2018 UK Corporate Governance Code, which is designed for premium listed companies
and, whilst we fully support the introduction of the Wates Corporate Governance Principles for Large Private Companies (in particular the focus on
purpos e, culture and employee and stakeholder engagement), the Board considers they are less appropriate for a wholly - owned subsidiary of a
premium listed company which is also a complex financial institution subject to a comprehensive regulatory regime. We have therefore adopted
our own corporate governance arrangements which we believe are most appropriate for the Company and are designed to ensure effective
decision - making to promote the Company’s success for the long term.
Our primary aim is that our governa nce is:
●
effective in providing challenge, advice and support to management;
●
providing checks and balances, and encourage constructive challenge;
●
driving informed, collaborative and accountable decision - making; and
●
creating long - term sustainable value for our shareholder, the ultimate shareholders of Barclays PLC (‘Barclays’), and our wider stakeholders.
Set out below are the principles which underpin our corporate governance arrangements and how these principles have been applied during 2019.
Certain addi tional information, signposted throughout this section, will be available in the ‘Board and Committee Governance’ section on pages 6 –
12.
Our group - wide governance framework is set by Barclays and has been designed to facilitate the effective management of the Barclays Group. This
includes the setting of Group policies in relation to matters such as Barclays values, Barclays’ Remuneration Policy and the Barclays’ Charter of
Expectations. Where appropriate, this corporate governance statement makes referen ce to those Group policies which are relevant to the way in
which the Company is governed.
Our corporate governance principles and how the Company has applied them during 2019 and to the date of this report
Principle One: Board leadership and company purpose
A successful company is led by an effective and entrepreneurial board whose role is to establish the company’s purpose, values and strategy,
aligned to its culture, and make decisions to promote its success for the long term benefit of its shareholder , having regard to the interests of other
relevant stakeholders and factors.
◾
Through the leadership of the Board, a clear vision for the Company’s purpose and overall values is articulated, underpinning and defining the
strategy and culture of the organisation. This is embedded at every level of management.
◾
Time was spent in 2019 overseeing the development of the Company's strategy that is shaped by the increasingly sophisticated needs of our
clients, and technological evolution across our indu stry, to fulfil the Barclays common purpose of 'Creating Opportunities to Rise'.
◾
Culture remains a core area of focus with the Board actively promoting ethical leadership and accountability and supporting and reinforcing the
Barclays ’ Code of Conduct, the Barclays Way, and the Barclays Values, to achieve a dynamic and positive culture.
Principle Two: Division of responsibilities
An effective board requires a clear division of responsibilities with the Chair leading the board and being responsible for its overall effectiveness, and
the executive leadership of the company’s business being delegated to the Chief Executive. The board should consist of an appropriate combination
of executive and independent non - executive directors each with a clear understanding of their accountability and responsibilities. The board’s
policies and procedures should support effective decision - making and independent challenge.
◾
Clear division of responsibilities between the Chairman and Chief Executive Officer. Detail on the role of each can be found on page 6. Page 7 lists
‘who is on the Board’ with a majority of the Board comprised of independent Non -Executive Directors.
◾
Polic ies and protocols are in place to support effective decision - making and independent challenge, including the Company’s Charter of
Expectations, setting out clearly the role and responsibilities of each Director. The Chairman meets privately with the Non - Executive Directors
when appropriate , to promote required independence.
◾
Board duties are executed in part through Board Committees, which provide oversight and make recommendations on the matters delegated to
them by the Board. Detail on the principal Commi ttees, their core responsibilities and activities in 2019 is set out on pages 6 to 12.
◾
Appropriate information and support is provided to the Board, to enable them to undertake their work with due care and discharge their
responsibilities. See page 7 for further detail.
◾
The Barclays Group’s Corporate Governance Manual clearly sets out guidelines of how the Barclays Group entities and their respective Boards
and Board committees should interact, while also providing guidance and clarity for management and directors as to how these relationships and
processes should work in practice. It is a dynamic document that continues to evolve with the changing nature of the Barclays Group.
Governance
Corporate Governance Statement
Barclays Bank PLC 2019 Annual Report on Form 20-F 4
Principle Three: Composition, succession and evaluation
A board with the right balance of skills, experience and diversity is critical to the sustainable delivery of value to the company’s shareholder and
broader stakeholders. The size of the board should be guided by the scale and complexity of the company and appointments should b e based on
merit and objective criteria and with a view to promoting diversity and subject to a formal, rigorous and transparent procedure which is
underpinned by an effective succession plan for board and senior management. A successful board is a cohesiv e board that provides informed and
constructive challenge to the management team and measures its effectiveness.
◾
The size and composition of the Board is appropriate for the business of the Barclays Bank Group. There is a good balance between Executive and
independent N on - Executive directors with the N on - Executive Directors providing independent challenge. The Board members have a strong
combination of technical, finance (including significant financial services experience) and commercial skills, with broader experience in culture
and colleague engagement.
◾
Diversity across the Barclays Group remains a key area of focus and the Board diversity target of 33% female directors was reached n 2019 .
◾
All appointments to the Board and senior management are based on merit and objective criteria. With a continued strong belief in the benefits of
diversity (gender, ethnicity and thought) for an effective Board and organisation. This will remain a key area of focus as we continue to strive to
build a workfor ce that reflects the diversity of our customers and the communities we serve. The approach is set out in the Barclays Group
Diversity Policy and further detail can be found on page 15.
◾
There is regular review of the leadership and succession needs of the business to ensure the depth and diversity of the talent and succession
pipeline at the Board, Executive and one level down. This remains a key focus for 2020 to ensure the quality of leadership is in place to lead the
business in the delivery of the strategy, against a challenging economic and operating environment.
◾
As part of the simpler and more effective governance structure, the membership of the Board was largely consolidated with the BPLC b oard with
effect from 25 September 2019. Further detail can be found on page 7.
◾
Effectiveness is driven through routine evaluations of the Board and Board Committees. Key findings are included for each committee on pages 6
to 13.
◾
Ongoing focus on training and professional development to provide Board members with a deeper and more granular understanding of the
business contributing to informed and sound decision - making. Further detail on 'training and induction' can be found on page 14.
Principle Four: Audit, Risk and Internal Control
The board should establish formal and transparent policies and procedures to (i) identify the nature and extent of principal risks the company is
willing to take in order to achieve its long - term strategic o bjectives; (ii) manage such risks effectively; (iii) oversee the internal control framework;
(iv) promote the independence and effectiveness of internal and external audit functions; and (v) satisfy itself on the integrity of financial reporting.
◾
Principal risks have been identified, as articulated on pages 25 to 43 in line with the ERMF, with robust processes in place to evaluate and manage
such risks; including regular reporting to, and oversight by the Risk Committee and the Board.
◾
The Board ap proves the Company's risk appetite; the level of risk the Company is prepared to accept across different risk types. Significant steps
have been taken in recent years to de - risk the business, setting us up for sustainable growth and value creation in the future.
◾
Effectiveness of risk management and internal controls is reviewed regularly by the Risk Committee (responsible for providing oversight on
current and potential future risk exposures) and the Audit Committee (responsible for controls, including revi ewing audit reports, internal
controls and risk management systems). Please see pages 8 – 13 for further detail on the role of these Committees.
◾
The Audit Committee continues to provide its oversight of the financial reporting processes and the work of the external and internal auditors
(including independence and effectiveness). Further detail can be found on page 8.
Governance
Corporate Governance Statement
Barclays Bank PLC 2019 Annual Report on Form 20-F 5
Principle Five: Remuneration
The remuneration policies and practices should support strategy and promote long - term sustainable success, and be developed in accordance with
formal and transparent procedures, ensuring no director is involved in deciding their own remuneration outcome. Executive remuneration should
be aligned to the company’s purpose and values and the successful delivery of the strategy; with outcomes taking account of company and
individual performance, and wider circumstances such as pay across the Company’s workforce and Barclays’ Fair Pay agenda.
◾
Barclays’ Remuneration Policy is set by the BPLC r emuneration c ommittee, but adopted by the Company’s independent Remuneration
Committee. Remuneration is aligned to the Company’s strategy and risk management approach and designed to promote the long - term success
of the Company.
◾
Executive and senior management remuneration appr oaches are developed in accordance with the Group’s formal procedures (ensuring no
Director is involved in deciding their own remuneration outcome) and having regard to workforce remuneration policies and alignment of
incentives and rewards with culture an d performance as reviewed annually by the B PLC r emuneration committee and shared with the Company ’s
Remuneration Committee.
◾
The Remuneration Committee has clearly defined terms of reference, with responsibility for the development of a remuneration approv al
framework to ensure an appropriate level of oversight of senior remuneration decisions, as well as annual consideration of the Company
incentive pool to ensure alignment with delivery of the Company’s strategic ambitions.
◾
Barclays remains focussed on improving its gender pay gap position, with the 2019 gender pay gap statistics due to be published on the
Government’s Gender Pay Gap reporting portal on 13 February 2020, along with a Pay Gaps report in which B arclays makes both statutory
g ender p ay gap disclosures and voluntary ethnicity p ay g ap disclosures.
Principle Six: Stakeholder r elationships and engagement
Directors should foster effective stakeholder relationships aligned to the company’s purpose. The board should recognise the importance of
listening to, and understanding the views of its stakeholders, including the workforce, and specifically the impact of the company’s behaviour and
business on customers and clients, colleagues, suppliers, communities and society more broadly; having regard to these views and impact when
taking decisions.
◾
Through the Company’s defined purpose and strategy, key stakeholders on whom the success of the Company depends are identified.
◾
The Board seeks to understand key stakeholders’ views, and the impact of our behaviour and business on customers and clients, colleagues,
suppliers, communities and society more broadly. There is more to be done in this regard in 2020.
◾
The Board monitors key indicators across areas such as culture, citizenship, conduct and customer satisfaction on a continuing and ongoing
basis.
◾
Engagement by Board and management throughout the year with broader stakeholders through participation in forums and roundtables and
joining industry, sector and topic debates.
◾
Our long - standing commitment to the importance and value of colleague engagement continues; our people are our most valuable asset.
Governance
Corporate Governance Statement
Barclays Bank PLC 2019 Annual Report on Form 20-F 6
Current Directors
Nigel Higgins – Chairman
Mike Ashley – Non - Executive Director and Board Audit Committee Chairman
Tim Breedon – Non - Executive Director, Board Risk Committee and Remuneration Committee Chairman
Mary Anne Citrino – Non - Executive Director
Mohamed A. El-Erian (Appointed 1 January 2020) - Non - Executive Director
Dawn Fitzpatrick - Non - Executive Director
Mary Francis - Non - Executive Director
Diane Schueneman - Non - Executive Director
Jes Staley – Chief Executive Officer
Tushar Morzaria – Executive Director
The Board
Executive and Non - Executive Directors share the same duties and are subject to the same constraints. However, a clear division of responsibilities
has been established. The Chairman is responsible for leading the Board and its overall effectiveness, demons trating objective judgement and
promoting a culture of openness and constructive debate between all Directors. The Chairman facilitates constructive board relations, the effective
contribution of all Non - Executive Directors and ensures Directors receive accurate, clear and timely information. It is our responsibility as the Board
to ensure that management deliver on short - term objectives, whilst promoting the long - term success of the Company and the Barclays Group. We
are also responsible for ensuring that management maintains an effective system of internal control. An effective system of internal control should
provide assurance of effective and efficient operations, internal financial controls and compliance with law and regulation. In meeting this
respon sibility, we consider what is appropriate for the Company’s business and reputation, the materiality of financial and other risks and the
relevant costs and benefits of implementing controls.
Since BBPLC became a non - ring fenced bank in April 2018, the Board has been responsible for the Barclays Bank Group, Barclays International
division, some of its head office and legacy matters. The previous Chairman, Sir Gerry Grimstone, resigned from the BBPLC Board in February 2019
and Nigel Higgins was appointe d in his stead on 1 March 2019. Since his appointment, Nigel has, with BPLC b oard and regulators, been reviewing
the operation of the Board particularly with a view to optimising the effectiveness of the Barclays Groups’ governance through consolidation an d
simplification wherever possible, reducing duplication and complexity, ensuring that the most critical issues are handled directly by the BPLC b oard.
This has ultimately resulted in a decision to largely consolidate membership of the Board with that of the BPLC b oard to create a simpler, more
efficient governance structure. This resulted in the reconstitution of the Board with its membership drawn exclusively from the BPLC b oard.
The BBPLC Schedule of Matters Reserved to the Board has been reviewed an d revised to ensure that appropriate coordination with the governance
of the consolidated boards is in place. Similarly, a review has been undertaken to ensure the B oard Committees are appropriately constituted and
coordinated with the Board c ommittees of BPLC. The Matters Reserved specifies those decisions to be taken by the Board, including but not limited
to material decisions relating to strategy, risk appetite, medium term plans, capital and liquidity plans, risk management and controls frameworks,
app roval of financial statements, approval of share allotments and dividends. The Board has delegated the responsibility for making and
implementing operational decisions and running the Company’s business on a day - to- day basis to the Chief Executive Officer and his senior
management team.
As listed in ‘Current Directors’ above, the Board comprises a Chairman, who was independent on appointment, two Executive Directors and seven
independent Non - Executive Directors. The majority of the Board are independent Non -Executive Directors bringing significant expertise (including
external perspectives) and independent challenge. The independence of our Non- Executive Directors is considered annually.
Governance
Corporate Governance Statement
Barclays Bank PLC 2019 Annual Report on Form 20-F 7
Attendance
Directors are expected to attend every Board meeting. I n 2019, attendance was very strong at scheduled meetings, as reflected in the table below:
Director
Eligible Meeting Attendance
(excluding ad hoc meetings)
Appointment Dates
Nigel Higgins
7/7
Appointed 1 March 2019
Mike Ashley
3/3
Appointed 25 September 2019
Tim Breedon
3/3
Appointed 25 September 2019
Mary Anne Citrino
3/3
Appointed 25 September 2019
Mary Francis
3/3
Appointed 25 September 2019
Dawn Fitzpatrick
3/3
Appointed 25 September 2019
Matthew Lester
3/3
Appointed 25 September 2019; retired 1 January 2020
Tushar Morzaria*
3/3
Appointed 25 September 2019
Diane Schueneman
3/3
Appointed 25 September 2019
Jes Staley**
6/6
Appointed 26 March 2019
Sir Gerry Grimstone
2/2
Resigned 28 February 2019
Peter Bernard
6/7
Resigned 25 September 2019
Steven Ewart*
7/7
Resigned 25 September 2019
Helen Keelan
6/7
Resigned 25 September 2019
Maria Richter
6/7
Resigned 25 September 2019
Jeremy Scott
7/7
Resigned 25 September 2019
Tim Throsby**
3/3
Resigned 26 March 2019
Alex Thursby
6/7
Resigned 25 September 2019
Hélène Vletter - van Dort
7/7
Resigned 25 September 2019
* Following Steven Ewart’s resignation as a Director on 25 September 2019, Tushar Morzaria was appointed as an Executive Director. Steven Ewart remains as the Chief Financial
Officer.
** Following Tim Throsby’s resignation as Chief Executive Officer and Director, Jes Staley was appointed as Chief Executive Officer and Executive Director of Barclays Bank PLC.
What we did in 2019
During 2019, the Board focused on the following specific areas:
Strategy and operational matters
◾
Received deep dive business presentations from Banking, Merchant Acquiring, Barclays Partner Finance and Private Banking and Overseas
Services.
◾
Provided with an overview of BX, its structure and costs.
◾
Discussed and considered the impact of the UK’s decision to leave the EU and the transfer of the Company’s European business to Barclays Bank
Ireland PLC under the European Referendum Response Programme.
◾
Discussed regular updates from the Chief Executive Officer and BBPLC President on the progress being made against the BBPLC strategy, key
strategic p rojects and recruitment.
Finance and liquidity
◾
Regularly assessed financial performance of the various businesses and the Barclays Bank Group results through reports from the BBPLC Chief
Financial Officer and through business specific updates to the Board.
◾
Reviewed and approved BBPLC’s financial results prior to publication.
◾
Considered and approved the BBPLC elements of the Group Recovery Plan.
◾
Consider ed and approved the BBPLC Medium Term Plan (‘MTP’) in which strategy is embedded, together with related funding and capital plans
for BBPLC.
Governance and risk (including regulatory issues)
◾
Delegated authority to the Risk Committee to consider and recommend, on behalf of the Board, the adoption by the Company of the Internal
Capital Adequacy Assessment Process and Internal Liquidity Adequacy Assessment Process.
◾
Received regular updates on key risk themes and approved the Company’s r isk appetite.
◾
Re ceived reports on Barclays’ operational and technology capability, including specific updates on cyber risk capability and resilience, and a
service management update in respect of services provided by BX Limited, the Barclays Group service company.
◾
Considered and approved appointments to the BBPLC Board and appointment of senior executives following recommendation from the
Nominations Committee.
◾
Received regular reports from the Chairmen of each Board Committee. See the reports from the Committee Chairmen below and on the following
page.
◾
Received and considered the feedback from the Barclays Group’s principal regulators including the PRA PSM Letter, FCA Firm Evaluation Letter,
FED Letter in respect of the IHC Governance review and the FDIC Exam on the governance of Barclays Bank Delaware.
◾
Provided an attestation to the PRA in respect of the ring - fenced bank and operational resilience.
◾
Considered the results of the external Board Evaluation conducted by Independent Board Evaluation.
Governance
Corporate Governance Statement
Barclays Bank PLC 2019 Annual Report on Form 20-F 8
Board Committees
The main Board Committees are the Audit Committee, the Nominations Committee, the Remuneration Committee and the Risk Committee.
Pursuant to authority granted under our Articles of Association, each Board Committee has had specific responsibilities delegated to it by the
Board. You can read about what each of the Committees did during 2019 on the following pages.
The Chairmen of each Board Committee provide a report on Committee business at each Board meeting, including the matters being
recomme nded by a Committee for Board approval.
Board Audit Committee
The Audit Committee is comprised solely of independent Non - Executive Directors, with membership designed to provide the breadth of financial
expertise and commercial acumen it needs to fulfil its responsibilities. Its members as a whole have recent and relevant experience of the banking
and financial services sector, in addition to general management and commercial experience, and are financially literate. The Audit Committee is
chaired by Mike Ashley who has over 20 years accounting and audit experience. Diane Schueneman and Tim Breedon are members of the
Committee. Matthew Lester was a member of the Committee until he stepped down from the Board on 1 January 2020. The Audit Committee met
nine times during 2019. Audit Committee meetings were attended by representatives from management in respect of matters relevant to their
function or business area, including the BBPLC Chief Financial Officer and, Barclays Group and/or BBPLC Chief Compliance Officer, Chief Controls
Officer, Chief Operating Officer, Chief Internal Auditor, General Counsel , as appropriate and the Company’s External Auditors, KPMG. The Audit
Committee held a number of separate private sessions with each of the Chief Internal Auditor and the lead external audit partner, which were not
attended by management.
As part of the Company’s commitment to effective oversight and allocation of responsibilities between the BPLC audit committee, the Barclays
Bank UK PLC audit committee and the Committee, the Audit Chairs of these committees met regularly during 2019 to share relevant information
and to ensure embedment of information flows and governance practice. In addition, regular dialogue has been held with the Audit Committees of
the Company’s major subsidiaries, Barclays Bank Ireland PLC and the Barclays US LLC.
An externally facilitated review of the effectiveness of the Board and Board members was undertaken in the first quarter of 2019. Following the
consolidation and streamlining of the membership of the BPLC and BBPLC b oards and the change in membership of the Audit Committee , it was
agreed that the recommendations from the re view of the performance of the BPLC Audit Committee would be adopted as the review of Audit
Committee performance in 2019. The results confirm that the Audit Committee is operating effectively and provide s an effective level of challenge
and oversight of the areas within its remit. It was noted that coverage of BBPLC matters within concurrent meetings was considered appropriate
and would benefit from further embedment.
Attendance at the Audit Committee du ring 2019 was as follows:
Member
Eligible Meeting Attendance
Appointment Dates
Mike Ashley (Chairman)
2/2
Appointed 25 September 2019
Tim Breedon
2/2
Appointed 25 September 2019
Matthew Lester
2/2
Appointed 25 September 2019; retired 1 January
2020
Diane Schueneman
2/2
Appointed 25 September 2019
Jeremy Scott (Former Chairman)
7/7
Retired 25 September 2019
Peter Bernard
7/7
Retired 25 September 2019
Helen Keelan
7/7
Retired 25 September 2019
Alex Thursby
7/7
Retired 25 September 2019
The principal role and responsibilities of the Audit Committee, pursuant to its Terms of Reference, are:
◾
Assessing the integrity of the Barclays Bank Group’s financial reporting and satisfying itself that any significant financial judgements made by
management are sound;
◾
Evaluating the effectiveness of the Barclays Bank Group’s internal controls, including internal financial controls;
◾
Scrutinising the activities and performance of the internal and external auditors, including monitoring their independ ence and objectivity;
◾
Overseeing the relationship with the Barclays Bank Group’s external auditor;
◾
Reviewing and monitoring the effectiveness of the Barclays Bank Group’s whistleblowing procedures;
◾
Overseeing significant legal and regulatory investigations, including the proposed litigation statement for inclusion in the Company’s statutory
accounts.
During 2019, the principal activities of the Audit Committee included:
◾
Financial reporting: assessing the appropriateness of key accounting themes, disclosures, issues and judgements, including in respect of IFRS9.
◾
Impairment: assessing the appropriateness of impairment experience against forecast and considering whether impairment provisions were
appropriate.
◾
Conduct provisions: analysing the judgeme nts and estimates made with regard to the Barclays Bank Group’s material conduct provisions.
Governance
Corporate Governance Statement
Barclays Bank PLC 2019 Annual Report on Form 20-F 9
◾
Legal, competition and regulatory provisions: evaluating advice on the status of current legal, competition and regulatory matters and
considering the adequacy of disclosures; assessing management’s judgements and estimates regarding provisions.
◾
Valuations: monitoring the valuation methods applied by management to significant valuation items and areas of judgement.
◾
Tax: overseeing tax matters relating to the Barcla ys Bank Group, including tax risk provisions and regulatory matters.
◾
Internal controls and business control environment: evaluating the status of the most material control issues identified by management, including
the Barclays Group Internal Control Enhan cement Programme; receiving deep dives on the status of specific control issues across the business of
the Barclays Bank Group and functions, and on progress of the related remediation programmes and lessons learned from critical risk events.
Utilising the output from the Risk and Control Self Assessments (RCSA) to review and monitor the control environment and related risks.
◾
Raising concerns: reviewing the annual report on whistleblowing matters, including reporting and training and key areas of the Barcl ays Bank
Group’s whistleblowing procedures and controls. Monitoring whistleblowing metrics and instances of retaliation reports, including whether any
instances had been substantiated.
◾
Internal audit: receiving thematic control and operational reporting from Barclays Internal Audit; overseeing issues arising from unsatisfactory
audit reports; evaluating reports regarding Barclays Internal Audit’s assessment of the management control approach and control environment in
the Barclays Bank Group.
◾
External audit: reviewing and approving the annual audit plan for the Barclays Bank Group, including the main areas of focus, and assessing the
progress of the 2019 audit. The Audit Committee also reviewed audit quality and discussed KPMG’s feedback on the Company’ s critical
accounting estimates and judgements.
In 2020 the Committee will still continue to monitor the embedment of IFRS 9 processes and further enhancements to our disclosure, particular as
regards sensitivities. We will also be looking to assess the reporting of control issues after the conclusion of Barclays Internal Controls Enhancement
Programme (‘BICEP’) as well as monitor the satisfactory completion of remediation programmes which are due to extend beyond 31 March 2020 ,
in particular the Designated Market Activities (‘DMA’) remediation plan.
Board Nominations Committee
The Nominations Committee is comp rised solely of independent Non - Executive Directors. Nigel Higgins, as Chairman of the BBPLC Board, Mike
Ashley, Tim Breedon and Diane Schueneman, are also members.
The Nominations Committee met three times during 2019. Attendance by the Nominations Committee members is shown in the table below, and
Nominations Committee meetings were attended during the ye ar by the Chief Executive Officer, President of BBPLC, the BPLC HR Director and the
BBPLC Head of Talent as appropriate.
An externally facilitated review of the effectiveness of the Board and Board members was undertaken in the first quarter of 2019. Fol lowing the
consolidation and streamlining of the membership of the BPLC and BBPLC Boards and the change in membership of the n ominations c ommittee, it
was agreed that the recommendations from the review of the performance of the BPLC Nominations Committee would be adopted as the review of
Nominations Committee performance in 2019. The results confirm that the Nominations Committee is operating effectively and provides an
effective level of challenge and oversight of the areas within its remit. It was noted that coverage of BBPLC matters within concurrent meetings was
considered appropriate and would benefit from further embedment.
Attendance at the Nominations Committee during 2019 was as follows:
Member
Eligible Meeting Attendance
(excluding ad hoc meetings)
Appointment Dates
Nigel Higgins (Chairman)
2/2
Appointed 1 March 2019
Mike Ashley
2/2
Appointed 25 September 2019
Tim Breedon
2/2
Appointed 25 September 2019
Diane Schueneman
2/2
Appointed 25 September 2019
Sir Gerry Grimstone (Former Chairman)
1/1
Resigned 28 February 2019
Jeremy Scott
1/1
Resigned 25 September 2019
Peter Bernard
1/1
Resigned 25 September 2019
Hélène Vletter - van Dort
1/1
Resigned 25 September 2019
The principal role and responsibilities of the Nominations Committee, pursuant to its Terms of Reference, are:
◾
Considering b oard appointments to the Board, its Committees and its significant subsidiaries;
◾
Considering composition of the Board and its Committees;
◾
Considering succession planning and talent management ;
◾
Evaluating Board effectiveness;
◾
Assessing serving Directors tenure;
◾
Considering b oard induction and training;
◾
Evaluating conflicts of interest; and
◾
Evaluating g overnance m atters.
Governance
Corporate Governance Statement
Barclays Bank PLC 2019 Annual Report on Form 20-F 10
During 2019, the principal activities of the Committee included:
◾
Reviewing the Board and Board Committee composition, taking into account time commitment, skills, knowledge, experience and diversity of the
Directors, and identifying any desirable skills to aid the Company in operating and competing effectively;
◾
Review and approv al of proposed changes to the Board of a number of the Company’s significant subsidiaries, including but not limited to
reviewing the composition of the b oards of Barclays US LLC, Barclays Bank Delaware and Barclays Capital Securities Limited; and
◾
Receiving updates on the Company ’s executive governance framework, talent and succession management and key appointments to the
Executive Committee, the succession planning review process for the Executive Committee and the global Barclays Group campaigns to promote
a diverse and inclusive workforce.
Board Remuneration Committee
The Remuneration Committee is comprised solely of independent Non - Executive Directors. The Remuneration Committee is chaired by Tim
Breedon with Mary Francis as a member.
The principal role and responsibilities of the Remuneration Committee, pursuant to its Terms of Reference, is to:
◾
Adopt the over - arching principles of remuneration policy for the Barclays Bank Group within the parameters set by the BPLC r emuneration
commit tee;
◾
Consider and endorse the incentive pool for the Company and its subsidiaries and the remuneration of key BBPLC executives and other specified
individuals as determined by the Remuneration Committee from time to time;
◾
Exercise oversight of remuneration issues within the Barclays Bank Group and of matters that more generally concern people and culture within
the Barclays Bank Group; and
◾
Approve the remuneration and compensation arrangement of employees that fall within the remit of the Remuneration Commi ttee.
The Remuneration Committee met five times during 2019 . Attendance by the Remuneration Committee members is shown in the table below.
Remuneration Committee meetings are attended by management, including the Chief Executive Officer and the BPLC HR Director.
An externally facilitated review of the effectiveness of the Board and Board members was undertaken in the first quarter of 2019. Following the
streamlining of the membership of the BPLC and BBPLC b oards and the change in membership of the Remune ration Committee, it was agreed that
the recommendations from the review of the performance of the BPLC Remuneration Committee would be adopted as the review of Remuneration
Committee performance in 2019. The results confirm that the Remuneration Committee is operating effectively and provides an effective level of
challenge and oversight of the areas within its remit. It was noted that coverage of BBPLC matters within concurrent meetings was considered
appropriate and would benefit from further embedment.
Attendance at the Remuneration Committee during 2019 was as follows:
Member
Eligible Meeting Attendance
(excluding ad hoc meetings)
Appointment Dates
Tim Breedon (Chairman)
2/2
Appointed 25 September 2019
Mary Francis
2/2
Appointed 25 September 2019
Hélène Vletter - van Dort (Former Chair)
3/3
Resigned 25 September 2019
Helen Keelan
3/3
Resigned 25 September 2019
Maria Richter
3/3
Resigned 25 September 2019
Alex Thursby
3/3
Resigned 25 September 2019
During the period, the Remuneration Committee’s activities have included:
◾
Approving the Group People Risk Reward Policy, Material Risk Taker Identification Methodology, and 2019 Incentive Funding Frameworks;
◾
Endorsing the funding ratio;
◾
Approving the 201 9 Ex Ante Risk adjustments;
◾
Approving the ex - post risk and conduct adjustments approach for individual remuneration;
◾
Receiving regular stakeholder, regulatory and legal updates, financial and risk performance updates, pay round timings and approach, and
co nsolidation of the Fair Pay Agenda; and
◾
Reviewing specific remuneration arrangements for individuals within the Remuneration Committee’s remit.
Board Risk Committee
The Risk Committee is comprised solely of independent Non - Executive Directors . Following the consolidation and streamlining of the BPLC and
BBPLC boards in September 2019, membership of the Risk Committee was aligned with the BPLC risk committee. The Risk Committee is chaired by
Tim Breedon. Mike Ashley, Mary Anne Citrino, Dawn Fitzpatrick and Diane Schueneman are members of the Committee. Matthew Lester was a
member of the Committee until he stepped down from the Board on 1 January 2020. During 2019, the Risk Committee met eight times, and also
held a number of ad hoc meetings duri ng the year. One of the key roles of the Risk Committee is to review and challenge the risk profile and risk
appetite of the Barclays Bank Group, and to consider key risk issues and internal control and risk policies concerning the Barclays Bank Group. Risk
Committee meetings are attended by management, including the BBPLC Chief Financial Officer and, Barclays Group and/or BBPLC Chief Risk
Officer, Chief Compliance Officer, Chief Internal Auditor, General Counsel, as appropriate and the Company’s External A uditors, KPMG. Following
the BPLC and BBPLC consolidation, the Committee continued to invite the relevant BBPLC Senior Manager to attend meetings for the appropriate
agenda items.
Governance
Corporate Governance Statement
Barclays Bank PLC 2019 Annual Report on Form 20-F 11
An externally facilitated review of the effectiveness of the Board and Boar d members was undertaken in the first quarter of 2019. Following the
streamlining of the membership of the BPLC and BBPLC b oards and the change in membership of the Risk Committee, it was agreed that the
recommendations from the review of the performance o f the BPLC r isk committee would be adopted as the review of Risk Committee performance
in 2019. The results confirm that the Risk Committee is operating effectively and provides an effective level of challenge and oversight of the areas
within its remit. I t was noted that coverage of BBPLC matters within concurrent meetings was considered appropriate and would benefit from
further embedment.
Attendance at the Risk Committee during 2019 was as follows:
Member
Eligible Meeting Attendance in 2019
(excluding ad hoc meetings)
Appointment Dates
Tim Breedon (Chairman)
3/3
Appointed 25 September 2019
Mike Ashley
3/3
Appointed 25 September 2019
Mary Anne Citrino
3/3
Appointed 25 September 2019
Dawn Fitzpatrick
Nil
Appointed 1 January 2020
Matthew Lester
3/3
Appointed 25 September 2019; retired 1 January 2020
Diane Schueneman
3/3
From 25 September 2019
Peter Bernard (Former Chairman)
5/5
Retired 25 September 2019
Jeremy Scott
5/5
Retired 25 September 2019
Maria Richter
5/5
Retired 25 September 2019
Hélène Vletter - van Dort
5/5
Retired 25 September 2019
The principal role and responsibilities of the Risk Committee, pursuant to its Terms of Reference, is to review, on behalf of the Board, management’s
recommendations on the principal risks as set out in the ERMF with the exception of Reputation r isk which is a matter reserved to the Board, and in
particular:
◾
Review, on behalf of the Board, the management of the principal risks in the ERMF;
◾
Consider and recommend to the Board, within the risk p arameters set by the BPLC r isk committee, the Company’s risk appetite and tolerance for
those principal risks;
◾
Review, on behalf of the Board, the Barclays Bank Group’s risk profile for those principal risks; and
◾
Commission, receive and consider reports on key risk issues.
During 2019, the principal activities of the Risk Committee included:
◾
Advising the Board on the appropriate risk appetite and risk tolerance for the principal risks in the ERMF when determining strategy, including
recommending to the Bo ard for approval the proposed overall r isk appetite and risk limits for the Company.
◾
Considering and approving the Company’s capital and liquidity stress test scenarios, and the results of different stress and reverse stress
assumptions, including both internal stress tests and those proposed by external regulatory bodies.
◾
Ensuring that the Company has enough capital, liquidity and financial resources to meet its regulatory requirements and obligations.
◾
Reviewing and considering the operational risks arising from the Company’s procedures, processes, systems and policies, and annual approval of
the operational risk tolerance statement.
◾
Evaluating the appropriateness of Barclays’ Model r isk management framework and receiving and considering reports from management on
specific modelling processes.
◾
Overseeing the management of Conduct r isk within BBPLC, and the performance of the Compliance function.
◾
Overseeing the Company’s regulatory requirements, as they relate to risk management, including regulatory and internal capital and funding
requirements, approving the Company’s Internal Capital Adequacy Assessment Process and Individual Liquidity Adequacy Assessment Process
and considering and recommending the Company’s Resolution and Recovery Plan to the Board for approval.
◾
Reviewing the frameworks, policies and resources in place to support effective risk management and oversight of the Barclays Bank Grou p.
◾
Reviewing performance against risk metrics and advising the Remuneration Committee when making remuneration decisions for 2019.
◾
Reviewing and approving strategic transactions above standard thresholds, taking account of the impact on the Company’s risk profile and
overall r isk appetite.
◾
Reviewing and endorsing statements in relation to the Company’s principal risks and the effectiveness of the Company’s risk management
systems made in the Company’s Strategic Report, A nnual Report, and Pillar 3 report ing.
Governance
Corporate Governance Statement
Barclays Bank PLC 2019 Annual Report on Form 20-F 12
The Risk Committee continually considers the impact of issues on the Barclays Bank Group and the risk environment in which it operates. It reviews
steps taken by the business to manage exposures in this context. The Risk Committee also received focused presentations on a number of areas
specific to the business and activities of Barclays Bank Group (including through joint presentations with the BPLC r isk committee), including:
◾
Risk appetite and risk profile: to review the key themes arising from the current and prospective macroeconomic, geopolitical, macro - prudential
and financial environment and their impact on the Company’s risk appetite and risk profi le.
◾
Conduct r isk: to receive an overview of the oversight and management of Conduct r isk across the Barclays Bank Group and the role of the
Compliance function in the management of Conduct r isk.
◾
Stress testing: the Risk Committee considered the 2019 Group Recovery Plan for BBPLC ahead of approval by the Board and the initial submission
of the Biennial Exploratory Scenario submission to the Bank of England.
◾
Deep dive on the Structured Products business: to provide the Risk Committee with an update on the governance processes embedded by the
Risk Function to ensure the structured products business is grown in a controlled manner.
◾
Certain important sovereign exposures of the bank.
◾
US credit c ard r isk: to inform the Risk Comm ittee on the risk profile and risk performance of the business within both current and stressed macro-
economic conditions; and continued progress in embedding the control environment.
◾
Strategic transactions: to review and approve strategic transactions abo ve standard thresholds, taking account of the impact on the Company’s
risk profile and overall risk appetite.
In 2020, the Risk Committee will continue to focus on the impact of the external environment on the risk profile of the Barclays Bank Group,
particularly as the negotiations on the future trade relationship with the EU progress and the broader geopolitical context evolves in the run
up to the US presidential election. The Risk Committee will continue to evaluate progress made by the Risk function in further developing its
capabilities and impact.
Leadership
Individual roles on the Board and their responsibilities are set out in the Company’s Charter of Expectations. This includes role profiles and the
behaviours and competencies required for each role on the Board, namely the Chair man , Non - Executive Directors, Executive Directors and
Committee Chairs. Pursuant to the Charter of Expectations, Non - Executive Directors provide effective oversight and scrutiny, strategic guidance
and constructive challenge whilst holding the Executive Directors to account against their agreed performance objectives. A copy of the Chart er of
Expectations can be found at home.barclays/corporate governance.
Appointment and r etirement of Directors
The appointment and retirement of Directors is governed by the Company’s Articles of Association (the A rticles), the Act 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 amongst the Directors. Any such Director holds office only until the next Annual General Me eting (‘AGM’) and may offer
himself/herself for re - election. All Directors will stand for election or re - election at the 2020 AGM.
All appointments to the Board and senior management are viewed through a diversity lens and are based on merit and objective criteria, which
focus on the skills and experience required for the Board’s effectiveness and the delivery of the Company’s strategy. Board appointments are made
following a rigorous and transparent proces s facilitated by the Nomination s Committee, with the aid of an external search consultancy firm. You
can read more about the work of the Nomination s Committee on pages 9 to 10. Diversity across the Barclays Group remains a key area of focus.
For more detail on the Barclays Bank Group actions to increase diversity please see page 15.
The Nominations Committee regularly reviews the composition of the Board, Board Committees and Executive Committee and the core
competencies, diversity and experience required. For the Board, it is standard practice to appoint any new non - executive director or chairman for
an initial three - year term subject to annual re - election at the AGM, which may be extended for up to a further three - year term. As such, non-
executive directors typ ically serve up to a total of six years.
Effectiveness
Appointments to the Board were made via a formal, rigorous and transparent process, based on merit, taking into account the skills, experience
and diversity needed on the Board in the context of the B arclays’ Group’s strategic direction. As at the date of this report, we have met the Board
gender diversity target of 33% with four female directors. The Board is committed to regularly reviewing its broad diversity profile.
The Company considers the composition of principal Board Committees to meet the independence criteria of the 2018 UK Corporate Governance
Code as it applied to BBPLC and there is appropriate cross - membership on the Board Committees to further promote effec tiveness.
All Directors are expected to commit sufficient time to fulfil their duties to the Company . This includes attending, and being well-prepared for, all
Board and Board Committee meetings, as well as making time to understand the business and meet with executives.
The Company’s
Charter of
Expectations
Governance
Corporate Governance Statement
Barclays Bank PLC 2019 Annual Report on Form 20-F 13
Director effectiveness assessment: disclosure of regulatory investigation
Barclays PLC has disclosed the following in relation to its annual director effectiveness assessment:
In accordance with the UK Corporate Governance Code, all of the current Directors of Barclays PLC will be submitting themselves for election or re-
election at the Annual General Meeting to be held on 7 May 2020, and will be unanimously recommended by the Barclays PLC Board for election or
re - election as appropriate. Further information in this regard will be set out in the Notice of Meeting which will be published in due course.
In deciding whether to recommend Jes Staley for re - election, the Board has carried out its usual formal and rigorous performance assessment,
which it does in respect of the effectiveness of each of the Directors. As part of its determination in respect of Mr. Staley, the Board has had regard
to media reports in the past 6 months that have highlighte d historical links between Mr. Staley and Jeffrey Epstein.
As has been widely reported, earlier in his career Mr. Staley developed a professional relationship with Mr. Epstein. In the summer of 2019, in light
of the renewed media interest in the relationship, Mr. Staley volunteered and gave to certain executives, and the Chairman, an explanation of his
relationship with Mr. Epstein. Mr. Staley also confirmed to the Board that he has had no contact whatsoever with Mr. Epstein at any time since
taking up his role as Barclays Group CEO in December 2015.
The relationship between Mr. Staley and Mr. Epstein was the subject of an enquiry from the Financial Conduct Authority (FCA), to which the
Company responded. The FCA and the Prudential Regulation Authority subsequently commenced an investigation, which is ongoing, into Mr.
Staley's characterisation to the Company of his relationship with Mr. Epstein and the subsequent description of that relationship in the Company’s
response to the FCA.
Based on a review , conducted with the support of external counsel, of the information available to us and representations made by Mr. Staley, the
Board (the Executive Directors having been recused) believes that Mr. Staley has been sufficiently transparent with the Company as regards the
nature and extent of his relationship with Mr. Epstein. Accordingly, Mr. Staley retains the full confidence of the Board, and is being unanimously
recommended for re - election at the Annual General Meeting.
The Board will continue to coope rate fully with the regulatory investigation, and will provide a further update as and when it is appropriate to do so.
Accountability
The Board is responsible for setting Barclays Bank Group risk appetite within the overall parameters set by the Barclays Group, that is, the level of
risk it is prepared to take in the context of achieving the Barclays’ Group strategic objectives. The ERMF is designed to identify and set minimum
requirements in respect of the main risks to achieving Barclays’ strategic obje ctives and to provide reasonable assurance that internal controls are
effective.
The Board, assisted by the Risk Committee, conducts robust assessments of the principal risks facing the Company , including those that would
threaten its business model, future performance, solvency or liquidity.
The Audit Committee oversees the effectiveness of BB PLC internal and external auditors. The Directors also review the effectiveness of the Barclays
Bank Group’s systems of internal control and risk management.
The Board has put in place processes to support the presentation to stakeholders of fair, balanced and understandable information.
Remuneration
The Remuneration Committee reviews and adopts the Barclays Group ’s Remuneration Policy for use in the Barclays Ban k Group. The purpose and
activities of which are contained in the Remuneration Committee report on page 10.
The Board has delegated responsibility for the consideration and approval of the remuneration arrangements of the Chairman, Executive Directors,
other senior executives and certain Barclays Bank Group employees to the Remuneration Committee. The Remuneration Committee when
considering the remuneration policies and practices will seek to ensure that they support the Company’s strategy and promote the long - term
success of the business and that they are aligned to successful delivery of the Barclays Group’s strategy. All executive and senior management
remuneration policies will only be developed in accordance with the Barclays Group’s formal and tran sparent procedures (ensuring that no Director
is involved in deciding his/her own remuneration outcome) and having regard to workforce remuneration and related policies and the alignment of
incentives and rewards with culture. All Remuneration Committee m embers will demonstrate independent judgement and discretion when
determining and approving remuneration outcomes. The Board as a whole, with the Non - Executive Directors abstaining, considers annually the
fees p aid to Non - Executive Directors.
Governance
Corporate Governance Statement
Barclays Bank PLC 2019 Annual Report on Form 20-F 14
Controls over financial reporting
A framework of disclosure controls and procedures is in place to support the approval of the financial statements of the Barclays Bank Group.
Specific governance committees are responsible for examining the financial reports and disclosures to ensure that they have been subject to
adequate verification and comply with applicable standards and legislation.
These committ ees report their conclusions to the Audit Committee, which debates its conclusions and provides further challenge. Finally, the Board
scrutinises and approves results announcements and the BBPLC PLC Annual Report, and ensures that appropriate disclosures h ave been made.
This governance process ensures that both management and the Board are given sufficient opportunity to debate and challenge the financial
statements of the Barclays Bank Group and other significant disclosures before they are made public.
A udit, Risk and Internal Control
The Company is committed to operating within a strong system of internal control that enables business to be transacted and risk taken without
exposure to unacceptable potential losses or reputational damage.
As referenced above, the Board is responsible for ensuring that management maintains 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.
Processes are in place for identifying, evaluating and managing the Principal Risks facing the Company. A key component of the framework is the
ERMF which supports the business in its aim to embed effective risk management and a strong risk management culture. The ERMF is designed to
identify and set minimum requirements, in respect of the main risks, to achieving the Company’s strategic objectives and to provide reasonable
assurance that internal controls are effective.
The effectiveness of the risk management and internal control systems is reviewed regularly by the Risk Committee and the Audit Committee (as
detailed above).
The Risk Committee is responsible for providing oversight and advice to the Board in relation to current and potential future risk exposures
examining reports covering the principal risks including those that would threaten its business mode l, future performance, solvency or liquidity, as
well as reports on risk measurement methodologies and risk appetite. Further detail of the work of the Risk Com mittee can be found on pages 10
to 12.
As referenced above, the Audit Committee carries out several duties, delegated to it by the Board, including oversight of financial reporting
processes, reviewing the effectiveness of internal controls, considering whistle-blowing arrangements and oversight of the work of the external and
internal auditors. Throughout the year ended 31 December 2019 and to date, the Company 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.
The Board together with the Audit Committee is responsible for ensuring the independent and effectiveness of the internal and external audit
functions. For this reason the Audit Committee members met regularly with the Head of Barcl ays Internal Audit and the External Audit Partner
without management present. Further detail of the work of the Audit Com mittee can be found on pages 8 to 9.
Management is responsible for establishing and maintaining adequate internal controls over financ ial reporting under the supervision of the
principal executive and financial officers, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements, in accordance with International Financial Reporting Standards (IFRS). 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 manageme nt and the respectiv e 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 de signed, have inherent limitations and may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that internal controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has assessed the internal control over financial reporting as of 31 December 2019. In making its assessment, management utilised
the criteria set out in the 2013 COSO framework and concluded that, based on its assessment, the internal control over financial reporting was
effective as of 31 December 2019.
Governance
Corporate Governance Statement
Barclays Bank PLC 2019 Annual Report on Form 20-F 15
The system of internal financial and operational controls is also subject to regulatory oversight in the UK and ov erseas. Further information on
supervision by the financial services regulators is provided under Supervision and Regulation in the Risk review section on pages 88 to 94.
Changes in internal control over financial reporting
There have been no changes in the Barclays 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 Barclays Group’s internal control over financial reporting.
Executive Committee
During 2019, the Executive Committee membership included the BBPLC President, Chief Financial Officer, Chief Risk Officer, and leaders of each
business unit, Human Resources, Legal and Compliance. The Executive Committee meets weekly and is chaired by the Chief Executive Officer. In
addition to the day - to- day management of the Company , the Executive Committee supports the Chief Executive Officer in ensuring that the values,
strategy and culture align, are implemented and are com municated consistently to colleagues – for example through regular leadership team
conferences,
roadshows and communications that are available to all colleagues
.
Non -Executive Directors time commitment and conflict
Non - Executive Directors, including the Chairman, are informed of the minimum time commitment prior to their appointment and they are required
to devote sufficient time to the Company to discharge their responsibilities effectively.
The time commitments of Directors are considered by the Boar d on appointment and are reviewed when appropriate. External appointments must
be agreed with the Chairman and disclosed to the Board, before appointment, with an indication of the time involved The Board is satisfied that
there are no Directors whose time commitment is considered to be a matter for concern
In accordance with the Act and the Articles of Association, the Board has authority to authorise conflicts of interest, and this ensures that the
influence of third parties does not compromise or overri de independent judgement of the Board. The Company Secretary maintains a conflicts
register, which is a record of actual and potential conflicts, together with any Board authorisation of the conflict.
Training and induction
During 2019 , Directors met regularly with senior management, as well as attending town halls and senior leadership gatherings.
In addition,
Directors are regularly provided with the opportunity to take part in ongoing training and development and can also request specific training they
may consider necessary or useful. During 2019 , the Directors received training on legal and regulatory developments, including
w histleblowing and
the Senior Manager’s Regime.
There is an induction programme for all new Directors which is tailored to their specific experience and knowledge, providing access to all parts of
the business, to support Directors in understanding the nature of the business and the key issues the Company faces. When a Director joins a Board
Committee, the schedule includes an induction to the operation of that Board Committee.
Diversity and i nclusion
The Board recognises the importance of ensuring that there is broad diversity among the Directors inclusive of, but not limited to, gender, ethnicity,
geography and business experience. In addition, the Company aims to ensure that employees of all backgrounds are treated equally and have the
opportunity to be successful. The Barclays Group’s G lobal Diversity and Inclusion (D&I) strategy sets objectives, initiatives and plans across five
core pillars: Gender, LGBT+, Disability, Multicultural and Multigenerational, in support of that ambition. Further information on the Barclays Group’s
Board Diversity Policy and D&I strategy can be found on page 62 of the Barclays PLC Annual Report 2019.
Governance
Directors’ report
Barclays Bank PLC 2019 Annual Report on Form 20-F 16
The Directors present their report together with the audited accounts for the Company for the year ended 31 December 2019.
BBPLC has addressed the Non - Financial Reporting requirements contained in sections 414CA and 414CB of the Act through the disclosure
contained in the Barclays PLC Annual Report on pages
39
to 40
.
Act, and as noted in this Directors’ Report, to include certain matters in its Strategic Report that would otherwise be disclosed in this Directors’
Report.
The particulars of important events affecting the Company since the financial year end can be found in the notes to the financial statements.
Other information that is relevant to the Directors’ Report, and which is incorporated by reference into this re port, can be located at:
Pages
Corporate Governance Report
3
Risk Management
25
Principal Risks
38
Disclosures required pursuant to Large and Medium -sized Companies and Groups (Accounts and Reports) Regulations 2008 as updated
by Companies (Miscellaneous Reporting) 2018 Regulations can be found on the following pages:
Engagement with employees (Sch.7 Para 11 and 11A 2008/2018 Regs and S172 (1) Statement)
21
Policy concerning the employment of disabled persons (Sch.7 Para 10 2008 Regs)
21
Financial Instruments (Sch.7 Para 6 2008 Regs)
38
Hedge accounting policy (Sch.7 Para 6 2008 Regs)
127
Profits and dividends
The results of the Barclays Bank Group show
statutory profit after tax of £2,780m (2018: £1,010m
1
). The Barclays Bank Group had net assets of
£50,615m at 31 December 2019 (2018: £ 47,711m ).
Barclays PLC will pay a full year dividend in respect of 2019 of 6p
per ordinary share on
3
April
2020 to shareholders on the share register on
28
February 2020. The Company will pay a dividend to Barclays PLC in order to fund its external dividend payment. The Directors of
BBPLC
recommend a dividend of no more than
£263m
to satisfy this requirement. Further details on total dividends on ordinary shares paid in 2019 are
set out in Note 9
to the financial statements. Dividends paid on preference shares for the year ended 31 December 2019 amounted to £41m (2018:
£ 204 m).
Share Capital
There was no increase in ordinary share capital during the year. Barclays PLC owns 100% of the issued ordinary shares. There are no restrictions on
the transfer of ordinary shares or agreements between holders of ordinary shares known to the Company which may result in restrictions on the
transfer of securities or voting rights. Further information on the Company’s share capital can be found in Note 27
of the financial statements.
Powers of Directors to issue or buy back the Company’s shares
The powers of the Directors are determined by the Act and the Company’s Articles of Association. No shares were issued or bought back in 2019.
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 2019 AGM. It will be proposed at the 2020 AGM that the Directors be granted new authorities to allot and buy-
back shares.
Repurchase of preference shares
No p reference shares were redeem ed by the Company during 2019.
1
previously recorded within retained earnings. Comparatives have been restated, reducing the tax charge for FY18 by £175m. Further detail can be found in Note 1.
Governance
Directors’ report
Barclays Bank PLC 2019 Annual Report on Form 20-F 17
Directors
The list of current Directors of the Company can be found in the Corporate Governance Statement. Changes to Directors during the year and up to
the date of signing this report are set out below.
Name
Role
Effective date of appointment/resignation
Mike Ashley
Non - Executive Director
Appointed 25 September 2019
Peter Bernard
Non - Executive Director
Resigned 25 September 2019
Tim Breedon
Non - Executive Director
Appointed 25 September 2019
Mary Anne Citrino
Non - Executive Director
Appointed 25 September 2019
Steven Ewart
Executive Director
Resigned 25 September 2019
Mohamed A. El-Erian
Non - Executive Director
Appointed 1 January 2020
Mary Francis
Non - Executive Director
Appointed 25 September 2019
Dawn Fitzpatrick
Non - Executive Director
Appointed 25 September 2019
Sir Gerry Grimstone
Non - Executive Director
Resigned 28 February 2019
Nigel Higgins
Non - Executive Director
Appointed 1 March 2019
Helen Keelan
Non - Executive Director
Resigned 25 September 2019
Matthew Lester
Non - Executive Director
Appointed 25 September 2019 and
Resigned 1 January 2020
Tushar Morzaria
Executive Director
Appointed 25 September 2019
Maria Richter
Non - Executive Director
Resigned 25 September 2019
Diane Schueneman
Non - Executive Director
Appointed 25 September 2019
Jeremy Scott
Non - Executive Director
Resigned 25 September 2019
Jes Staley
Executive Director
Appointed 26 March 2019
Tim Throsby
Executive Director
Resigned 26 March 2019
Alexander Thursby
Non - Executive Director
Resigned 25 September 2019
Helene Vletter Van Dort
Non - Executive Director
Resigned 25 September 2019
Directors’ i ndemnities
Qualifying third party indemnity provisions (as defined by section 234 of the Act) were in force during the course of the financial year ended 31
December 2019 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’ & 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 Act) were in force during the course of the financial year ended
31 December 2019 for the benefit of the then Directors, and at the date of this report are in force for the benefit of Directors of Barc lays 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’s activities as Trustee of the Barclays Bank UK Retirement Fund.
Similarly, qualifying pension scheme indemnities were in force during 2019 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 Int ernational Pension Scheme (No.1),
and Barclays PLC Funded Unapproved Retirement Benefits Scheme. The Directors of the Trustee are indemnified against liability incurred in
connection with the Company’s activities as Trustee of the schemes above.
Politica l donations
The Barclays Bank Group did not give any money for political purposes in the UK, the rest of the EU or outside 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. Details of any political contributions made by the wider Barclays Group can be found in the 2019 Barclays PLC Annual Report.
Environment
Barclays focuses on addressing environmental issues where we believe we have the greatest potential to make a difference. We focus on managing
our own carbon footprint and reducing our absolute carbon emissions, developing products and services to help enable the transition to a low-
carbon economy, and man aging 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 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.
Disclosure of global greenhouse gas emissions is done at a Barclays Group level with information available in the Barclays PLC 2019 Annual Report
with fuller disclosure available on our website at home.barclays.com/citizenship.
Governance
Directors’ report
Barclays Bank PLC 2019 Annual Report on Form 20-F 18
Engagement with customers, suppliers and others in a business relationship with the Company
Customers and clients are the heart of the Barclays business – without them, Barclays would not exist. Barclays works hard to understand the
needs of its customers and clients to inform and improve its products and services. Barclays engages with them in a variety of ways, including
conducting a wide - range of customer and client research; using the invaluable insight to inform bu siness decisions on the development of services
and initiatives.
As an illustration, during 2019, the Company continued the roll out of the Corporate Bank’s European platform, providing clients with a consistent
digital cash management offering and servicing model across the continent and launched BARX as a newly integrated, cross - asset electronic
trading platform to create a better experience for Investment Bank clients.
Barclays supply chain helps it deliver for all of its customers, clients and stakeholders. Barclays engages with its suppliers through its contractual
arrangements and requirements to ensure suppliers adhere to the Barclays’ Supplier Control Obligations and the Supplier Code of Conduct. From
such engagement suppliers have identified prom pt payment as critical. Barclays is a signatory to the Prompt Payment Code in the UK and is
committed to paying its suppliers within clearly defined terms, and to ensuring there is a proper process for dealing with any issues that may arise.
Please see pag e 33 of the Barclays PLC 2019 Annual Report for detail on Barclays’ supplier payment on - time performance in 2019.
For further detail on customer, client and supplier engagement is set out on page 33 of the Barclays PLC 2019 Annual Report.
Branches and Country-by-Country r eporting
The Barclays Bank Group operates through branches, offices and subsidiaries in the UK and overseas. Those branches are in a number of different
jurisdictions including in Hong Kong, Singapore and New York.
The Company is exemp t from publishing information required by The Capital Requirements (Country - by - Country Reporting) Regulations 2013 as
this information is published by its parent Barclays PLC. This information is due to be published on or around 13 February 2020 and will b e available
at home.barclays.com/citizenship.
Research and d evelopment
In the ordinary course of business, the Barclays Bank Group develops new products and services in each of its business divisions.
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.
The Auditors
The BPLC audit committee reviews the appointment of the external auditors, as well as their relationship with the Barclays
Group, including
monitoring the Barclays Group’s use of the external auditors for non - audit services and the balance of audit and non - audit fees paid to them. The
BBPLC Audit Committee also monitors the use of the external auditors for non - audit services within BBPLC. More details on this can be found in
Note
40
to the financial statements.
An external audit tender was conducted in 2015 and the decision was made to appoint KPMG as Barclays Group’s external auditor with effect from
the 2017 financial year, with PwC resigning as Barclays Group’s statutory auditor at the conclusion of the 2016 audit.
The Company is in compliance with the requirements of The Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of
Competitive Tender Processes and Audit Committee Responsibilities) Order 2014, which relates to the frequency and governance of tenders for the
appointment of the external auditor and the setting of a policy on the provision of non - audit services.
Provided that KPMG continue to maintain their independence and objectivity, and the BPLC audit committee remains satisfied with their
performance, the Barclays Group has no intention of appointing an alternative external auditor before the end of the current required period of 10
years.
Non -audit s ervices
In order to safeguard the auditor’s independence and objectivity, the Barclays Group has in place a policy setting out the circumstances in which
the Auditor may be engaged to provide services other than those covered by the Barclays Group audit. The Barcl ays Group Policy on the Provision
of Services by the Group Statutory Auditor (the Policy) applies to all Barclays’ subsidiaries and other material entities over which Barclays has
significant influence. The core principle of the Policy is that non - audit services (other than those legally required to be carried out by the Barclays
Group’s Auditor) should only be performed by the Auditor in certain, controlled circumstances. The P olicy sets out those types of services that are
strictly prohibited and those that are allowable in principle. Any service types that do not fall within either list are considered by the chairman of the
BPLC audit c ommittee a case-by - case basis, supported by a risk assessment provided by management.
Under the policy the BPLC audit c o mmittee has pre - approved all allowable services for which fees are less than £100,000. All requests to engage
the Auditor are assessed by independent management before work can commence. Requests for allowable service types in respect of which the
fees are expected to meet or exceed the above threshold must be approved by the chairman of the BPLC audit committee before work is permitted
to begin. Services where the fees are expected to be £250,000 or higher must be approved by the BPLC audit committee as a whole. All expenses
and disbursements must be included in the fees calculation. More information on this can be found in the Barclays PLC 2019 Annual Report.
Governance
Directors’ report
Barclays Bank PLC 2019 Annual Report on Form 20-F 19
The fees payable to KPMG for the year ended 31 December 2019 amounted to £35m, of which £4m
(2018: £4m) was payable in respect of non-
audit services. A breakdown of the fees payable to the auditor for statutory audit and non - audit work can be found in Note 40.
Disclosure of i nformation 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 of 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
Act and should be interpreted in accordance with and subject to those provisions.
Directors’ responsibilities
Th e following statement, which should be read in conjunction with the auditors’ report set out on page 96, is made with a view to distinguishing for
shareholders the respective responsibilities of the directors and of the auditors in relation to the accounts .
Going concern
BBPLC’s business activities, financial position, capital, factors likely to affect its future development and performance and its objectives and policies
in managing the financial risks to which it is exposed are discussed in the Strategic Report section of the Barclays Bank Annual Report and the Risk
Review section.
The Directors considered it appropriate to prepare the financial statements on a going concern basis.
In preparing each of the Barclays Bank Group and Company financial statements, the Directors are required to:
●
assess the Barclays Bank Group and Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern; and
●
use the going concern basis of accounting unless they either intend to liquidate the Barclays Bank Group or to cease operations, or have no
realistic alternative but to do so.
The Barclays Bank Group’s business activities, financial position (including the implications of the UK’s decision to leave the European Union ),
capital, factors likely to affect its future development and performance and its objectives and policies in managing the financial risks to which it is
exposed are discussed in the risk management sections. The Directors have evaluated these risks in the preparation of the
financial statements and consider it appropriate to prepare the financial statements on a going concern basis.
Preparation of accounts
The Directors are required by the Act to prepare the Company and the Barclays Bank Group accounts for each financial year and, with regards to
Barclays Bank Group accounts, in accordance with article 4 of the IAS regulation. The Directors have prepared these accounts in accordance with
IFRS as adopted by the EU. Under the Act, the Directors must not approve the accounts unless they are satisfied that they give a true and fair view
of the state of affairs of the Barclays Bank Group and the Company and of their profit or loss for that period.
The Directors consider that, in preparing the financial statements the Barclays Bank Group and the Company has used appropriate accounting
policies, supported by reasonable judgements and estimates, and that all accounting standards which they consider to be applicable have been
followed.
The Directors 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 are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
Directors’ r esponsibility s tatement
The Directors have respon sibility for ensuring that the Company and the Barclays Bank Group keeps accounting records which disclose with
reasonable accuracy the financial position of the Company and the Barclays Bank Group and which enable them to ensure that the accounts
comply w ith the Act.
The Directors are also responsible for preparing a Strategic Report, Directors’ Report and Corporate Governance Statement in accordance with
applicable law and regulations.
The Directors are responsible for the maintenance and integrity of the Annual Report and Financial Statements as they appear on 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 Company and to
prevent and detect fraud and other irregularities.
The Directors, whose names are set out on page 7, 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 consolida tion taken as a whole; and
Governance
Directors’ report
Barclays Bank PLC 2019 Annual Report on Form 20-F 20
(b)
the management report, in Strategic Report within Barclays Bank PLC Annual Report on pages 1 to 9, which is incorporated in the Directors’
Report, 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
Stephen Shapiro
Company Secretary
12 February 2020
Barclays Bank PLC
Registered in England. Company No. 1026167
Governance
Our people and culture
Barclays Bank PLC 2019 Annual Report on Form 20-F 21
Our people and culture
We believe that the culture of Barclays is built and shaped by the thousands of professionals around the world who serve our customers and clients
with a shared purpose and values. Our people make a critical difference to our success, and our investment in them protects and strengthens our
culture. The following sub - sections are therefore consistent with those detailed in the People Section of the Barclays PLC Annual Report and
figures mentioned are for Barclays PLC Group other than specifically mentioned.
Colleague engagement
We have an established approach to engaging colleagues, based on best practice set out by the UK’s Financial Reporting Council and in line with
new governance requirements in 2019. This ensures that we understand their perspective, take it into account in our decision making at the most
senior level, and share with them our strategy and progress. That extends to those who work for us indirectly as well, such as contractors, although
in a more limited way. In 2020, our supplier code of conduct will require these organisations to demonstrate that they have an effective workforce
engagement approach of their own.
It’s important to us that our Board members are engaged with our people – directly, and indirectly through our management team. We regularly
report on our colleague engagement activity to our Boards.
Together with direct engagement, this comprehensive reporting approach and dedicated time at board meetings helps our Board take the issues of
interest to our colleagues into account in their decision making. This has enabled them to confirm that our workforce engagement approach is
effective.
Listening to our people
Our regular colleague survey formally captures the views of all our people and is a key part of how we track colleague engagement, alongside more
granular colleague sentiment tracking across our businesses. Barclay Bank Group’s overall engagement score reduced slightly to 73% in 2019, but
77% of our colleagues would still recommend Barclays as a good place to work.
The results from the survey are an important part of the conversati ons our leaders have about how we run the business, and it’s a specific focus for
our Executive Committee and our Board.
We monitor our culture across the organisation, and in individual business areas, through Culture Dashboards. These combine colleague survey
data with other metrics about our business, so that we can see the effect our people’s engagement has on our perfor mance, and on the continued
strength of our culture. 82% of our people have heard or read senior leaders across the Group talking about the character and culture of Barclays.
Keeping our people informed
In addition to these data sources, our leaders, inc luding our Board, engage face to face with colleagues to hear what they think. That might be
through site visits, large - scale town halls, training and development activity, mentoring, informal breakfast sessions, committee membership,
diversity and wellbeing programmes, or focus and consultative groups.
We make sure we’re regularly keeping everyone up to date on the strategy, performance and progress of the organisation through a strategically-
coordinated, multichannel approach across a combination of leader - led engagement, and digital and print communication, including blogs, vlogs
and podcasts.
We also engage with our people collectively through a strong and effective partnership with Unite, as well as the Barclays Group European Forum,
which represent s all Barclays Group colleagues within the European Union.
These conversations help us to deliver things like a collective pay deal for our Unite covered colleagues, who represent 84% of our UK - based
colleagues, as well as more complex business change an d our long - term focus on colleague wellbeing. We regularly brief our union partners on the
strategy and progress of the business and seek their input on ways in which we can improve the colleague experience of working in Barclays. The
collective bargaining coverage of Unite in the UK represents c.52% of our global workforce.
Building a supportive culture
Diversity of thought and experience works best when everyone feels included. People who feel they can be themselves at work are happier and
more producti ve, so we believe that creating an inclusive and diverse culture isn’t just the right thing to do, but is also best for our business.
Our policies require managers to give full and fair consideration to those with a disability on the basis of their aptitudes and abilities; both when
hiring and through ongoing people management, as well as ensuring opportunities for training, career development and promotion are available to
all. As part of our Disability Confident scheme, we actively encourage application s from people with a disability, or a physical or mental health
condition.
We encourage our people to benefit from Barclays’ performance by enrolling in our share plans, further strengthening their commitment to the
organisation.
Risk review
Contents
Barclays Bank PLC 2019 Annual Report on Form 20-F 22
The management of risk is a critical underpinning to the execution of the Barclays Bank Group’s strategy. The material
risks and uncertainties the Barclays Bank Group faces across its business and portfolios are key areas of management
focus.
Risk management strategy
Page
Overview of the Barclays Bank Group’s approach to
risk management.
◾
Enterprise Risk Management Framework (ERMF)
◾
Segregation of duties – the “Three Lines of Defence” model
◾
Principal risks
◾
Risk appetite for the principal risks
◾
Risk committees
◾
Barclays’ risk culture
25
25
25
25
26
27
Material existing and emerging risks
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
28
◾
Credit risk
31
◾
Market risk
32
◾
Treasury and capital risk
32
◾
Operational risk
33
◾
Model risk
34
◾
Conduct risk
34
◾
Reputation risk
35
◾
Legal risk and legal, competition and regulatory matters
36
Climate change risk management
Overview of the Barclays Bank Group’s approach to
managing climate change risk.
◾
Overview, organisation and structure
◾
Risk management policy
37
37
Principal risk management
The Barclays Bank Group’s approach to risk
management for each principal risk with focus on
organisation and structure and roles and
responsibilities.
◾
Credit risk management
38
◾
Market risk management
39
◾
Treasury and capital risk management
39
◾
Operational risk management
41
◾
Model risk management
42
◾
Conduct risk management
42
◾
Reputation risk management
43
◾
Legal risk management
43
Risk performance
Credit risk:
Group from the failure of clients, customers or
counterparties, including sovereigns, to fully honour
their obligations to the Barclays Bank Group,
including the whole and timely payment of principal,
interest, collateral and other receivables.
◾
Credit risk overview and summary of performance
45
◾
Maximum exposure and effects of netting, collateral and risk transfer
46
◾
Expected credit losses
49
◾
Movement in gross exposure and impairment allowance including
provisions for loan commitments and financial guarantees
50
◾
Measurement uncertainty and sensitivity analysis
55
◾
Analysis of the concentration of credit risk
61
◾
Approach to the management and representation of credit quality
63
◾
Analysis of specific portfolios and asset types
67
Risk review
Contents
Barclays Bank PLC 2019 Annual Report on Form 20-F 23
Risk performance continued
Page
Market risk:
adverse changes in the value of the Barclays Bank
Group’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.
◾
Market risk overview and summary of performance
◾
Review of management measures
69
69
Treasury and capital risk – Liquidity:
The risk that the Barclays Bank Group 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.
◾
Liquidity risk overview
◾
Liquidity risk stress testing
◾
Contractual maturity of financial assets and liabilities
72
72
72
Treasury and capital risk – Capital:
The risk that the Barclays Bank Group 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 also includes the
risk from the Barclays Bank Group’s pension plans.
◾
Capital risk overview
77
Treasury and capital risk – Interest rate risk in the
banking book :
The risk that the Barclays Bank
Group is exposed to capital or income volatility
because of a mismatch between the interest rate
exposures of its (non - traded) assets and liabilities.
◾
Interest rate risk in the banking book overview and summary of
performance
◾
Net interest income sensitivity
◾
Analysis of equity sensitivity
◾
Volatility of the fair value through other comprehensive income
( FVOCI ) portfolio in the liquidity pool
81
81
82
83
Operational risk:
The risk of loss to the Barclays
Bank Group 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.
◾
Operational risk overview and summary of performance
◾
Operational risk profile
87
87
Model risk:
The risk of the potential adverse
consequences from financial assessments or
decisions based on incorrect or misused model
outputs and reports.
◾
Model risk overview and summary of performance
87
Conduct risk:
The risk of detriment to customers,
clients, market integrity, effective competition or
Barclays from the inappropriate supply of financial
services, including instances of wilful or negligent
misconduct.
◾
Conduct risk overview and summary of performance
87
Reputation risk:
The risk that an action, transaction,
investment, event, decision, or business relationship
will reduce trust in the Barclays Bank Group’s
integrity and/or competence.
◾
Reputation risk overview and summary of performance
87
Risk review
Contents
Barclays Bank PLC 2019 Annual Report on Form 20-F 24
Page
Legal risk:
The risk of loss or imposition of
penalties, damages or fines from the failure of the
Barclays Bank Group to meet its legal obligations
including regulatory or contractual requirements.
◾
Legal risk overview and summary of performance
87
Su pervision and regulation
The Barclays Bank Group’s operations, including
its overseas offices, subsidiaries and associates,
are subject to a significant body of rules and
regulations.
◾
Supervision of the Barclays Bank Group
◾
Global regulatory developments
◾
Financial regulatory framework
88
88
89
Risk review
Risk management
Barclays’ risk management strategy
Barclays Bank PLC 2019 Annual Report on Form 20-F 25
The Barclays Bank Group’s risk management strategy
This section introduces the Barclays Bank Group’s approach to managing and identifying risks, and for fostering a strong risk culture.
Enterprise Risk Management Framework (ERMF)
The ERMF sets the strategic approach for risk management by defining standards, objectives and responsibilities for all areas of the Barclays Group.
It is approved by the Barclays PLC Board on recommendation of the Barclays Group Chief Risk Officer (CRO) ; it is then adopted by the Barclays Bank
Group with modifications where needed. It supports senior management in effective risk management and developing a strong risk culture.
The ERMF sets out:
◾
Segregation of duties: The ERMF defines a Three Lines of Defence model .
◾
Principal risks faced by the Barclays Bank Group : This list guides the organisation of the risk management function, and the identification,
management and reporting of risks.
◾
Risk appetite requirements : This helps define the level of risk we are willing to undertake in our business.
◾
Roles and responsibilities for risk management: The ERMF sets out the accountabilities of the Barclays Bank Group CEO and other senior
managers, as well as the Barclays Bank Group committees.
The ERMF is complemented by frameworks, policies and standards which are mainly aligned to individual Principal Risks:
◾
Frameworks cover the management approach for a collection of related activities and define the associated policies used to govern them.
◾
Policies set out principles and other core requirements for the activities of the Barclays Bank Group . Policies describe “what” must be done.
◾
Standards set out the key control objectives that describe how the requirem ents set out in the p olicy are met, and who needs to carry them out.
Standards describe “how” controls should be undertaken.
Segregation of duties - the "Three Lines of Defence" model
The ERMF sets out a clear lines of defence model. All colleagues are responsible for understanding and managing risks within the context of their
individual roles and responsibilities, as set out below:
◾
First line comprises all employees engaged in the revenue generating and client facing areas of the Barclays Bank Group an d all associated
support functions, including Finance, Treasury, and Human Resources. The first line is responsible for identifying and managing the risks they
generate, establishing a control framework, and escalating risk events to Risk and Compliance.
◾
Second line is comprised of the Risk and Compliance functions. 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 r isk appetite of the Barclays Bank Group , and to monitor the performance of the
first line against these limits and constraints. Note that limits for a number of first line activities, related to o perational r isk, will be set by the first
line and overseen by the Chief Con trols Office. These will remain subject to supervision by the second line.
◾
Third line of defence is Internal Audit, who are responsible for providing independent assurance over the effectiveness of governance, risk
management and control over current, systemic and evolving risks.
◾
The Legal function provides support to all areas of the bank and is not formally part of any of the three lines. However , it is subject to second line
oversight.
Principal risks
The ERMF identifies eight principal risks (see pages 31 to 36) and sets out associated responsibilities and expectations around risk management.
Each of the principal r isks is overseen by an accountable executive within the Barclays Group who is responsible for the framework, p olicies and
standards that detail the related requirem ents. Risk reports to executive and Board committees are clearly organised by p rincipal r isk. In addition,
certain risks span more than one principal risk; these are also subject to the ERMF and are reported to executive and Board committees.
Risk appetite for the principal risks
Risk appetite is defined as the level of risk which the Barclays Bank Group’s businesses are prepared to accept in the conduct of their activities. It
sets the ‘tone from the top’ and provides a basis for ongoing dialogue between management and Board with respect to the Barclays Bank Group’s
current and evolving risk profile, allowing strategic and financial decisions to be made on an informed basis.
The Barclays Group ’s total risk appetite and its allocation to the Barclays Bank G roup are supported by limits to control exposures and activities that
have material concentration risk implications.
Risk review
Risk management
Barclays’ risk management strategy
Barclays Bank PLC 2019 Annual Report on Form 20-F 26
Risk Committees
Barclays Bank Group Product/Risk Type Committees consider risk matters relevant to their business, and escalate as required to the Barclays Group
Risk Committee, whose Chairman, in turn, escalates to the Barclays Bank PLC Board Committees and the Barclays Bank PLC Board.
There are two Board - level forums which oversee the application of the ERMF and review and monitor r isk across Barclays Bank PLC. These are: the
Barclays Bank PLC Board Risk Committee and the Barclays Bank PLC Board Audit Committee. Additionally, the Barclays Bank PLC Board
Remuneration Committee oversees pay practices focusing on aligning pay to sustainable performance in line with p olicies. Finally, the Barclays
Bank PLC Board receives regular information on the risk profile of Barclays Bank Group, and has ultimate responsibility for risk appetite and capital
plans, within the parameters set by the Barc lays PLC Board.
◾
The Barclays Bank PLC Board:
approved by the B arclays PLC Board and disseminated across legal entities, including the Barclays Bank Group . The Barclays Bank Group may
choose to adopt a lower risk appetite than allocated to it by the Barclays Group.
The Barclays Bank PLC Board is also responsible for the adoption
of the ERMF.
◾
The Barclays Bank PLC Board Risk Committee (BRC
): The BRC monitors Barclays Bank Group’s risk profile against the agreed appetite. Where
actual performance differs from expectations, the actions taken by management are reviewed to ascertain that the BRC is comfortable with them.
The Barclays Bank Group CRO regularly presents a report to the BRC summarising developments in the risk environment and performance trends
in the key portfolios. The BRC also reviews certain key risk methodol ogies, the effectiveness of risk management, and the Barclays Bank Grou p
risk profile, including the material issues affecting each business portfolio and forward risk trends. The committee also commissions in- depth
analyses of significant risk topics, which are presented by the Barclays Bank Group CRO or senior r isk managers in the businesses.
All members are independent non - executive Directors . The Chairman of the BRC also sits on the BAC.
◾
The Barclays Bank PLC Board Audit Committee (BAC):
material control issues of significance, and on accounting judgements (including impairment). It also receives a half-yearly review of the
adequacy of impairment allowan ces, which it reviews relative to the risk inherent in the portfolios, the business environment and Barclays Bank
Group policies and methodologies. The Chairman of the BAC also sits on the BRC.
◾
The Barclays Bank PLC Board Remuneration Committee (RemCo):
risk profile, and proposals on ex - ante and ex - post risk adjustments to variable remuneration. These inputs are considered in the setting of
performance incentives.
A small number of risk management forums, supported by reporting processes, include representation from the Barclays Group risk management
executives, as well as from the operating entities (including the Barclays Bank Group ) as appropriate. This is typically to consider matters that are
relevant to the risk profile of the Barclays Group, and/or where it is appropriate to make decisions that apply uniformly across the Barclays Group
(for instance, the Barclays Group Impairment Committee approves impairment results).
Role o f the Barclays Group Risk Management Processes and Forums in the Barclays Bank Group
The Barclays Group Risk teams and Board Committees conduct risk management activity, and oversight, in respect of the Barclays Bank Group:
◾
The Barclays Group Board allocates a portion of the overall risk appetite to the Barclays Bank Group;
◾
Certain Barclays Group Committees and executives review, and take decisions on, matters, events or transactions originating in the Barclays Bank
Group that are relevant to the risk profile of the Barclays Group ;
Risk review
Risk management
Barclays’ risk management strategy
Barclays Bank PLC 2019 Annual Report on Form 20-F 27
◾
Barclays Group - wide risk policies are owned by the Barclays Group Risk Function teams, and adopted by the Barclays Bank Group. Entity-specific
addenda are agreed with the Barclays Group where local regulations would otherwi se preclude adoption, or to clarify or emphasise particular
aspects.
Barclays’ risk culture
Risk culture can be defined as the norms, attitudes and behaviours related to risk awareness, risk taking and risk management . This is reflected in
how the Barclays Bank Group identifies, escalates and manages risk matters.
The Barclays Bank Group is committed to maintaining a robust risk culture in which:
◾
management expect, model and reward the right behaviours from a risk and control perspective;
◾
colleagues identify, manage and escalate risk and control matters, and meet their responsibilities around risk management.
Specifically, all employees regardless of their positions, functions or locations must play their part in the Barclays Bank Group’s risk managem ent.
Employees are required to be familiar with risk management policies which are relevant to their responsibilities, know how to escalate actual or
potential risk issues, and have a role - appropriate level of awareness of the risk management process as de fined by the ERMF.
Our Code of Conduct – the Barclays Way
Globally, all colleagues must attest to the “Barclays Way”, our Code of Conduct, and comply with all frameworks, policies and standards applicable
to their roles. The Code of Conduct outlines the purpose and values which govern our “Barclays Way” of working across our business globally. It
constitutes a reference point covering the aspects of colleagues’ working relationships, with other Barclays employees, customers and clients,
governments and regulators, business partners, suppliers, competitors and the broader community.
Risk review
Material existing and emerging risks
Barclays Bank PLC 2019 Annual Report on Form 20-F 28
Material existing and emerging risks to the Barclays Bank Group’s future performance
The Barclays Bank Group has identified a broad range of risks to which its businesses are exposed . Material risks are those to which senior
management pay particular attention and which could cause the delivery of the Barclays Bank Group’s strategy, results of operations, financial
condition and/or prospects to differ materially from expectations. Emerging risks are those which have unknown components, the impact of
which could crystallise over a longer time peri od. In addition, certain other factors beyond the Barclays Bank Group’s control, including escalation
of terrorism or global conflicts, natural disasters, epidemic outbreaks and similar events, although not detailed below, could have a similar impact
on the Barclays Bank Group.
Material existing and emerging risks potentially impacting more than one principal risk
i)
Business conditions, general economy and geopolitical issues
The Barclays Bank Group’s operations are subject to potentially unfavourable global and local economic and market conditions, as well as
geopolitical developments, which may have a material effect on the Barclays Bank Group’s business, results of operations, financial condition and
prospects.
A deterioration in global or local economic and market conditions may lead to (among other things) : (i) deteriorating business, consumer or
investor confidence and lower levels of fixed asset investment and productivity growth, which in turn may lead to lower client activity, including
lower demand for borrowing from creditworthy customers; (ii) higher default rates, delinquencies, write- offs and impairment charges as
borrowers struggle with the burden of additional debt; (iii) subdued asset prices and payment patterns, including the value of any collateral held by
the Barclays Bank Group; (iv) mark - to- market losses in trading portfolios resulting from changes in factors such as credit ratings, share prices and
solvency of counterparties; and (v) revisions to calculated expected credit losses (ECLs) leading to increases in impairment allowances. In addition,
the Barclays Bank Group’s ability to borrow from other financial institutions or raise funding from external investors may be affected by
deteriorating economic co nditions and market disruption.
Geo political events may lead to further financial instability and affect economic growth. In particular:
◾
In the UK , the decision to leave the European Union (EU) may give rise to further economic and political consequences including for investment
and market confidence in the UK and the remainder of EU . See “(ii) Process of UK withdrawal from the EU ” below for further details.
◾
A significant proportion of the Barclays Bank Group’s portfolio is located in the US, including a major credit card portfolio and a range of
corporate and investment banking exposures. The possibility of significant continued changes in US policy in certain sectors (including trade,
healthcare and commodities), may have an impact on the Barclays Bank Group’s associated portfolios. Stress in the US economy, weakening
GDP and the associated exchange rate fluctuations, heightened trade tensions ( such as the current dispute between the US and China) , an
unexpected rise in unemployment and/or an increase in interest rates could lead to incre ased levels of impairment, resulting in a negative
impact on the Barclays Bank Group’s profitability.
◾
Global GDP growth weakened in 2019, as elevated policy uncertainty weighed on manufacturing activity and investment. As a result, a number
of central bank s, most notably the Federal Reserve and European Central Bank ( ECB) , pursued monetary easing. Growth is expected to stabilise
in 2020, but macroeconomic risks remain skewed to the downside, while concerns around the efficacy of existing policy tools to cou nter these
risks persist. An escalation in geopolitical tensions, increased use of protectionist measures or a disorderly withdrawal from the EU may
negatively impact the Barclays Bank Group’s business in the affected regions.
◾
In China the pace of credit growth remains a concern, given the high level of leverage and despite government and regulatory action. A stronger
than expected slowdown could result if authorities fail to appropriately manage growth during the transition from manufacturing towards
serv ices and the end of the investment and credit - led boom. Deterioration in emerging markets could affect the Barclays Bank Group if it results
in higher impairment charges via sovereign or counterparty defaults.
ii)
Process of UK withdrawal from the EU
The manner in which the UK withdraws from the EU will likely have a marked impact on general economic conditions in the UK and the EU. The
UK’s future relationship with the EU and its trading relationships with the rest of the world could take a number of years to resolve. This may lead
to a prolonged period of uncertainty, unstable economic conditions and market volatility, including fluctuations in interest rates and foreign
exchange rates.
Whilst the exact impact of the UK’s withdrawal from the EU is unk nown, the Barclays Bank Group continues to monitor the risks that may have a
more immediate impact for its business, including, but not limited to:
◾
Market volatility, including in currencies and interest rates, might increase which could have an impact on the value of the Barclays Bank Group’s
trading book positions.
◾
Credit spreads could widen leading to reduced investor appetite for the Barclays Bank Group’s debt securities. This could negatively impact the
Barclays Bank Group’s cost of and/or access to fu nding. In addition, market and interest rate volatility could affect the underlying value of assets
in the banking book and securities held by the Barclays Bank Group for liquidity purposes.
◾
A credit rating agency downgrade applied directly to the Barclays Bank Group, or indirectly as a result of a credit rating agency downgrade to the
UK Government, could significantly increase the Barclays Bank Group’s cost of and/or reduce its access to funding, widen credit spreads and
materially adversely affect the Ba rclays Bank Group’s interest margins and liquidity position.
◾
A UK recession with lower growth, higher unemployment and falling UK property prices could lead to increased impairments in relation to a
number of the Barclays Bank Group’s portfolios, including , but not limited to, its corporate portfolios and commercial real estate exposures.
◾
The ability to attract, or prevent the departure of, qualified and skilled employees may be impacted by the UK’s and the EU’s future approach to
the EU freedom of movement and immigration from the EU countries and this may impact the Barclays Bank Group’ s access to the EU talent
pool.
Risk review
Material existing and emerging risks
Barclays Bank PLC 2019 Annual Report on Form 20-F 29
◾
A disorderly exit from the EU may put a strain on the capabilities of the Barclays Bank Group’s systems, increasing the risk of failure of those
systems and potentially resulting in losses and reputational damage for the Barclays Bank Group.
◾
Changes to current EU ‘Passporting’ rights may require further adjustment to the current model for the Barclays Bank Group’s cross - border
banking operation which could increase operational complexity and/or costs for the Barclays Bank Group.
◾
The legal framework within which the Barclays Bank Group operates could change and become more uncertain if the UK takes steps to replace
or repeal certain laws currently in force, which are based on EU legislation and regulation (including EU regulation of the banking sector)
following its withdrawal from the EU. Certainty around the ability to maintain existing contracts, enforceability of certain legal obligations and
uncertainty around the jurisdiction of the UK courts may be affected until the impacts of the loss of the current legal and regulatory
arrangements between the UK and EU and the enforceabil ity of UK judgements across the EU are fully known.
◾
Should the UK see reduced access to financial markets infrastructures (including exchanges, central counterparties and payments services, or
other support services provided by third party suppliers) service provision for clients could be impacted , likely resulting in reduced market share
and revenue and increased operating costs for the Barclays Bank Group.
iii)
The impact of interest rate changes on the Barclays Bank Group’s profitability
Any changes to interest rates are significant for the Barclays Bank Group, especially given the uncertainty as to the direction of interest rates and
the pace at which interest rates may change particularly in the Barclays Bank Group’s main markets of the UK and the US.
A continued period of low interest rates and flat yield curves, including any further cuts, may affect and continue to put pressure on the Barclays
Bank Group’s net interest margins (the difference between its lending income and borrowing costs) and could adversely affect the profitability and
prospects of the Barclays Bank Group.
However, whilst interest rate rises could positively impact the Barclays Bank Group’s profitability as retail and corporate business income increases
due to margin de - compression , further increases in interest rates, if larger or more frequent than expected, could lead to general ly weaker than
expected growth, reduced business confidence and higher unemployment, which in turn could cause stress in the lending portfolio and
underwr iting activity of the Barclays Bank Group. Resultant higher credit losses driving an increased impairment charge would most notably
impact retail unsecured portfolios and wholesale non - investment grade lending and could have a material effect on the Barcla ys Bank Group’s
business, results of operations, financial condition and prospects.
In addition, changes in interest rates could have an adverse impact on the value of the securities held in the Barclays Bank Group’s liquid asset
portfolio. Consequently, this could create more volatility than expected through the Barclays Bank Group’s FVOCI reserves.
iv)
The competitive environments of the banking and financial services industry
The Barclays Bank Group’s businesses are conducted in competitive environments (in particular, in the UK and US), with increased competition
scrutiny, and the Barclays Bank Group’s financial performance depends upon the Barclays Bank Group’s ability to respond effectively to
competitive pressures whether due to competitor behaviour, new entrants to the market, consumer demand, technological changes or otherwise.
This competitive environment, and the Barclays Bank Group’s response to it, may have a material adverse effect on the Barclays Bank Group’s
ability to maintain existing or capture additional market share, business, results of operations, financial condition and prospects.
v)
Regulatory change agenda and impact on bus iness model
The Barclays Bank Group remains subject to ongoing significant levels of regulatory change and scrutiny in many of the countries in which it
operates (including, in particular, the UK and the US). As a result, regulatory risk will remain a focus for senior management . Furthermore, a more
intensive regulatory approach and enhanced requirements together with the potential lack of international regulatory co - ordination as enhanced
supervisory standards are developed and implemented may adverse ly affect the Barclays Bank Group’s business, capital and risk management
strategies and/or may result in the Barclays Bank Group deciding to modify its legal entity, capital and funding structures and business mix, or to
exit certain business activities altogether or not to expand in areas despite otherwise attractive potential.
There are several significant pieces of legislation and areas of focus which will require significant management attention, cost and resource,
including:
◾
Chan ges in prudential requ irements may impact minimum requirements for own funds and eligible liabilities (MREL) (including requirements for
internal MREL), leverage, liquidity or funding requirements, applicable buffers and/or add - ons to such minimum requirements and risk weighted
assets calculation methodologies all as may be set by international, EU or national authorities. Such or similar changes to prudential
requirements or additional supervisory and prudential expectations, either individually or in aggregate, may result in, among other things, a need
for further management actions to meet the changed requirements, such as:
-
increasing capital, MREL or liquidity resources, reducing leverage and risk weighted assets;
-
restricting distributions on capital instruments;
-
modifying the terms of outstanding capital instruments;
-
modifying legal entity structure (including with regard to issuance and deployment of capital, MREL and funding);
-
changing the Barclays Bank Group’s business mix or exiting other businesses;
-
and/or undertaking other actions to strengthen the Barclays Bank Group’s position.
◾
The derivatives market has been the subject of particular focus for regulators in recent years across the G20 countries and beyond, with
regulations introduced which require the reporting and clearing of standardised over the counter (OTC) derivatives and the mandatory
margining of non - cleared OTC derivatives. The se regulation s may increase costs for market participants, as well as reduce liquidity in the
derivatives markets. More broadly , changes to the regulatory framework (in particular, the review of the second Markets in Financial Instruments
Directive and the implementation of the Benchmarks Regulation) could entail significant costs for market participants and may hav e a significant
impact on certain markets in which the Barclays Bank Group operates.
Risk review
Material existing and emerging risks
Barclays Bank PLC 2019 Annual Report on Form 20-F 30
◾
The Barclays Group and certain of its members including Barclays Bank PLC 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) and the Federal Reserve Board ( FRB ). Failure to meet the requirements of regulatory stress tests, or the
failure by regulators to approve the stress test results and capital plans of the Barclays Group, could result in the Barclays Group or certain of its
members including Barclays Bank PLC being required to enhance their capital position, limit capital distributions or position additional capital in
specific subsidiaries.
For further details on the regulatory supervision of, and regulations applicable to, the Barclays Bank Group, see Supervision and regulation on
pages 88 to 94.
vi)
The impact of climate change on the Barclays Bank Group’s business
The risks associated with climate change are subject to rapidly increasing societal, regulatory and political focus, both in the UK and internationally.
Embedding climate risk into the Barclays Bank Group’s risk framework in line with regulatory expectations, and adapting the Barcl ays Bank Group’s
operations and business strategy to address both the financial risks resulting from: (i) the physical risk of climate change; and (ii) the risk from the
transition to a low carbon economy , could have a significant impact on the Barclays Ba nk Group’s business.
Physical risks from climate change arise from a number of factors and relate to specific weather events and longer - term shifts in the climate. The
nature and timing of extreme weather events are uncertain but they are increasing in frequency and their impact on the economy is predicted to
be more acute in the future. The potential impact on the economy includes, but is not limited to, lower GDP growth, higher unemployment and
significant changes in asset prices and profitability of industries. Damage to the properties and operations of borrowers could impair asset values
and the creditworthiness of customers leading to increased default rates, delinquencies, write- offs and impairment charges in the Barclays Bank
Group’s portfolios . In addition, the Barclays Bank Group’s premises and resilience may also suffer physical damage due to weather events leading
to increased costs for the Barclays Bank Group.
As the economy transitions to a low - carbon economy, financial institutions such as the Barclays Bank Group may face significant and rapid
developments in stakeholder expectations, policy, law and regulation which could impact the lending activities the Barclays Bank Group
undertakes, as well as the risks associated with its lending portfol ios, and the value of the Barclays Bank Group’s financial assets. As sentiment
towards climate change shifts and societal preferences change, the Barclays Bank Group may face greater scrutiny of the type of business it
conducts, adverse media coverage and reputational damage, which may in turn impact customer demand for the Barclays Bank Group's products,
returns on certain business activities and the value of certain assets and trading positions resulting in impairment charges.
In addition, the impacts of physical and transition climate risks can lead to second order connected risks, which have the potential to affect the
Barclays Bank Group’s retail and wholesale portfolios. The impacts of climate change may increase losses for those sectors sensitive to the effects
of physical and transition risks. Any subsequent increase in defaults and rising unemployment could create recessionary pressures, which may
lead to wider deterioration in the creditworthiness of the Barclays Bank Group’s clients, higher ECLs, and increased charge - offs and defaults
among retail customers.
If the Barclays Bank Group does not adequately embed risks associated with climate change into its risk framework to appropriately measure,
manage and disclose the various financial and operational risks it faces as a result of climate change, or fails to adapt its strategy and business
model to the changing regulatory requirements and market expectations on a timely basis, it may have a material and adverse impact on the
Barclays Bank Gr oup’s level of business growth, competitiveness, profitability, capital requirements, cost of funding, and financial condition.
For further details on the Barclays Bank Group’s approach to climate change, see page 37 of climate change risk management.
vii)
Impact of benchmark interest rate reforms on the Barclays Bank Group
For several years, global regulators and central banks have been driving international efforts to reform key benchmark interest rates and indices,
such as the London Interbank Offered Rate (“LIBOR”), which are used to determine the amounts payable under a wide range of transactions and
make them more reliable and robust. This has resulted in significant changes to the methodology and operation of certain benchmarks and
indices, the adoptio n of alternative “risk-free” reference rates and the proposed discontinuation of certain reference rates (including LIBOR), with
further changes anticipated.
Uncertainty as to the nature of such potential changes, the availability and/or suitability of alternative “risk-free” reference rates and other reforms
may adversely affect a broad range of transactions (including any securities, loans and derivatives which use LIBOR to determine the amount of
interest payable that are included in the Barclays Bank Gr oup’s financial assets and liabilities) that use these reference rates and indices and
introduce a number of risks for the Barclays Bank Group, including, but not limited to:
◾
Conduct risk:
conduct risks, which may lead to customer complaints, regulatory sanctions or reputational impact if the Barclays Bank Group is ( i) considered
to be undertaking market activities that are manipulative or create a false or misleading impression, (ii) misusing sensitive information or not
identifying or appropriately managing or mitigating conflicts of interest, (iii) providing custom ers with inadequate advice, misleading
information, unsuitable products or unacceptable service, (iv) not taking an appropriate or consistent response to remediation activity or
customer complaints, (v) providing regulators with inaccurate regulatory repor ting or (vi) colluding or inappropriately sharing information with
competitors;
◾
Financial risks:
“risk-free” reference rates may impact the ability of members of the Barclays Bank Group to calculate and model amounts rece ivable by them on
certain financial assets and determine the amounts payable on certain financial liabilities (such as debt securities issued by them) because
currently alternative “risk-free” reference rates (such as the Sterling Overnight Index Average ( SONIA) and the Secured Overnight Financing Rate
(SOFR)) are look - back rates whereas term rates (such as LIBOR) allow borrowers to calculate at the start of any interest period exactly how
much is payable at the end of such interest period. This may have a material adverse effect on the Barclays Bank Group’s cashflows;
Risk review
Material existing and emerging risks
Barclays Bank PLC 2019 Annual Report on Form 20-F 31
◾
Pricing risk:
free” reference rates may impact the pricing mechanisms used by the Barclays Bank Group on certain transactions;
◾
Operational risk:
“risk-free” reference rates may require cha nges to the Barclays Bank Group’s IT systems, trade reporting infrastructure, operational processes,
and controls. In addition, if any reference rate or index (such as LIBOR) is no longer available to calculate amounts payable, the Barclays Bank
Group may incur additional expenses in amending documentation for new and existing transactions and/or effecting the transition from the
original reference rate or index to a new reference rate or index; and
◾
Accounting risk:
financial results and performance.
Any of these factors may have a material adverse effect on the Barclays Bank Group’s business, results of operations, financial conditi on and
prospects.
For further details on the impacts of benchmark interest rate reforms on the Barclays Bank Group, see Note 13 .
Material existing and emerging risks impacting individual principal risks
i)
Credit risk
Credit risk is the risk of loss to the Barclays Bank Group from the failure of clients, customers or counterparties, including sovereigns, to fully
honour their obligations to members of the Barclays Bank Group, including the whole and timely payment of pr incipal, interest, collateral and other
receivables.
a)
Impairment
The introduction of the impairment requirements of IFRS 9
Financial Instruments
, resulted in impairment loss allowances that are recognised
earlier, on a more forward - looking basis and on a broader scope of financial instruments, and may continue to have, a material impact on the
Barclays Bank Group’s business, results of operations, financial condition and prospects.
Measurement involves complex judgement and impairment charges could b e volatile, particularly under stressed conditions. Unsecured products
with longer expected lives, such as credit cards, are the most impacted. Taking into account the transitional regime, the capital treatment on the
increased reserves has the potential to adversely impact the Barclays Bank Group’s regulatory capital ratios.
In addition, the move from incurred losses to ECLs has the potential to impact the Barclays Bank Group’s performance under stressed economic
conditions or regulatory stress tests. For more information, refer to Note 1.
b)
Specific sectors and concentrations
The Barclays Bank Group is subject to risks arising from changes in credit quality and recovery rate s of loans and advances due from borrowers
and counterparties in any specific portfol io. Any deterioration in credit quality could lead to lower recoverability and higher impairment in a specific
sector. The following are areas of uncertainties to the Barclays Bank Group’s portfolio which could have a material impact on performance:
◾
UK retail, hospitality & leisure.
Softening demand, rising costs and a structural shift to online shopping is fuelling pressure on the UK High Street
and other sectors heavily reliant on consumer discretionary spending. As these sectors continue to reposit ion themselves, the trend represents a
potential risk in the Barclays Bank Group’s UK corporate portfolio from the perspective of the its interactions with both retailers and their
landlords.
◾
Consumer affordability
unemployment, that impact a customer’s ability to service unsecured debt payments could lead to increased arrears in unsecured products.
Barclays Ba nk Group is exposed to the adverse credit performance of unsecured products, particularly in the US through its US Cards business.
◾
UK real estate market.
UK property represents a significant portion of the Barclays Bank Group’s overall corporate credit exp osure. In 2019,
property price growth across the UK has slowed, particularly in London and the South East where the Barclays Bank Group’s exposure has high
concentration. The Barclays Bank Group is at risk of increased impairment from a material fall in pr operty prices.
◾
Leverage finance underwriting.
The Barclays Bank Group takes on sub - investment grade underwriting exposure, including single name risk,
particularly in the US and Europe. The Barclays Bank 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 Barclays Bank Group, or an increased capital requirement should there be
a need to hold the exposure for an extended period.
◾
Italian mortgage portfolio.
in run - off and positions to wholesale customers. Growth in the Italian economy remained weak in 2019 and should the economy deteriora te
further, there could be a material adverse effect on the Barclays Bank Group’s results including, but not limited to, increased credit losses and
higher impairment charges.
The Barclays Bank Group also has large individual exposures to single name count erparties, both in its lending activities and in its financial services
and trading activities, including transactions in derivatives and transactions with brokers, central clearing houses, dealers, other banks, mutual and
hedge funds and other institutional clients. 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 cann ot 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 Barclays Bank Group’s results due to, for example, increas ed credit losses and higher impairment
charges.
For further details on the Barclays Bank Group’s approach to credit risk, see credit risk management on pages 38 to 39 and credit risk performance
on pages 45 to 67.
Risk review
Material existing and emerging risks
Barclays Bank PLC 2019 Annual Report on Form 20-F 32
ii)
Market risk
Market risk is the risk of loss arising from potential adverse change in the value of the Barclays Bank Group’s assets and liabilities from fluctuation
in market variables including, but not limited to, interest rates, foreign exchange, equity prices, commodity prices, credit spread s, implied
volatilities and asset correlations.
A broadening in trade tensions between the US and its major trading partners, slowing global growth and political concerns in the US and Europe
(including Brexit) are some of the factors that could heighten market risks for the Barclays Bank Group’s portfolios. In addition, the Barclays Bank
Group’s trading business is generally exposed to a prolonged period of elevated asset price volatility, particularly if it negatively affects the depth of
marketplace liquidity. Such a scenario could impact the Barclays Bank 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 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.
It is difficult to predict changes in market conditions, and such changes could have a material adverse effect on the Barclays Bank Group’s
business, results of operations, financial condition and prospects.
For further details on the Barclays Bank Group’s approach to market risk, see market risk management on page 39 and market risk performance
on pages 68 to 70.
iii)
Treasury and capital risk
There are three primary types of treasury and capital risk faced by the Barclays Bank Group:
a) Liquidity risk
Liquidity risk
is the risk that the Barclays Bank Group 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. This could cause the Barclays Bank Group to fail to meet
regulatory liquidity standards or be unable to support day - to- day banking activities. Key liquidity risks that the Barclays Bank Group faces include:
◾
The stability of the Barclays Bank Group’s current funding profile:
demand or at short notice, could be affected by the Barclays Bank Group failing to preserve the current level of customer and investor
confidence. The Barclays Bank Group also regularly accesses the money and capital markets to provide short - term and long - term funding to
support its operations. Several factors, including adverse macroeconomic conditions, adverse outcomes in conduct and legal, competition and
regulatory matters and loss of confidence by investors, counterparties and/or customers in the Barclays Bank Group, can affect the ability of the
Barclays Bank Group to access the capital markets and/or the cost and other terms upon which the Barclays Bank Group is able to obtain market
funding
.
◾
Credit rating changes and the impact on funding costs
: Rating agencies regularly review credit ratings given to Barclays Bank PLC and certain
members of the Barclays Bank Group. Credit ratings are based on a number of factors, including some which are not within the Barclays Bank
Group’s control (such as political and regulatory developments, changes in rating methodologies, macro - economic conditions and the sovereign
credi t rating s of the countries in which the Barclays Bank Group operates ).
Whilst the impact of a credit rating change will depend on a number of factors (including the type of issuance and prevailing market conditions),
any reductions in a credit rating (in p articular, any downgrade below investment grade) may affect the Barclays Bank Group’s access to the
money or capital markets and/or terms on which the Barclays Bank Group is able to obtain market funding, increase costs of funding and credit
spreads, reduc e the size of the Barclays Bank Group’s deposit base, trigger additional collateral or other requirements in derivative contracts and
other secured funding arrangements or limit the range of counterparties who are willing to enter into transactions with the Barclays Bank Group.
Any of these factors could have a material adverse effect on the Barclays Bank Group’s business, results of operations, financial condition and
prospects.
b) Capital risk
Capital risk is the risk that the Barclays Bank Group 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 regulator y stress testing purposes). This includes the risk from the Barclays Bank Group’s pension plans. Key capital risks that the
Barclays Bank Group faces include:
◾
Failure to meet prudential capital requirements
: This could lead to the Barclays Bank Group being unable to support some or all of its business
activities, a failure to pass 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 Barclays Bank
Group's capital or leverage position.
◾
Adverse changes in FX rates impacting capital ratios
: The Barclays Bank Group has capital resources, risk weighted assets and leverage
exposures denominated in foreign currencies. Changes in foreign currency exchange rates may adversely impact the Sterling equivalent value of
these items. As a result, the Barclays Bank Group’s regulatory capital ratios are sensitive to foreign currency movements. Failure to appropriately
manage the Barclays Bank Group’s balance sheet to take account of foreign currency movements could result in an adverse impact on the
Barclays Bank Group’s regulatory capital and leverage ratios.
◾
Adverse movements in the pension fund
:
Adverse movements in pension assets and liabilities for defined benefit pension schemes could
result
in deficits on a funding and/or accounting basis. This could lead to the Barclays Bank Group making substantial additional contributions to its
pension plans and/or a deterioration in its capital position. Under IAS 19, the liabilities discount rate is derived from the yields of high quality
corporate bonds.
Therefore, the valuation of the Barclays Bank Group’s defined benefits schemes would be adversely affected by a prolonged fall
in the discount rate due to a persistent low interest rate and/or credit spread environment. Inflation is another significant risk driver to the
pension fund as the liabilities are ad versely impacted by an increase in long - term inflation expectations.
Risk review
Material existing and emerging risks
Barclays Bank PLC 2019 Annual Report on Form 20-F 33
c)
Interest rate risk in the banking book is the risk that the Barclays Bank Group is exposed to capital or income volatility because of a mismatch
between the interest rate exposures of its (non - traded) assets and liabilities. The Barclays Bank Group’s hedge programmes for interest rate risk in
the banking book rely on behavioural assumptions and, as a result, the success of the hedging strategy can not be guaranteed. A potential
mismatch in the balance or duration of the hedge assumptions could lead to earnings deterioration. A decline in interest rates in G3 currencies
may also compress net interest margin on retail portfolios. In addition, the Barc lays Bank Group’s liquidity pool is exposed to potential capital
and/or income volatility due to movements in market rates and prices.
For further details on the Barclays Bank Group’s approach to treasury and capital risk, see treasury and capital risk management on pages 39 to 41
and treasury and capital risk performance on pages 71 to 83.
iv)
Operational risk
Operational risk is the risk of loss to the Barclays Bank Group from inadequate or failed processes or systems, human factors or due to external
events where the root cause is not due to credit or market risks. Examples include:
a)
Operational resilience
The loss of or disruption to business processing is a material inherent risk within the Barclays Bank Group and across the financial services
industry, whether arising through impacts on the Barclays Bank Group’s technology systems or availability of perso nnel or services supplied by
third parties. Failure to build resilience and recovery capabilities into business processes or into the services of technology, real estate or suppliers
on which the Barclays Bank Group’s business processes depend, may result in significant customer detriment, costs to reimburse losses incurred
by the Barclays Bank Group’s customers, and reputational damage.
b)
Cyber threats
The frequency of cyber - attacks continues to grow and is a global threat that is inheren t across all industries. The financial sector remains a primary
target for cyber criminals, hostile nation states, opportunists and hacktivists and there is an increasing level of sophistication in criminal hacking
for the purpose of stealing money, stealing, destroying or manipulating data (including customer data) and/or disrupting operations, where
multiple threats exist including threats arising from malicious emails, distributed denial of service (DDoS) attacks, payment system compromises,
insider attackers, supply chain and vulnerability exploitation. Cyber events have a compounding impact on services and customers, e.g. data
breaches in social networking sites, retail companies and payments networks.
Any failure in the Barclays Bank Group’s cyber - security policies, procedures or controls and/or its IT systems, may result in significant financial
losses, major business disruption, inability to deliver customer services, or loss of data or other sensitive information (including as a result of an
outage) and may cause associated reputational damage. Any of these factors could increase costs (including, but not limited to, costs relating to
notification of, or compensation for customers) or may affect the Barclays Bank Group’s ability to retain an d attract customers. Regulators in the
UK, US and Europe continue to recognise cyber - security as an increasing systemic risk to the financial sector and have highlighted the need for
financial institutions to improve their monitoring and control of, and re silience (particularly of critical services) to cyber - attacks, and to provide
timely notification of them, as appropriate. Given the Barclays Bank Group’s reliance on technology, a cyber - attack could have a material adverse
effect on its business, results of operations, financial condition and prospects.
For further details on the Barclays Bank Group’s approach to cyber threats, see operational risk performance on pages 84 to 86.
c)
New and emergent technology
Technological advancements present opportunities to develop new and innovative ways of doing business across the Barclays Bank Group, with
new solutions being developed both in- house and in association with third - party companies. Introducing new forms of technology, however, also
has the potential to increase inherent risk. Failure to evaluate, actively manage and closely monitor risk exposure during all phases of business
development could introduce new vulnerabilities and security flaws and have a material adverse effect on the Barclays Bank Group’s business,
results of operations, financial condition and prospects .
d)
External fraud
T he level and nature of fraud threats continues to evolve, particularly with the increasing use of digital products and the greater functionality
available online. Criminals continue to adapt their techniques and are increasingly focused on targeting customers and clients through ever more
sophisticated methods of social engineering. External data breaches also provide criminal s with the opportunity to exploit the growing levels of
compromised data. These fraud threats could lead to customer detriment, loss of business, missed business opportunity and reputational damage,
all of which could have a material adverse effect on the Barclays Bank Group’s business, results of operations, financial condition and prospects.
e)
Data management and information protection
The Barclays Bank Group holds and processes large volumes of data, including personally identifiable information, intellectual property, and
financial data. The General Data Protection Regulation (GDPR) has strengthened the data protection rights of customers and increased the
accountability of the Barclays Bank Group in its management of such data. Failure to accurat ely collect and maintain this data, protect it from
breaches of confidentiality and interference with its availability exposes the Barclays Bank Group to the risk of loss or unavailability of data
(including customer data discussed under “vi) Conduct risk, c) Data protection and privacy” below) or data integrity issues. Any of these failures
could have a material adverse effect on the Barclays Bank Group’s business, results of operations, financial condition and prospects.
f)
Algorithmic trading
In some areas of the investment banking business, trading algorithms are used to price and risk manage client and principal transactions. An
algorithmic error could result in erroneous or duplicated transactions, a system outage, or impact the Barclays Bank Group’s pric ing abilities, which
could have a material adverse effect on the Barclays Bank Group’s business, results of operations, financial condition and prospects and reputation.
g)
Processing error
As a large, complex financial institution, the Barclays Bank Group faces the risk of material errors in existing operational processes, or from new
processes as a result of on - going change activity, including payments and client transactions. Material operational or payment errors could
disadvantage the Barclays Bank Grou p’s customers, clients or counterparties and could have a material adverse effect on the Barclays Bank
Risk review
Material existing and emerging risks
Barclays Bank PLC 2019 Annual Report on Form 20-F 34
Group’s business, results of operations, financial condition and prospects .
h)
Supplier exposure
The Barclays Bank Group depends on suppliers, including Barclays Execution Services Limited, for the provision of many of its services and the
development of technology. Whilst the Barclays Bank Group depends on suppliers, it remains fully accountable for any risk arising from the actions
of suppliers. The dependency on suppliers and sub - contracting of outsourced services introduces concentration risk where the failure of specific
suppliers could have an impact on the Barclays Bank Group’s ability to contin ue to provide material services to its customers. Failure to adequately
manage supplier risk could have a material adverse effect on the Barclays Bank Group’s business, results of operations, financial condition and
prospects.
i)
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 credit impairment charges for amortised cost assets, taxes, fair value of
financial instruments, pensions and post- retirement benefits, and provisions including conduct and legal, competition and regulatory matters.
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
material losses to the Bar clays Bank Group, beyond what was anticipated or provided for.
Further development of standards and interpretations
under IFRS could also materially impact the financial results, condition and prospects of the Barclays Bank Group. For further details on the
accounting estimates and policies, see the Notes to the audited financial statements on pages 105 to 196.
j)
Tax risk
The Barclays Bank Group is required to comply with the domestic and international tax laws and practice of all countries in which it has business
operations. There is a risk that the Barclays Bank Group could suffer losses due to additional tax charges, other financial costs or reputational
damage as a result of failing to comply with such laws and practice, or by failing to manage its tax affairs in an appropriate manner, with much of
this risk attributable to the international structure of the Barclays Bank Group. In addition, increasing reporting and disclosure requirements around
the world and the digitisation of the administration of tax has potential to increase the Barclays Bank Group’s tax compliance obligations further.
k)
Ability to hire and retain appropriately qualified employees
As a regulated financial institution, the Barclays Bank Group requires diversified and specialist skilled colleagues. The Barclays Bank Group’s ability
to attract, develop and retain a diverse mix of talent is key to the delivery of its core business activity and strategy. This is impacted by a range of
external and internal factors, such as the UK’s decision to leave the EU and the enhanced individual accountability applicable to the banking
industry. Failure to attract or prevent the departure of appropriately qualified and skilled employees could have a material adverse effect on the
Barclays Bank Group’s business, results of operations, financial condition and prospects . Additionally, this may result in disruption to service which
could in turn lead to disenfranchising certain customer groups, customer detriment and reputational damage.
For further details on the Barclays Bank Group’s approach to operational risk, see operational risk management on pages 41 to 42 and operational
risk performance on pages
84 to 86 .
v)
Model risk
Model risk is the risk of potential adverse consequences from financial assessments or decisions based on incorrect or misused model outputs and
reports. The Barclays Bank Group relies on models to support a broad range of business and risk management activities, including informing
business decisions and strategies, measuring and limiting risk, valuing exposures (including the calculation of impairment), conducting stress
testing, assessing capital adequacy, supporting new business acceptance and risk and reward evaluation, managing client assets, and meeting
reporting requirements. Models are, by their nature, imperfect and incomplete representations of reality because they rely on assumptions and
inputs, and so they may be subject to errors affecting the accuracy of their outputs. For instance, the quality of the data used in models across the
Barclays Bank Group has a material impact on the accuracy and completeness of its risk and financial metrics. Models may also be misused. Mod el
errors or misuse may result in (among other things) the Barclays Bank Group making inappropriate business decisions and/or inaccuracies or
errors being identified in the Barclays Bank Group’s risk management and regulatory reporting processes. This coul d result in significant financial
loss, imposition of additional capital requirements, enhanced regulatory supervision and reputational damage, all of which could have a material
adverse effect on the Barclays Bank Group’s business, results of operations, financial condition and prospects.
For further details on the Barclays B ank Group’s approach to model risk, see model risk management on page 42 and model risk performance on
pages
87.
vi)
Conduct risk
Conduct risk is the risk of detriment to customers, clients, market integrity, effective competition or the Barclays Bank Group from the
inappropriate supply of financial services, including instances of wilful or negligent misconduct. This risk could manifest itself in a variety of ways:
a)
Employee misconduct
The Barclays Bank Group’s businesses are exposed to risk from potential non - compliance with its policies and instances of wilful and negligent
misconduct by employees, all of which could result in enforcement action or r eputational harm. It is n ot always possible to deter employee
misconduct, and the precautions we take to prevent and detect this activity may not always be effective. Employee misconduct could have a
material adverse effect on the Barclays Bank Group’s customers, clients, market integrity as well as reputation, financial condition and prospects.
b) Product governance and life cycle
The ongoing review, management and governance of new and amended products has come under increasing regulatory focus (for example, the
recast of the Markets in Financial Instruments Directive and guidance in relation to the adoption o f the EU Benchmarks Regulation) and the
Barclays Bank Group expects this to continue. The following could lead to poor customer outcomes: (i) ineffective product governance, including
design, approval and review of products, and (ii) inappropriate controls over internal and third party sales channels and post sales services, such as
complaints handling, collections and recoveri es. The Barclays Bank Group is at risk of financial loss and reputational damage as a result.
Risk review
Material existing and emerging risks
Barclays Bank PLC 2019 Annual Report on Form 20-F 35
c)
Financial crime
The Barclays Bank Group may be adversely affected if it fails to effectively mitigate the risk that third parties or its employees facilitate, or that its
products and services are used to facilitate, financial crime (money laundering, terrorist financing and proliferation financing, breaches of
economic and financial sanctions, bribery and corruption, and the facilitation of tax evasion). UK and US regulations cov ering financial institutions
continue to focus on combating financial crime. Failure to comply may lead to enforcement action by the B arclays Bank Group’s regulators,
including severe penalties, which may have a material adverse effect on the Barclays Bank Group’s business, financial condition and prospects.
d)
Data protection and privacy
Proper handling of personal data is critical to sustaining long - term relationships with our customers and clients and complying with privacy laws
and regulations. Failure to protect personal data can lead to potential detriment to our customers and clients, reputational damage, enforcement
action and financial loss, which may be substantial (see “iv) Operational risk, (e) Data management and information protection” above).
e)
Regulatory focus on culture and accountability
Regulators around the world continue to emphasise the importance of culture and personal accountability and enforce the adoption of adequate
internal reporting and whistleblowing procedures to help to promote appropriate conduct and driv e positive outcomes for customers, colleagues,
clients and markets. The requirements and expectations of the UK Senior Managers Regime, Certification Regime and Conduct Rules have driven
additional accountabilities for individuals across the Barclays Bank Group with an increased focus on governance and rigour. Failure to meet these
requirements and expectations may lead to regulatory sanctions, both for the individuals and the Barclays Bank Group.
For further details on the Barclays Bank Group’s approach to conduct risk, see conduct risk management on page 42 and conduct risk
performance on page 87 .
vii)
Reputation risk
Reputation risk is the risk that an action, transaction, investment, event, decision or business relationship will reduce trust in the Barclays Bank
Group’s integrity and competence.
Any material lapse in standards of integrity, compliance, customer service or operating efficiency may represent a potential reputation risk.
Stakeholder expe ctations constantly evolve, and so reputation risk is dynamic and varies between geographical regions, groups and individuals. A
risk arising in one business area can have an adverse effect upon the Barclays Bank Group’s overall reputation and any one tran saction, investment
or event (in the perception of key stakeholders) can reduce trust in the Barclays Bank Group’s integrity and competence. The Barclays Bank
Group’s association with sensitive topics and sectors has been, and in some instances continues to be, an area of concern for stakeholders,
including (i) the financing of, and investments in, businesses which operate in sectors that are sensitive because of their relative carbon intensity or
local environmental impact; (ii) potential association with human rights violations (including combating modern slavery) in the Barclays Bank
Group’s operations or supply chain and by clients and customers; and (iii) the financing of businesses which manufacture and export military and
riot control goods and services.
Reputation risk could also arise from negative public opinion about the actual, or perceived, manner in which the Barclays Bank Group conducts its
business activities, or the Barclays Bank Group’s financial performance, as well as actual or perceived practices in banking and the financial
services industry generally. Modern technologies, in particular online social media channels and other broadcast tools that facilitate
communication with large au diences in short time frames and with minimal costs, may significantly enhance and accelerate the distribution and
effect of damaging information and allegations. Negative public opinion may adversely affect the Barclays Bank Group’s ability to retain and attract
customers, in particular, corporate and retail depositors, and to retain and motivate staff, and could have a material adverse effect on the Barclays
Bank Group’s
business, results of operations, financial condition and prospects.
In addition to the above, reputation risk has the potential to arise from operational issues or conduct matters which cause detriment to customers,
clients, market integrity, effective competition or the Barclays Bank Group (see “iv) Operational risk” above).
For furthe r details on the Barclays Bank Group’s approach to reputation risk, see reputation risk management on page 43 and reputation risk
performance on page 87 .
Risk review
Material existing and emerging risks
Barclays Bank PLC 2019 Annual Report on Form 20-F 36
viii)
Legal risk and legal, competition and regulatory matters
The Barclays Bank Group conducts activities in a highly regulated market which exposes it to legal risk arising from (i) the multitude of laws and
regulations that apply to the businesses it operates, which are highly dynamic, may vary between jurisdictions, and are often unclear in their
application to particular circumstances especially in new and emerging areas; and (ii) the diversified and evolving nature of the Barclays Bank
Group’s businesses and business practices. In each case, this exposes the Barclays Bank Group to the risk of loss or the imposition of penalties,
damages or fines from the failure of members of the Barclays Bank Group to meet their respective legal obligations, including legal or contractual
requirements. Legal risk may arise in relation to a number of the risk factors identified above, including (without limitation) as a result of (i) the
UK’s withdrawal from the EU, (ii) benchmark reform, (iii) the regulatory change agenda, and (iv) rapidly evolving rules and regulations in relation to
data protection, privacy and cyber - security.
A breach of applicable legislation and/or regulations by the Barclays Bank Group or its employees could result in criminal prosecution, regulatory
censure, potentially significant fines and other sanctions in the jurisdictions in which the Barclays Bank Group operates. Where clients, customers
or other third parties are harmed by the Barclays Bank Group’s conduct, this may also give rise to civil legal proceedings, including class actions.
Other legal disputes may also arise between the Barclays Bank Group and third parties relating to matters such as breaches or enforcement of legal
rights or obligations arising under contracts, statutes or common law. Adverse findings in any such matters may result in the Barclays Bank Group
being liable to third pa rties or may result in the Barclays Bank Group’s rights not being enforced as intended.
Details of legal, competition and regulatory matters to which the Barclays Bank Group is currently exposed are set out in Note 25. In addition to
matters specifically d escribed in Note 25, the Barclays Bank Group is engaged in various other legal proceedings which arise in the ordinary course
of business. The Barclays Bank 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 Barclays Bank Group is, or has been, engaged.
The outcome of legal, competition and regulatory matters, both those to which the Barclays Bank Group is currently exposed and any others
which may arise in the future, is difficult to predict. In connection with such matters, the Barclays Bank Group may incur significant expense,
regardless of the ultimate outcome, and any such matters could expose the Barclays Bank Group to any of the following outcomes: substantial
monetary damages, settlements and/or fines; remediation of affected customers and clients; other penal ties and injunctive relief; additional
litigation; criminal prosecution; the loss of any existing agreed protection from prosecution; regulatory restrictions on the Barclays Bank Group’s
business operations including the withdrawal of authorisations; incre ased regulatory compliance requirements or changes to laws or regulations;
suspension of operations; public reprimands; loss of significant assets or business; a negative effect on the Barclays Bank Group’s reputation; loss
of confidence by investors, coun terparties, clients and/or customers; risk of credit rating agency downgrades; potential negative impact on the
availability and/or cost of funding and liquidity; and/or dismissal or resignation of key individuals. 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 have a material adverse
effect on the Barclays Bank Group’s business, results of operations, financial condition and prospects.
Risk review
Climate change risk management
Barclays Bank PLC 2019 Annual Report on Form 20-F 37
Climate Change Risk Management
Overview
The Barclays Group has a longstanding commitment to Environmental Risk Management (ERM) and its approach, aided by regulatory initiatives,
has continued to evolve, incorporating climate change in recent years as the understanding of associated risks has grown. In 2018, a dedicated
Sustainability team was created to consider how the Barclays Group approaches wider sustainability and ESG matters, working closely with the
ERM function.
In 2019, the Barclays Group pub lished an Energy & Climate Change Statement
(
https://home.barclays/statements/barclays -energy -and-climate-
change-statement
)
which articulates our focus on three areas: financing growth of renewables and businesses addressing environmental challenges;
taking a responsible approach to financing energy sources with a greater carbon intensity; and reducing our own carbon footprint. It is supported
by an internal standard containing guidelines for restricting or supporting financing activities in carbon - intensive energy sectors, as well as
enhanced due diligence requirements for environmentally or socially sensitive sectors.
For more detail on how climate change risks arise and their impact on the Barclays Bank Group, refer to material existing and emerging risks on
page 28.
Organisation and Structure
The matters and risks associated with climate change are managed at a Barclays Group level, with additional input and oversight provided by the
Barclays Bank Group CRO for matters pertaining to the Barclays Bank Grou p .
On behalf of the Barclays PLC Board, the Barclays PLC BRC reviews and approves the Barclays Group’s approach to managing the financial and
operational risks associated with climate change.
Broadly, climate change matters are co - ordinated by the Sustainability team, including reputation risks linked to the Barclays Group’s financial and
societal impact. In 2019, reputation risk became the responsibility of the Barclays PLC Board, where the most material issues facing the Barclays
Group are escalated to and directly handled by the Barclays PLC Board.
Risk management – Policy
In 2019, the Barclays Group published a ‘Climate Change Financial Risk and Operational Risk Policy’. This introduced climate change as an
overarching risk impacting certain principal risks: credit risk, market risk, treasury & capital risk and operational risk. The policy is jointly owned by
the relevant Principal Risk Leads with oversight by the Barclays PLC BRC, and applies across the Barclays Group including within the Bar clays Bank
Group .
Each relevant Principal Risk Lead has developed a methodology and implementation plan for quantifying climate change risk.
Risk review
Principal r isk management
Barclays Bank PLC 2019 Annual Report on Form 20-F 38
Credit risk management (audited)
The risk of loss to the Barclays Bank Group from the failure of clients, customers or counterparties, including sovereigns, to fully hono ur their
obligations to the Barclays Bank Group , including the whole and timely payment of principal, intere st, collateral and other receivables.
Overview
The credit risk that the Barclays Bank Gro up faces arises from wholesale and retail loans and advances together with the counterparty credit risk
arising from derivative contracts with clients; trading activities, including: debt securities, settlement balances with market counterparties, FVOCI
assets and reverse repurchase loans.
Credit risk management objectives are to:
◾
maintain a framework of controls to oversee credit risk;
◾
identify, assess and measure credit risk clearly and accurately across the Barclays Bank 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; and
◾
monitor credit risk and adherence to agreed control s.
Organisation, roles and responsibilities
The first line of defence has primary responsibility for managing credit risk within the risk appetite and limits set by the Risk function, supported by
a defined set of policies, standards and controls. In the Barclays Bank Group , business risk committees (attended by the first line) monitor and
review the credit risk profile of each business unit where the most material issues are escalated to the Retail Credit Risk Management Committee,
Wholesale Credit Risk M anagement Committee and the Barclays Group Risk Committee.
Wholesale and retail portfolios are managed separately to reflect the differing nature of the assets; wholesale balances tend to be larger and are
managed on an individual basis, while retail balan ces are greater in number but lesser in value and are, therefore, managed in aggregated
segments.
The responsibilities of the credit risk management teams in the businesses, the sanctioning team and other shared services include: sanctioning
new credit agr eements (principally wholesale); setting strategies 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 portfolios ; and review and validation of credit risk measurement
��
retailmodels. The credit risk management teams in the Barclays Bank Group are accountable to the Barclays Bank PLC CRO, who reports to the Barclays
Group CRO.
For wholesale portfolios , credit risk managers are organised in sanctioning teams by geography, industry and/or product. In 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 assigned 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 Barclays Bank PLC Senior Credit Officer. For exposures in
excess of the Barclays Bank PLC Senior Credit Officer’s authority, approval by the Barclays Group Senior Credit Officer/Barclays PLC Board Risk
Committee is also required. The Barclays Group Credit Risk Committee, attended by the Ba rclays Bank PLC Senior Credit Officer, provides a formal
mechanism for the Barclays Group Senior Credit Officer to exercise the highest level of credit authority over the most material Barclays Group single
name exposures.
Credit risk mitigation
The Barc lays Bank Group employs a range of techniques and strategies to actively mitigate credit risks. These can broadly be divided into three
types:
◾
netting and set-off
◾
collateral
◾
risk transfer.
Netting and set-off
Cre dit risk exposures can be reduced by applying netting and set-off. For derivative transactions, the Barclays Bank 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 derivative transactions against the obligations to the counterparty in the event of default, and so produce a lower
net credit exposure. These agreements may also reduce settlement exposu re (e.g. for foreign exchange transactions) by allowing payments on the
same day in the same currency to be set-off against one another.
Collateral
The Barclays Bank Group has the ability to call on collateral in the event of default of the counterparty, comprising:
◾
home loans:
◾
wholesale lending:
◾
other retail lending:
lease receivables .
◾
derivatives:
which the Barclays Bank Group has master netting agreements in place. These annexes to master agreements provide a mechanism for further
reducing credit risk, whereby collateral (margin) is posted on a regular basis (typically daily) to collateralise the mark to market exposure of a
derivative por tfolio measured on a net basis.
Risk review
Principal r isk management
Barclays Bank PLC 2019 Annual Report on Form 20-F 39
◾
reverse repurchase agreements:
Group subjec t to an agreement to return them for a fixed price.
◾
financial guarantees and similar off-balance sheet commitments:
Risk transfer
A range of instruments including guarantees, credit insurance, credit derivatives and securitisation 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 creditworthy than the original counterparty, then o verall 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.
Market risk management (audited)
The risk of loss arising from potential adverse changes in the value of the Barclays Bank Group’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 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 Barclays Bank 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 , volatility or
correlations.
Organisation, roles and responsibilities
Market risk in the businesses resides primarily in CIB and Treasury. These businesses have the mandate to assume market risk. The front office and
Treasury trading desks are responsible for managing market risk on a day - to- day basis, where they are required to understand and adhere to all
limits applicable to their businesses. The Market Risk team support the trading desks with the day - to- day limit management of market risk
exposures through governance processes which are outlined in supporting market risk polic ies and standards.
Market risk oversight and cha llenge is provided by business committees and Barclays Group c ommittees, including the Market Risk Committee.
The objectives of market risk management are to:
◾
Identify, understand and control market risk by robust measurement, limit setting, reporting and oversight
◾
facilitate business growth within a controlled and transparent risk management framework
◾
control market risk in the businesses according to the allocated appetite.
To meet the above objectives, a governance structure is in place to manage these risks consistent with the ERMF.
The Barclays Bank PLC Board Risk Committee recommends market risk appetite to the Barclays Bank PLC Board for their approval, within the
parameters set by the Barclays PLC Boa rd.
The Market Risk Committee approves and makes recommendations concerning the Barclays Group - wide market risk profile to the Barclays Group
Risk Committee. This includes overseeing the operation of the Market Risk Framework and associated standards and p olicies; reviewing market or
regulatory issues and limits and utilisation. The committee is chaired by the Market Risk Principal Risk Lead and attendees include the business
heads of market risk and business aligned market risk managers.
Management value at r isk (VaR)
VaR is an estimate of the potential loss arising from unfavourable market movements if the current positions were to be held unchanged for one
business day. For internal market risk management purposes, a historical simulation methodology with a two - year equally weighted historical
period, at the 95% confidence level is used for all trading books and some banking books.
In some instances, historical data is not available for particular market risk factors for the entire look - back period, for example, complete historical
data would not be available for an equity security following an initial public offering. In these cases, market risk managers will proxy the unavailable
market risk factor data with available data for a related market risk factor.
Limits are applied at the total level as well as by risk factor type, which are then cascaded down to particular trading desks and businesses by the
market risk management function.
See page 39 for a review of management VaR in 2019.
Treasury and capital risk management
This comprises :
Liquidity risk:
The risk that Barclays Bank Group 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.
Risk review
Principal r isk management
Barclays Bank PLC 2019 Annual Report on Form 20-F 40
Capital risk:
The risk that Barclays Bank Group 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 r egulatory testing purposes). This also includes the risk from Barclays Bank Group’s pension plans.
Interest rate risk in the banking book:
The risk that Barclays Bank Group is exposed to capital or income volatility because of a mismatch between
the intere st rate exposures of its (non traded) assets and liabilities.
The Barclays Bank Group Treasury manages treasury and capital risk exposure on a day - to- day basis with the Barclays Group Treasury Committee
acting as the principal management body. The Barclays Group Treasury and Capital Risk function is responsible for over sight and provide insight
into key capital, liquidity, interest rate risk in the banking book (IRRBB) and pension risk management activities.
Liquidity risk management (audited)
Overview
The efficient management of liquidity is essential to the Barclays Bank Group in order to retain the confidence of the financial markets and maintain
the sustainability of the business. The liquidity risk control framework is used to manage all liquidity risk exposures under both BAU and stressed
conditions. The framework is designed to maintain liquidity resources that are sufficient in amount, quality and funding tenor profile to support the
liquidity risk appetite as expressed by the Barclays Bank PLC Board. The liquidity risk appetite is monitored against bot h internal and regulatory
liquidity metrics.
Organisation, roles and responsibilities
Treasury has the primary responsibility for managing liquidity risk within the set risk appetite. Both Risk and Treasury contribute to the production
of the I nternal Liqu idity A dequacy A ssessment P rocess (ILAAP).
The Treasury and Capital Risk function is responsible for the management and
governance of the liquidity risk mandate, as defined by the Barclays Bank PLC Board .
The liquidity risk control framework is designed to deliver the appropriate term and structure of funding, consistent with the liquidity risk appetite
set by the Barclays Bank PLC Board.
The control framework incorporates a range of ongoing business management tools to monitor, limit and stress test the Barclays Bank Group
balance sheet and contingent liabilities. 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. In addition, Barclays maintains a Group reco very plan which includes application to the Barclays Bank Group.
Together, these tools reduce the likelihood that a liquidity stress event could lead to an inability to meet the Barclays Bank Group’ s obligations as
they fall due.
The Barclays Bank PLC Boar d approves the Barclays Bank Group funding plan, internal stress tests and results of regulatory stress tests. The
Barclays Bank PLC Treasury Committee is responsible for monitoring and managing liquidity risk in line with the Barclays Bank Group’s funding
management objectives, funding plan and risk frameworks. The Barclays Group Treasury and Capital Risk Committee monitors and reviews the
liquidity risk profile and control environment, providing second line oversight of the management of liquidity risk. The Barclays Bank PLC Board Risk
Committee reviews the risk profile, and annually reviews risk appetite and the impact of stress scenarios on the Barclays Bank Group funding
plan/forecast in order to agree the Barclays Bank Group’s projected funding abilities.
Capital risk management (audited)
Overview
Capital risk is managed through ongoing monitoring and management of the capital position, regular stress testing and a robust capital
governance framework. The objectives of the framework are to maintain adequate capital for the Barclays Bank Group and its legal entities to
withstand the impact of the risks that may arise under normal and stressed conditions, and maintain adequate capital to cover current and forecast
business needs and associated risks to provide a viable and sustainable business offering.
Organisation, r oles and responsibilities
Treasury has the primary responsibility for managing and monitoring capital. The Barclays Bank Group Treasury and Capital Risk function provides
oversight of capital risk and is an independent risk function that reports to the Barclays Bank Group CRO. Production of the Barclays Bank PLC
I nternal Capital A dequacy A ssessment P rocess (ICAAP) is the responsibility of Treasury.
Capital risk management is underpinned by a control framework and policy. The capital management strategy, outlined in the relevant legal entity
capital plans, is developed in alignment with the control framework and pol icy for capital risk, and is implemented consistently in order to deliver on
the Barclays Bank Group’s objectives, which are aligned to those of the Barclays Group.
The Barclays Bank PLC Board approves the Barclays Bank PLC capital plan, internal stress tests and results of regulatory stress tests and those of
the relevant Barclays Bank Group entities. The Barclays PLC Board also approves the Barclays Group recovery plan which takes into account
management actions identified at the Barclays Bank Group level. The Barclays Bank PLC Treasury Committee together with the Barclays Group
Treasury Committee are responsible for monitoring and managing capital risk in line with Barclays Bank Group’s capital management objectives,
capital plan and risk frameworks. The BRC monitors and reviews the capital risk profile and control environment, providing second line oversight of
the management of capital risk.
For the relevant Barclays Bank Group subsidiaries, local management assures compliance with an entity’s minimum re gulatory capital requirements
by reporting to local Asset and Liability Committees (or equivalents) with oversight by the Barclays Bank PLC Treasury Committee and the Barclays
Group Treasury Committee, as required. In 2019, Barclays complied with all regul atory minimum capital requirements.
Pension risk
The Barclays Bank Group maintains a number of defined benefit pension schemes for past and current employees. The ability of schemes to meet
pension payments is achieved with investments and contributions.
Risk review
Principal r isk management
Barclays Bank PLC 2019 Annual Report on Form 20-F 41
Pension risk arises because the market value of pension fund assets might decline; investment returns might reduce; or the estimated value of
pension liabilities might increase. The Barclays Bank Group monitors the pension risks arising from its defined b enefit pension schemes and works
with Trustees to address shortfalls. In these circumstances the Barclays Bank Group could be required or might choose to make extra contributions
to the pension fund. The Barclays Bank Group ’s main defined benefit scheme wa s closed to new entrants in 2012.
Interest rate risk in the banking book management (IRRBB)
Overview
Interest rate risk in the banking book is driven by customer deposit taking and lending activities, investments in the liquid asset portfolio and
funding activities. As per the Barclays Bank Group’s policy to remain within the defined risk appetite, businesses and Treasury execute hedging
strategies to mitigate the risks. However, the Barclays Bank Group remains susceptible to interest rate risk and other non - traded market risks from
key sources:
◾
Interest rate and repricing risk:
timing of interest rate changes between assets and liabilities, and other constraints on interest rate changes as per product terms and conditions.
◾
Customer behavioural risk:
the risk that net interest income could be adversely impacted by the discretion that custom ers and counterparties
may have in respect of being able to vary their contractual obligations with the Barclays Bank Group. This risk is often referred to by industry
regulators as ‘embedded option risk’.
◾
Investment risks in the liquid asset portfolio:
the risk that the fair value of assets held in the liquid asset portfolio and associated risk
management portfolios could be adversely impacted by market volatility, creating volatility in capital directly.
Organisation, roles and responsibilities
The Barclays Bank PLC Treasury Committee, together with the Barclays Group Treasury Committee, are responsible for monitoring and managing
IRRBB risk in line with Barclays Bank’s management objectives and risk frameworks. The BRC and Treasury and Capital Risk Committee monitors
and reviews the IRRBB risk profile and control environment, providing second line oversight of the management of IRRBB. The BRC reviews the
interest rate risk profile, including annual review of the risk appetite and the impact of stress scenarios on the interest rate risk of the Barclays Bank
Group’s banking books.
In addition, the Barclays Bank Group’s IRRBB policy sets out the processes and key controls required to identify all IRRBB risks arising from banking
book operations, to monitor the risk exposures via a set of metrics with a frequency in line with the risk management horizon, and to manage these
risks within agreed risk appetite and limits.
Operational risk management
The risk of loss to Barclays Bank Group 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.
Overview
The management of operational risk has three key objectives:
◾
d eliver an operational risk capability owned and used by business leaders to enable sound ri sk decisions over the long term;
◾
p rovide the frameworks, policies and standards to enable management to meet their risk management responsibilities while the second line of
defence provides robust, independent, and effective oversight and challenge; and
◾
d eliver a consistent and aggregated measurement of operational risk that will provide clear and relevant insights, so that the right management
actions can be taken to keep the operational risk profile consistent with the Barclays Bank Group’s strategy, the stated risk appetite and
stakeholder needs.
The Barclays Bank Group operates within a system of internal controls that enables business to be transacted and risk taken without exposing it to
unacceptable potential losses or reputational damages .
Organisation, roles and responsibilities
The prime responsibility for the management of operational risk and the compliance with control requirements rests within the business and
functional units where the risk arises. The operational risk profile and control environment is reviewed by management through business risk
committees and control committees. Businesses and functions are required to report their operational r isks on both a regular and an event - 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,
operational risk events and a review of scenarios.
The Barclays Group Head of Operational Risk is responsible for establishing, owning and maintaining an appropriate Barclays Group -wide
Operational Risk Management Framework, meanwhile the Barclays Bank PLC Head of Operational Risk is responsible for overse eing the portfolio of
operational risk across all businesses.
Operational Risk Management (ORM) acts in a second line of defence capacity, and is responsible for defining and overseeing the implementation
of the framework and monitoring Barclays Bank Group ’s operational risk profile. ORM alerts management when risk levels exceed acceptable
tolerance in order to drive timely decision making and actions by the first line of defence. Operational risk issues escalated from these meetings are
considered through the second line of defence review meetings. Depending on their nature, the outputs of these meetings are presented to the
Barclays Bank Risk Forum, BRC or the BAC. In addition, specific reports are prepared by the business and Barclays Bank PLC Head of Operational
Risk on a regular basis for the Barclays Bank Risk Forum and the BRC.
Operational risk categories
Operational risks are grouped into risk categories to support effective risk management, measurement and reporting. These comprise: Data
Management & Information Risk; Financial Reporting Risk; Fraud Risk; Payments Process Risk; People Risk; Premises Risk; Physical Security Risk;
Supplier Risk; Tax Risk; Technology Risk; Transaction Operations Risk and Execution Risk.
Risk review
Principal r isk management
Barclays Bank PLC 2019 Annual Report on Form 20-F 42
In addition to the above, operational risk encompasses risks associated with prudential regulation. This includes the risk of failing to: adhere to
prudential regulatory requirements, provide regulatory submissions; or monitor and manage adherence to new prudential regulatory requirements.
Enterprise risk themes
The Barclays Bank Group also recognises that there are certain threats/risk drivers that are more thematic and have the potential to impact the
Barclays Bank Group’s strategic objectives. These are enterprise risk themes which require an overarching and integrated risk management
approach. The Barclays Bank Group’s enterprise risk themes include Cyber, Data and Resilience.
For definitions of the Barclays Bank Group’s operational risk categories and enterpris e risk themes, refer to pages 199 to 200 of the Barclays PLC
Pillar 3 Report 2019.
Model risk management
The risk of the potential adverse consequences from financial assessments or decisions based on incorrect or misused model outputs and reports.
Overview
The Barclays Bank Group 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.
Since models are imperfect and incomplete representations of reality, they may be subject to errors affecting the accuracy of their output. Model
errors and misuse are the primary sources of model risk.
Organisation, roles and responsibilities
The Barclays Group 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 and the model inventory.
The model risk management framework consists of the model risk policy and standards. The policy prescribes the Barclays G roup - wide, en d - 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, risk appetite,
as well as vendor models and stress testing challenger models.
The function reports to the Barclays Group CRO and operates a global framework. Implementation of best practice standards is a centr al objective
of the Barclays Group.
The key model risk management activities include:
◾
Correctly identifying models across all relevant areas of the Bar clays Bank Group, and recording models in the Barclays Group Models Database
(GMD), the Barclays Group - wide model inventory.
◾
Enforcing 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 and maintain that the model presented to IVU is and remains fit for purpose.
◾
Overseeing that every model is subject to validation and approval by IVU, prior to being implemented and on a continual basis.
◾
Defining model risk appetite in terms of risk tolerance, and qualitative metrics which are used to track and report model risk.
Conduct risk management
The risk of detriment to customers, clients, market integrity, effective competition or Barclays from the inappropriate supply of financial services,
including instances of wilful or negligent misconduct.
Overview
The Barclays Bank Group defines, manages and mitigates conduct risk with the objective of providing good customer and client outcomes, prote cting
market integrity and promoting effective competition.
Product Lifecycle, Culture and Strategy and Financial Crime are the risk categories under the Barclays Group definition of conduct risk.
Organisation, roles and responsibilities
The governance of conduct risk within the Barclays Bank Group is fulfilled through management committees and forums operated by the first and
second lines of d efence with clear escalation and reporting lines to the Barclays Bank PLC Board committees. The Barclays Group Risk Committee is the
most senior executive body responsible for reviewing and m onitoring the effectiveness of both the Barclays Bank Group and the Barclays Group’s
management of conduct risk.
The Conduct Risk Management Framework (CRMF) comprises a number of elements that allow the Barclays Bank Group to manage and measure its
conduct risk profile.
Senio r m anagers have accountability for managing conduct risk in their areas of responsibility. This is expressed in their Statement of Responsibilities
which identifies the activities and areas for which they are accountable. The primary responsibility for managing conduct risk and compliance with
control requirements sits with the business where the risk arises. The Barclays Bank Group Controls Committee provi des oversight of controls relating
to conduct risk.
The Barclays Bank Group Chief Compliance Officer is responsible for providing effective oversight, management and escalation of conduct r isk in line
with the CRMF. This includes overseeing the development and maintenance of the relevant conduct risk p olicies and standards and monitoring and
reporting on the consistent application and effectiveness of the implem entation of controls to manage conduct r isk.
Risk review
Principal r isk management
Barclays Bank PLC 2019 Annual Report on Form 20-F 43
The Barclays Group Risk Committee is the primary second line governance committee for the oversight of conduct risk profile and implementation of
the CRMF for the Barclays Bank Group. The responsibilities of the Barclays Group Risk Committee in relation to the Barclays Bank Group include
adoption of the co nduct risk tolerance and the business defined key indicators. Additional responsibilities include the identification and discussion of
any emerging conduct risks exposures that have been identified.
Reputation risk management
The risk that an action, transaction, investment, event, decision, or business relationsh ip will reduce trust in Barclays Bank Group ’s integrity and/or
competence .
Overview
A reduction of trust in the Barclays Bank Group’s integrity and competence may reduce the attractiveness of Barclays Bank Group to customers and
clients and other stakeholders and could lead to negative publicity, loss of revenue, regulatory or legislative action, loss of existing and potential client
business, reduce workforce morale and difficulties in recruiting talent. Ultimately it may destroy shareholder value.
Organisation, roles and responsibilities
The governance of reputation risk within the Barclays Bank Group is fulfilled through managem ent committees and forums operated by the First and
Second Lines of Defence, with clear escalation and reporting lines to the relevant Barclays Bank Group Board committees.
The Barclays Group Risk Committee is the most senior executive body responsible fo r reviewing and monitoring the effectiveness of the Barclays Bank
Group management of reputation risk.
The Reputation Risk Management Framework (RRMF) comprises a number of elements that allow the Barclays Bank Group to manage and measure
its reputation ri sk profile. The RRMF sets out what is required to manage reputation risk across the Barclays Bank Group.
The Barclays Bank PLC Chief Compliance Officer is responsible for assessing the appropriateness of the relevant reputation risk policy and standards
an d oversight of the implementation of controls to manage the risk. The Barclays Bank Group is required to prepare reports for the Barclays Group Risk
Committee highlighting the most significant current and potential reputation risks and issues and how they are being managed.
Legal risk management
The risk of loss or imposition of penalties, damages or fines from the failure of Barclays Bank Group to meet its legal obligations including
regulatory or contractual requirements.
Overview
The Barclays Bank Group has no tolerance for wilful breaches of laws, regulations or other legal obligations. However, the multitude of laws and
regulations across the globe are highly dynamic and their application to particular circumstances is often unclear; this results in a level of inherent
legal risk, for which the Barclays Bank Group has limited tolerance.
Organisation, roles and responsibilities
The Barclays Bank Group’s businesses and functions have primary responsibility for identifying, managing and escalating legal risk in their area as
well as responsibility for adherence to minimum control requirements.
The Legal Function organisation and coverage model aligns expertise to businesses, functions, products, activities and geographic locations so
that the Barclays Bank Group receives legal support from appropriate legal professionals. The senior management o f the Legal Function oversees,
monitors and challenges legal risk across the Barclays Group. The Legal Funct ion does not sit in any of the three lines of d efence but supports
them all.
The Barclays Group General Counsel is responsible for maintaining an ap propriate Barclays Group - wide legal risk management framework. This
includes defining the relevant legal risk policies and oversight of the implementation of controls to manage and escalate legal risk.
The legal risk profile and control environment is reviewed by management through business risk committe es and control committees. The BRC is
the most senior body responsible for reviewing and monitoring the effectiveness of risk management across the Barclays Bank Group. Escalation
paths from this committee exist to the Barclays Group Risk Committee.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 44
Summary of Contents
Credit risk represents a significant risk to the Barclays
Bank 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.
◾
Credit risk overview and summary of performance
◾
M aximum exposure and effects of netting, collateral and risk transfer
45
46
This section outlines the expected credit loss
allowances, the movements in allowances during the
period, material management adjustments to model
output and measurement uncertainty and sensitivity
analysis.
◾
Expected credit losses
-
Loans and advances at amortised cost by product
-
Movement in gross exposure and impairment allowance for loans
and advances at amortised cost including provisions for loan
commitments and financial guarantees
-
Stage 2 decomposition
-
Stage 3 decomposition
◾
Management adjustments to models for impairment
◾
Measurement uncertainty and sensitivity analysis
49
49
50
54
54
55
55
The Barclays Bank Group reviews and monitors risk
concentrations in a variety of ways. This section outlines
performance against key concentration risks.
◾
Analysis of the concentration of credit risk
-
Geographic concentrations
-
Industry concentrations
◾
A pp roach to management and representation of credit quality
-
Asset credit quality
-
Debt securities
-
Balance sheet credit quality
-
Credit exposures by internal PD grade
61
61
62
63
63
63
63
65
Credit Risk monitors exposure performance across a
range of significant portfolios.
◾
Analysis of specific portfolios and asset types
-
Credit cards, unsecured loans and other retail lending
67
67
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 45
A ll disclosures in this section pages 45 to 67 are unaudited unless otherwise stated.
Overview
Credit risk represents a significant risk to the Barclays Bank 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.
Further detail can be found in the Financial statements section in Note 7 Credit impairment charges. Descriptions of terminology can be found in
the glossary, available at home.barclays/annualreport.
Summary of performance in the period
Credit impairment charges increased 87% to £1,202m. CIB credit impairment charges increased to £157m (2018: release of £152m) due to the
non - recurrence of favourable macroeconomic scenario updates and single name recove ries in 2018. CC&P credit impairment charges increased to
£1,016m (2018: £808m) due to growth in cards balance and the non - recurrence of favourable US macroeconomic scenario updates in 2018. Credit
metrics remained stable, with US cards 30 and 90 day arrears of 2.7% (Q418: 2.7%) and 1.4% (Q41 8: 1.4%) respectively.
Key metrics
Decrease of £112m impairment allowance
Impairment allowances on loans and advances at amortised cost, including off - balance sheet elements of the allowance in Barcl ays Bank Group
decreased by £112 m to £3,948m (2018: £4,060m) during the year. This is driven by a decrease in Home Loans £32m, Credit cards, unsecured
loans and other retail lending of £144m offset by an increase in Wholesale Loans of £29m and an increase in off - balance sheet provisions of £35m.
Please refer to Pg 00 Expected Credit loss section for further details.
Please see risk management section on pages
25
to
27
for details of governance, policies and procedures.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 46
Analysis of the Balance Sheet
Barclays Bank Group’s maximum exposure and effects of netting, collateral and risk transfer
The following tables present a reconciliation between the Barclays Bank Group’s maximum exposure and its net exposure to credit risk, reflecting
the financial effects of risk mitigation reducing the Barclays Bank 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. For off - balance sheet guarantees, the maximum exposure is the maximum amount that the Barclays Bank Group would have to
pay if the guarantees w ere to be called upon. For loan and other credit related commitments , the maximum exposure is the full amount of the
committed facilities.
This and subsequent analyses of credit risk exclude other financial assets not subject to credit risk, mainly equity securities.
The Barclays Bank Group mitigates the credit risk to which it is exposed through netting and set-off, collateral and risk transfer. Furt her detail on
these forms of credit enhan cement is presented on page 31 of the credit risk management section.
Overview
As at 31 December 2019, the Barclays Bank Group’s net exposure to credit risk, after taking into account credit risk mitigation, increase d 0 .4% to
£657.7 bn . Overall, the extent to which the Barclays Bank Group holds mitigation against its total exposure remained unchanged at 4 0% (2018:
40%).
Of the unmitigated on balance sheet exposure, a significant portion relates to cash held at central banks, cash collateral and settlement balances,
and debt securities issued by governments, all of which are considered to be lower risk. The increase in the Barclays Bank Group’s net exposure to
credit risk has been driven by increases in cash col lateral and settlement balances, wholesale corporate loans and off - balance sheet loan
commitments, offset by decreases in cash and balances at central banks and trading portfolio assets. 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 derivatives, financial investments and wholesale loan assets are predomina ntly investment
grade and there are no significant changes from prior year. Further analysis on the credit quality o f assets is presented on pages 63 to 64 .
Collateral obtained
Where collateral has been obtained in the event of default, the Barclays Bank Group does not, ordinarily, use such assets for its own operations and
they are usually sold on a timely basis. The carrying value of assets held by the Barclays Bank Group as at 31 December 2019, as a result of the
en forcement of collateral, was £6 m (2018 : £6m).
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 47
Maximum exposure and effect of netting, collateral and risk transfer (audited)
Maximum
exposure
Netting and
set -off
Cash
collateral
Non -cash
collateral
Risk transfer
Net exposure
Barclays Bank Group
As at 31 December 2019
£m
£m
£m
£m
£m
£m
On-balance sheet:
Cash and balances at central banks
125,940
-
-
-
-
125,940
Cash collateral and settlement balances
79,486
-
-
-
-
79,486
Loans and advances at amortised cost:
Home loans
10,986
-
(293)
(10,582)
(69)
42
Credit cards, unsecured loans and other retail lending
33,503
-
(695)
(4,753)
(256)
27,799
Wholesale loans
97,147
(7,636)
(146)
(25,915)
(4,550)
58,900
Total loans and advances at amortised cost
141,636
(7,636)
(1,134)
(41,250)
(4,875)
86,741
764
-
(2)
(749)
(13)
-
658
-
(7)
(271)
(3)
377
780
-
(9)
(209)
(19)
543
2,202
-
(18)
(1,229)
(35)
920
Reverse repurchase agreements and other similar secured lending
1,731
-
-
(1,731)
-
-
Trading portfolio assets:
Debt securities
51,880
-
-
(423)
-
51,457
Traded loans
5,378
-
-
(134)
-
5,244
Total trading portfolio assets
57,258
-
-
(557)
-
56,701
Financial assets at fair value through the income statement:
Loans and advances
19,137
-
(14)
(14,791)
(57)
4,275
Debt securities
5,220
-
-
-
-
5,220
Reverse repurchase agreements
97,823
-
(1,132)
(96,672)
-
19
Other financial assets
742
-
-
-
-
742
Total financial assets at fair value through the income statement
122,922
-
(1,146)
(111,463)
(57)
10,256
Derivative financial instruments
229,641
(176,022)
(33,469)
(5,403)
(5,564)
9,183
Financial assets at fair value through other comprehensive income
45,405
-
-
(305)
(727)
44,373
Other assets
614
-
-
-
-
614
Total on -balance sheet
804,633
(183,658)
(35,749)
(160,709)
(11,223)
413,294
Off-balance sheet:
Contingent liabilities
23,777
-
(400)
(4,412)
(159)
18,806
Loan commitments
270,027
-
(48)
(42,420)
(1,913)
225,646
Total off-balance sheet
293,804
-
(448)
(46,832)
(2,072)
244,452
Total
1,098,437
(183,658)
(36,197)
(207,541)
(13,295)
657,746
Off-balance sheet exposures are shown gross of provisions of £252m (2018: £217m). See Note 24 for further details.
In addition to the above, Barclays Bank Group holds forward starting reverse repos amounting to £31.1 bn (2018: £35.5bn). The balances are fully
collateralised.
For further information on credit risk mitigation techniques, refer to page 31 within the credit risk management section.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 48
Maximum exposure and effects of netting, collateral and risk transfer (audited)
Maximum
exposure
Netting and
set -off
Cash
collateral
Non-cash
collateral
Risk transfer
Net exposure
Barclays Bank Group
As at 31 December 2018
£m
£m
£m
£m
£m
£m
On-balance sheet:
Cash and balances at central banks
136,359
-
-
-
-
136,359
Cash collateral and settlement balances
74,352
-
-
-
-
74,352
Loans and advances at amortised cost:
Home loans
13,160
-
(294)
(12,675)
(129)
62
Credit cards, unsecured loans and other retail lending
33,791
-
(607)
(5,063)
(427)
27,694
Corporate loans
90,008
(7,546)
(63)
(27,853)
(3,971)
50,575
Total loans and advances at amortised cost
136,959
(7,546)
(964)
(45,591)
(4,527)
78,331
887
-
(3)
(854)
(30)
-
645
-
(6)
(231)
(38)
370
558
-
-
(150)
(17)
391
2,090
-
(9)
(1,235)
(85)
761
Reverse repurchase agreements and other similar secured lending
1,613
-
(17)
(1,565)
-
31
Trading portfolio assets:
Debt securities
57,134
-
-
(451)
-
56,683
Traded loans
7,234
-
-
(154)
-
7,080
Total trading portfolio assets
64,368
-
-
(605)
-
63,763
Financial assets at fair value through the income statement:
Loans and advances
15,644
-
(11)
(9,690)
-
5,943
Debt securities
4,515
-
-
(445)
-
4,070
Reverse repurchase agreements
119,391
-
(2,996)
(115,951)
-
444
Other financial assets
528
-
-
-
-
528
Total financial assets at fair value through the income statement
140,078
-
(3,007)
(126,086)
-
10,985
Derivative financial instruments
222,683
(172,014)
(31,475)
(5,502)
(4,712)
8,980
Financial assets at fair value through other comprehensive income
44,983
-
-
-
(399)
44,584
Other assets
699
-
-
-
-
699
Total on -balance sheet
822,094
(179,560)
(35,463)
(179,349)
(9,638)
418,084
Off-balance sheet:
Contingent liabilities
19,394
-
(399)
(1,418)
(190)
17,387
Loan commitments
257,768
-
(89)
(36,852)
(1,288)
219,539
Total off-balance sheet
277,162
-
(488)
(38,270)
(1,478)
236,926
Total
1,099,256
(179,560)
(35,951)
(217,619)
(11,116)
655,010
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 49
Expected Credit Losses
Loans and advances at amortised cost by product
The table below presents a breakdown of loans and advances at amortised cost and the impairment allowance with stage allocation by asset
classification. Impairment allowance under IFRS 9 considers both the drawn and the undrawn counterparty exposure. For r etail portfolios, the total
impairment allowance is allocated to the drawn exposure to the extent that the allowance does not exceed the exposure as ECL is not reported
separately. Any excess is reported on the liability side of the balance sheet as a prov ision. For wholesale portfolios the impairment allowance on the
undrawn exposure is reported on the liability side of the balance sheet as a provision .
Barclays Bank Group (audited)
Stage 2
As at 31 December 2019
Stage 1
Not past due
<=30 days
past due
past due
Total
Stage 3
Total
a
Gross exposure
£m
£m
£m
£m
£m
£m
£m
Home loans
9,604
544
48
82
674
1,056
11,334
Credit cards, unsecured loans and other retail lending
29,541
3,806
304
340
4,450
2,129
36,120
Wholesale loans
89,200
6,489
354
672
7,515
1,163
97,878
Total
128,345
10,839
706
1,094
12,639
4,348
145,332
Impairment allowance
Home loans
16
24
9
7
40
292
348
Credit cards, unsecured loans and other retail lending
362
523
99
162
784
1,471
2,617
Wholesale loans
114
219
8
7
234
383
731
Total
492
766
116
176
1,058
2,146
3,696
Net exposure
Home loans
9,588
520
39
75
634
764
10,986
Credit cards, unsecured loans and other retail lending
29,179
3,283
205
178
3,666
658
33,503
Wholesale loans
89,086
6,270
346
665
7,281
780
97,147
Total
127,853
10,073
590
918
11,581
2,202
141,636
Coverage ratio
%
%
%
%
%
%
%
Home loans
0.2
4.4
18.8
8.5
5.9
27.7
3.1
Credit cards, unsecured loans and other retail lending
1.2
13.7
32.6
47.6
17.6
69.1
7.2
Wholesale loans
0.1
3.4
2.3
1.0
3.1
32.9
0.7
Total
0.4
7.1
16.4
16.1
8.4
49.4
2.5
As at 31 December 2018
Gross exposure
£m
£m
£m
£m
£m
£m
£m
Home loans
11,486
663
50
147
860
1,194
13,540
Credit cards, unsecured loans and other retail
��
lending29,548
4,381
305
240
4,926
2,078
36,552
Wholesale loans
81,555
7,480
315
443
8,238
917
90,710
Total
122,589
12,524
670
830
14,024
4,189
140,802
Impairment allowance
Home loans
26
29
9
9
47
307
380
Credit cards, unsecured loans and other retail lending
356
694
118
160
972
1,433
2,761
Wholesale loans
107
214
11
11
236
359
702
Total
489
937
138
180
1,255
2,099
3,843
Net exposure
Home loans
11,460
634
41
138
813
887
13,160
Credit cards, unsecured loans and other retail lending
29,192
3,687
187
80
3,954
645
33,791
Wholesale loans
81,448
7,266
304
432
8,002
558
90,008
Total
122,100
11,587
532
650
12,769
2,090
136,959
Coverage ratio
%
%
%
%
%
%
%
Home loans
0.2
4.4
18.0
6.1
5.5
25.7
2.8
Credit cards, unsecured loans and other retail lending
1.2
15.8
38.7
66.7
19.7
69.0
7.6
Wholesale loans
0.1
2.9
3.5
2.5
2.9
39.1
0.8
Total
0.4
7.5
20.6
21.7
8.9
50.1
2.7
Note
a Other financial assets subject to impairment not included in the table above include cash collateral and settlement balances, financial assets at fair value through other
comprehensive income, accrued income and sundry debtors. These have a total gross exposure of £125.5bn (December 2018: £120.1bn) and impairment allowance of £22m
(December 2018: £11m). This comprises £10m (December 2018: £9m) ECL on £124.7bn (December 2018: £119.6bn) Stage 1 assets and £2m (December 2018:£2m) on £0.8bn
(December 2018: £ 0.5bn) Stage 2 fair value through other comprehensive income assets, cash collateral and settlement assets and £10m (December 2018: £n il) on £10m Stage 3
(December 2018: £nil) other assets. Loan commitments and financial guarantee contracts have total ECL of £252m (December 2018: £217m).
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 50
Movement in gross exposures and impairment allowance including provisions for loan commitments and financial guarantees
The following tables present a reconciliation of the opening to the closing balance of the exposure and impairment allowance. Explanation of the
terms: 12 - month ECL, lifetime ECL and credit - impaired are included in page 115 The disclosure has been enhanced in 2019 to provide further
granularity by product. Transfers between stages in the tables have been reflected as if they had taken place at the beginning of the year. The
movements are measured over a 12 - month period.
Loans and advances at amortised cost
(audited)
Stage 1
Stage 2
Stage 3
Total
Barclays Bank Group
Gross
ECL
Gross
ECL
Gross
ECL
Gross
ECL
£m
£m
£m
£m
£m
£m
£m
£m
Home loans
As at 1 January 2019
11,486
26
860
47
1,194
307
13,540
380
Transfers from Stage 1 to Stage 2
(320)
(1)
320
1
-
-
-
-
Transfers from Stage 2 to Stage 1
301
11
(301)
(11)
-
-
-
-
Transfers to Stage 3
(103)
-
(94)
(12)
197
12
-
-
Transfers from Stage 3
13
-
70
2
(83)
(2)
-
-
Business activity in the year
785
1
-
-
-
-
785
1
Changes to models used for calculation
a
-
-
-
-
-
-
-
-
Net drawdowns, repayments, net re-
measurement and movements due to exposure
and risk parameter changes
(793)
(19)
(58)
19
(70)
1
(921)
1
Final repayments
(1,042)
(1)
(61)
(2)
(159)
(5)
(1,262)
(8)
Disposals
b
(723)
(1)
(62)
(4)
(2)
-
(787)
(5)
Write-offs
c
-
-
-
-
(21)
(21)
(21)
(21)
As at 31 December 2019
d
9,604
16
674
40
1,056
292
11,334
348
Credit cards, unsecured loans and other retail lending
As at 1 January 2019
29,548
356
4,926
972
2,078
1,433
36,552
2,761
Transfers from Stage 1 to Stage 2
(1,611)
(41)
1,611
41
-
-
-
-
Transfers from Stage 2 to Stage 1
2,134
312
(2,134)
(312)
-
-
-
-
Transfers to Stage 3
(585)
(15)
(524)
(244)
1,109
259
-
-
Transfers from Stage 3
4
3
16
8
(20)
(11)
-
-
Business activity in the year
6,007
75
311
56
45
10
6,363
141
Changes to models used for calculation
a
-
16
-
(57)
-
(7)
-
(48)
Net drawdowns, repayments, net re-
measurement and movements due to exposure
and risk parameter changes
(3,690)
(318)
410
346
341
1,018
(2,939)
1,046
Final repayments
(2,266)
(26)
(166)
(26)
(202)
(31)
(2,634)
(83)
Disposals
b
-
-
-
-
(54)
(32)
(54)
(32)
Write-offs
c
-
-
-
-
(1,168)
(1,168)
(1,168)
(1,168)
As at 31 December 2019
d
29,541
362
4,450
784
2,129
1,471
36,120
2,617
Wholesale loans
As at 1 January 2019
81,555
107
8,238
236
917
359
90,710
702
Transfers from Stage 1 to Stage 2
(2,465)
(6)
2,465
6
-
-
-
-
Transfers from Stage 2 to Stage 1
2,905
42
(2,905)
(42)
-
-
-
-
Transfers to Stage 3
(305)
(1)
(381)
(13)
686
14
-
-
Transfers from Stage 3
52
-
92
15
(144)
(15)
-
-
Business activity in the year
31,714
44
1,496
22
31
-
33,241
66
Changes to models used for calculation
a
-
(9)
-
(19)
-
-
-
(28)
Net drawdowns, repayments, net re-
measurement and movements due to exposure
and risk parameter changes
7,366
(33)
615
70
139
220
8,120
257
Final repayments
(31,622)
(30)
(2,105)
(41)
(362)
(91)
(34,089)
(162)
Disposals
b
-
-
-
-
-
-
-
-
Write-offs
c
-
-
-
-
(104)
(104)
(104)
(104)
As at 31 December 2019
d
89,200
114
7,515
234
1,163
383
97,878
731
Notes
a Changes to models used for calculation include a £48m movement in Credit cards, unsecured loans and other retail lending and a £28m movement in Wholesale loans . These
reflect methodology changes made during the year. Barclays continually review the output of models to determine accuracy of the ECL calculation including review of model
monitoring, external benchmarking and experience of model operation over an extended period of time. This ensures that the models used continue to reflect the risks inherent
across the businesses.
b The £787m movement of gross loans and advances disposed of across Home Loans relates to the sale of a portfolio of mortgages from the Italian loan book. The £54m disposal
reported within Credit cards, unsecured loans and other retai l lending portfolio relates to debt sa les undertaken during the year.
c
In 2019, gross write -offs amounted to £1, 293m (2018: £1,456m) and post write -off recoveries amounted to £73m (2018: £86m). Net write -offs represent gross write -offs less
post write -off recoverie s and amounted to £1,220m (2018: £1,370m).
d Other financial assets subject to impairment not included in the table above include cash collateral and settlement balances, financial assets at fair value through other
comprehensive income, accrued income and sundry debtors. These have a total gross exposure of £125.5bn (December 2018: £120.1bn) and impairment allowance of £22m
(December 2018: £11m). This comprises £10m ECL (December 2018 £9m) on £124.7bn stage 1 assets (December 2018: £119.6bn) and £2m (December 2018: £2m) on £0.8bn
stage 2 fair value through other comprehensive income assets, cash collateral and settlement assets (December 2018: £0.5bn) and £10m (December 2018: £ nil ) on £10m Stage 3
other assets (December 2018: £nil ).
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 51
Reconciliation of ECL movement to impairment charge/(release) for the period
£m
Home loans
(6)
Credit cards, unsecured loans and other retail lending
1,056
Wholesale loans
133
ECL movement excluding assets derecognised due to disposals and write -offs
1,183
Post write - off recoveries
(73)
Exchange and other adjustments
a
31
Impairment charge on loan commitments and financial guarantees
55
Impairment charge on other financial assets
b
6
Income statement charge for the period
1,202
Notes
a Includes foreign exchange and interest and fees in suspense.
b Other financial assets subject to impairment not included in the table above include cash collateral and settlement balances, financial assets at fair value through other
comprehensive income, accrued income and sundry debtors. These have a total gross exposure of £125.5bn (December 2018: £120.1bn) and impairment allowance of £22m
(December 2018: £11m). This comprises £10m ECL (December 2018 £9m) on £124.7bn stage 1 assets (December 2018: £119.6bn) and £2m (December 2018: £2m) on £0.8bn
stage 2 fair value through other comprehensive income assets, cash collateral and settlement assets (December 2018: £0.5bn) and £10m (December 2018: £nil ) on £10m Stage 3
other assets (December 2018: £nil).
Loan commitments and financial guarantees
(audited)
Stage 1
Stage 2
Stage 3
Total
Barclays Bank Group
Gross
ECL
Gross
ECL
Gross
ECL
Gross
ECL
£m
£m
£m
£m
£m
£m
£m
£m
Home loans
As at 1 January 2019
15
-
1
-
-
-
16
-
Net transfers between stages
-
-
-
-
-
-
-
-
Business activity in the year
18
-
-
-
-
-
18
-
Net drawdowns, repayments, net re-
measurement and movement due to exposure
and risk parameter changes
1
-
(1)
-
-
-
-
-
Final repayments
-
-
-
-
-
-
-
-
As at 31 December 2019
34
-
-
-
-
-
34
-
Credit cards, unsecured loans and other retail lending
As at 1 January 2019
74,624
32
4,304
21
69
20
78,997
73
Net transfers between stages
251
4
(981)
(3)
730
(1)
-
-
Business activity in the year
13,322
2
173
-
6
6
13,501
8
Net drawdowns, repayments, net re-
measurement and movement due to exposure
and risk parameter changes
1,169
(15)
(810)
(2)
(725)
(10)
(366)
(27)
Final repayments
(11,109)
(1)
(633)
(1)
(13)
(1)
(11,755)
(3)
As at 31 December 2019
78,257
22
2,053
15
67
14
80,377
51
Wholesale loans
As at 1 January 2019
173,951
59
12,139
83
352
2
186,442
144
Net transfers between stages
(881)
7
585
(8)
296
1
-
-
Business activity in the year
53,666
22
2,777
22
16
-
56,459
44
Net drawdowns, repayments, net re-
measurement and movement due to exposure
and risk parameter changes
686
(1)
1,211
36
238
41
2,135
76
Final repayments
(44,421)
(24)
(4,659)
(36)
(266)
(3)
(49,346)
(63)
As at 31 December 2019
183,001
63
12,053
97
636
41
195,690
201
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 52
Gross exposure for loans and advances at amortised cost (audited)
Barclays Bank Group
Stage 1
Stage 2
Stage 3
Total
£m
£m
£m
£m
As at 1 January 2018
266,173
49,592
9,081
324,846
Disposal of business to Barclays Bank UK PLC
(155,390)
(27,978)
(4,202)
(187,570)
Net transfers between stages
4,999
(6,196)
1,197
-
Business activity in the year
51,044
1,650
122
52,816
Net drawdowns and repayments
(5,635)
767
155
(4,713)
Final repayments
(33,493)
(3,811)
(654)
(37,958)
Disposals
(5,109)
-
(54)
(5,163)
Write- offs
-
-
(1,456)
(1,456)
As at 31 December 2018
122,589
14,024
4,189
140,802
Impairment allowance on loans and advances at amortised cost (audited)
Barclays Bank Group
Stage 1
Stage 2
Stage 3
Total
£m
£m
£m
£m
As at 1 January 2018
608
3,112
3,382
7,102
Disposal of business to Barclays Bank UK PLC
(168)
(1,490)
(1,278)
(2,936)
Net transfers between stages
664
(995)
331
-
Business activity in the year
191
114
57
362
Net re -measurement and movement due to exposure and risk
parameter changes
(740)
597
1,189
1,046
UK economic uncertainty adjustment
-
50
-
50
Final repayments
(66)
(133)
(72)
(271)
Disposals
-
-
(54)
(54)
Write- offs
-
-
(1,456)
(1,456)
As at 31 December 2018
a
489
1,255
2,099
3,843
Reconciliation of ECL movement to impairment charge/(release)
for the period
ECL movement excluding assets derecognised due to disposals and
write- offs
1,187
Post write- off recoveries
(86)
Exchange and other adjustments
(212)
Impairment release on loan commitments and financial guarantees
b
(48)
Impairment charge on other financial assets
3
Income statement charge/(release) for the period
c
844
Notes
a Other financial assets subject to impairment not included in the table above include cash collateral and settlement balances, financial assets at fair value through other
comprehensive income, accrued income and sundry debtors. These have a total gross exposure of £120.1bn (1 January 2018: £128.1bn) and impairment allowance of £11m (1
January 2018: £9m). This comprises £9m ECL on £119.6bn stage 1 as sets and £2m on £0.5bn stage 2 fair value through other comprehensive income assets.
b Impairment release of £48m on loan commitments and financial guarantees represents reduction in impairment allowance excluding disposal of business to Barclays Bank UK PLC
of £116m and exchange and other adjustments of £68m.
c Barclays Bank PLC transferred its UK banking business on 1 April 2018 to Barclays Bank UK PLC. Net impairment charge of £201m (Impairment charges: £217m and recoveries:
£16m) relating to the UK banking business for the three months ended 31 March 2018 is included in the reconciliation in “Income statement charge/(release) for the period”.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 53
Gross exposure for loans and advances at amortised cost
Continuing operations
Barclays Bank Group
Stage 1
Stage2
Stage3
Total
£m
£m
£m
£m
As at 1 January 2018
113,375
19,913
4,831
138,119
Net transfers between stages
3,795
(4,588)
793
-
Business activity in the year
43,520
1,188
48
44,756
Net drawdowns and repayments
(2,773)
1,117
486
(1,170)
Final repayments
(30,219)
(3,606)
(590)
(34,415)
Disposals
(5,109)
-
(54)
(5,163)
Write-offs
-
-
(1,325)
(1,325)
As at 31 December 2018
122,589
14,024
4,189
140,802
Impairment allowance on loans and advances at amortised cost
Continuing operations
Barclays Bank Group
Stage 1
Stage2
Stage3
Total
£m
£m
£m
£m
As at 1 January 2018
437
1,713
2,108
4,258
Net transfers between stages
446
(697)
251
-
Business activity in the year
167
86
30
283
Net re-measurement and movement due to exposure and risk parameter
changes
(506)
220
1,151
865
UK economic uncertainty adjustment
-
50
-
50
Final repayments
(55)
(117)
(62)
(234)
Disposals
-
-
(54)
(54)
Write-offs
-
-
(1,325)
(1,325)
As at 31 December 2018
489
1,255
2,099
3,843
Gross exposure for loans and advances at amortised cost
Discontinued operations
Barclays Bank Group
Stage 1
Stage2
Stage3
Total
£m
£m
£m
£m
As at 1 January 2018
152,798
29,679
4,250
186,727
Net transfers between stages
1,204
(1,608)
404
-
Business activity in the year
7,524
462
74
8,060
Net drawdowns and repayments
(2,862)
(350)
(331)
(3,543)
Final repayments
(3,274)
(205)
(64)
(3,543)
Write-offs
-
-
(131)
(131)
Transferred to Barclays Bank UK PLC on 1 April 2018
155,390
27,978
4,202
187,570
Impairment allowance on loans and advances at amortised cost
Discontinued operations
Barclays Bank Group
Stage 1
Stage2
Stage3
Total
£m
£m
£m
£m
As at 1 January 2018
171
1,399
1,274
2,844
Net transfers between stages
218
(298)
80
-
Business activity in the year
24
28
27
79
Net re-measurement and movement due to exposure and risk parameter
changes
(234)
377
38
181
Final repayments
(11)
(16)
(10)
(37)
Write-offs
-
-
(131)
(131)
Transferred to Barclays Bank UK PLC on 1 April 2018
168
1,490
1,278
2,936
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 54
Stage 2 decomposition
Loans and advances at amortised cost
a
2019
2018
Gross Exposure
Impairment
allowance
Gross Exposure
Impairment
allowance
As at 31 December
£m
£m
Quantitative test
8,415
848
10,357
1,116
Qualitative test
3,365
181
3,324
118
30 days past due backstop
859
29
343
21
Total Stage 2
12,639
1,058
14,024
1,255
Note
a
Where balances satisfy more than one of the above three criteria for determining a significant increase in credit risk, the corresponding gross exposure and ECL has been assigned
in order of categories presented.
Stage 2 exposures are predominantly identified using quantitative tests where the lifetime PD has deteriorated more than a pre - determined amount
since origination. This is augmented by inclusion of accounts meeting the designated high risk criteria (including watchlist) for the portfolio under
the qualitative test. Qualitative tests include £1.7bn relating to Corporate and Investment Bank, £0.9bn relating to Barclaycard International and
£0.7bn relating to Private Bank.
A small number of other accounts (3% of impairment allowances and 7% of gross exposure) are included in Stage 2. These accounts are not
otherwise identified by the quantitative or qualitative tests but are more than 30 day s past due. The percentage triggered by these backstop criteria
is a measure of the effectiveness of the Stage 2 criteria in identifying deterioration prior to delinquency. These balances include items in Corporate
and Investment Bank for reasons such as outstanding interest and fees rather than principal balances .
For further detail on the three criteria for determining a significant increase in credit risk required for Stage 2 classification, refer to Note 7.
Stage 3 decomposition
Loans and advances at amortised cost
2019
2018
Gross Exposure
Impairment
allowance
Gross Exposure
Impairment
allowance
As at 31 December
£m
£m
Exposures not charged -off including within cure period
a
1,429
490
1,410
509
Exposures individually assessed or in recovery book
b
2,919
1,656
2,779
1,590
Total Stage 3
4,348
2,146
4,189
2,099
Notes
a
Includes £0.6bn of gross exposure in a cure period that must remain in Stage 3 for a minimum of 12 months before moving to Stage 2.
b
Exposures individually assessed or in recovery book cannot cure out of Stage 3.
Management adjustments to models for impairment (audited)
Management adjustments to impairment models are applied in order to factor in certain conditions or changes in policy that are not fully
incorporated into the impairment models, or to reflect additional facts and circumstances at the period end. Management adjustments are
reviewed and incorporated into future model development where applicable.
Total management adjustments to impairment allowance are presented by product below.
Management adjustments to models for impairment (audited)
a
2019
2018
Management
adjustments to
impairment
allowances
Proportion of
total impairment
allowances
Management
adjustments to
impairment
allowances
Proportion of
total impairment
allowances
As at 31 December
£m
%
£m
%
Home loans
-
-
4
1.1
Credit cards, unsecured loans and other retail lending
3
0.1
(18)
(0.7)
Wholesale loans
(40)
(5.5)
(12)
(1.7)
Total
(37)
(1.0)
(26)
(0.7)
Note
a
Positive values relate to an in crease in impairment allowance.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 55
Credit cards, unsecured loans and other retail lending:
the US Cards portfolio to account for changes in the modelled lifetime of credit cards in Stage 2. This adjustment will be removed once updates to
the model have been incorporated.
Wholesale loans:
adjustments in CIB related to Probability of Default at origination and Loss Given Default floors.
A £50m ECL adjustment is held in CIB for the anticipated impact of economic uncertainty in the UK, first taken in December 2018 and retained as at
2019 year - end.
Measurement uncertainty and sensitivity analysis
The measurement of ECL involves complexity and judgement, including estimation of probabilities of default (PD), loss given default (LGD), a range
of unbiased future economic scenarios, estimation of expected lives, estimation of exposures at default (EAD) and assessing significant increases in
credit risk.
The Barclays Bank Group uses a five- scenario model to calculate ECL. An external consensus foreca st is assembled from key sources, including HM
Treasury (short and medium term forecasts) , Bloomberg (based on median of economic forecasters) and the Urban Land Institute (for US House
Prices) , which forms the B aseline scenario. In addition, two adverse scenarios (Downside 1 and Downside 2) and two favourable scenarios (Upside
1 and Upside 2) are derived, with associated probability weightings. The adverse scenarios are calibrated to a similar severity to internal stress tests,
whilst also considering IFR S 9 specific sensitivities and non - linearity. Downside 2 is benchmarked to the Bank of England’s annual cyclical scenarios
and to the most severe scenario from Moody’s inventory, but is not designed to be the same. The favourable scenarios are calibrated to be
symmetric to the adverse scenarios, subject to a ceiling calibrated to relevant recent favourable benchmark scenarios. All scenarios are regenerated
at a minimum annually. The scenarios include eight economic variables, (GDP, unemployment, House Price Index (HPI) and base rates in both the
UK and US markets), and expanded variables using statistical models ba sed on historical correlations. The upside and downside shocks are
designed to evolve over a five- year stress horizon, with all five scenarios con verging to a steady state after approximately eight years.
Scenario weights (audited)
The methodology for estimating probability weights for each of the scenarios involves a comparison of the distribution of key historical UK and US
macroeconomic variables against the forecast paths of the five scenarios. The m ethodology works such that the B aseline (reflecting current
consensus outlook) has the highest weight and the weights of adverse and favourable scenarios de pend on the deviation from the Baseline; the
further from the B aseline, the smaller the weight. This is reflected in the table below where the probability weights of the scenarios as of 31
December 2019 are shown. A single set of five scenarios is used across all po rtfolios and all five weights are normalised to equate to 100%. The
same scenarios and weights that are used in the estimation of expected credit losses are also used for the Barclays Bank Group internal planning
purposes. The impacts across the portfolios are different because of the sensitivities of each of the portfolios to specific macroeconomic variables,
for example, mortgages are highly sensitive to house prices and base rates, credit cards and unsecured consumer loans are highly sensitive to
unemployment.
The tables below show the macroeconomic variables for each scenario and their respective scenario weights. Macroeconomic variables are
presented using the most relevant basis for each variable. 5 - year average tables and movement over time graphs provide additional transparency.
Scenario probability weighting (audited)
Upside 2
Upside 1
Baseline
Downside 1
Downside 2
As at 31 December 2019
Scenario probability weighting
10.1
23.1
40.8
22.7
3.3
As at 31 December 2018
Scenario probability weighting
9.0
24.0
41.0
23.0
3.0
The weights of Upside 2 and Downside 2 have increased slightly reflecting the small decrease in dispersion in the scenarios. The impact on ECL is
immaterial.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 56
Macroeconomic variables used in the calculation of ECL (specific bases) (audited)
a
Upside 2
Upside 1
Baseline
Downside 1
Downside 2
As at 31 December 2019
UK GDP
b
4.2
2.9
1.6
0.2
(4.7)
UK unemployment
c
3.4
3.8
4.2
5.7
8.7
UK HPI
d
46.0
32.0
3.1
(8.2)
(32.4)
UK bank rate
c
0.5
0.5
0.7
2.8
4.0
US GDP
b
4.2
3.3
1.9
0.4
(3.4)
US unemployment
c
3.0
3.5
3.9
5.3
8.5
US HPI
d
37.1
23.3
3.0
0.5
(19.8)
US federal funds rate
c
1.5
1.5
1.7
3.0
3.5
As at 31 December 2018
UK GDP
b
4.5
3.1
1.7
0.3
(4.1)
UK unemployment
c
3.4
3.9
4.3
5.7
8.8
UK HPI
d
46.4
32.6
3.2
(0.5)
(32.1)
UK bank rate
c
0.8
0.8
1.0
2.5
4.0
US GDP
b
4.8
3.7
2.1
0.4
(3.3)
US unemployment
c
3.0
3.4
3.7
5.2
8.4
US HPI
d
36.9
30.2
4.1
-
(17.4)
US federal funds rate
c
2.3
2.3
2.7
3.0
3.5
Macroeconomic variables used in the calculation of ECL (5 -year averages) (audited)
a
Upside 2
Upside 1
Baseline
Downside 1
Downside 2
As at 31 December 2019
UK GDP
3.2
2.4
1.6
0.8
(0.7)
UK unemployment
3.5
3.9
4.2
5.4
7.7
UK HPI
7.9
5.7
3.1
(1.1)
(6.5)
UK bank rate
0.5
0.5
0.7
2.5
3.7
US GDP
3.5
2.8
1.9
1.0
(0.5)
US unemployment
3.1
3.6
3.9
5.0
7.5
US HPI
6.5
4.3
3.0
1.3
(3.7)
US federal funds rate
1.6
1.7
1.7
2.9
3.4
As at 31 December 2018
UK GDP
3.4
2.6
1.7
0.9
(0.6)
UK unemployment
3.7
4.0
4.3
5.1
7.9
UK HPI
7.9
5.8
3.2
0.9
(6.4)
UK bank rate
0.8
0.8
1.0
2.3
3.7
US GDP
3.7
3.0
2.1
1.1
(0.5)
US unemployment
3.1
3.5
3.7
4.7
7.4
US HPI
6.5
5.4
4.1
2.4
(2.6)
US federal funds rate
2.3
2.3
2.7
3.0
3.4
Notes
a
UK GDP = Real GDP growth seasonally adjusted; UK unemployment = UK unemployment rate 16-year+; UK HPI = Halifax All Houses, All Buyers Index; US GDP = Real GDP growth
seasonally adjusted; US unemployment = US civilian unemployment rate 16-year+; US HPI = FHFA house price index.
b
Highest annual growth in Upside scenarios; 5-year average in Baseline; lowest annual growth in Downside scenarios.
c
Lowest yearly average in Upside scenarios; 5-year average in Baseline; highest yearly average in Downside scenarios.
d
Cumulative growth (trough to peak) in Upside scenarios; 5-year average in Baseline; cumulative fall (peak-to-trough) in Downside scenarios.
Over the year, the macroeconomic baseline variables have worsened in the US, in part due to the trade dispute with Ch ina. Baseline expectations for
the US federal funds rate have also moved lower from to 1.7% averaged over the first five years. Macroeconomic baseline variables in the UK
��
2.7%have remained fairly flat with a small decrease in bank rates driven by market expectations of lower interest rates in the next few years. The other
scenarios are generally unchanged from 2018, with the exception of UK HPI in the Downside 1 scenario where the cumulative fall in house prices
now represents a mo re severe fall of 8.2% versus 0.5% in 2018.
The graphs below plot the historical data for GDP growth rate and unemployment rate in the UK and US as well as the forecasted data under each
of the five scenarios.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 57
ECL under 100% weighted scenarios for modelled portfolios (audited)
The table below shows the Expected Credit Risk (ECL) assuming scenarios have been 100 % weighted. Model exposures are allocated to a stage
based on the individual scenario rather than through a probability - weighted approach as required for Barclays reported impairment allowances. As
a result, it is not possible to back solve to the final re ported weighted ECL from the individual scenarios as a balance may be assigned to a different
stage dependent on the scenario. Model exposure uses Exposure at default (EAD) values and is not directly comparable to gross exposure used in
prior disclosures. For Credit cards, unsecured loans and other retail lending, an average EAD measure is used (12 month or lifetime depending on
stage allocation in each scenario). Therefore, the model exposure movement into Stage 2 is higher than the corresponding Stage 1 r eduction.
All ECL using a model is included, with the ex ception of Treasury assets (£7.7 m of ECL), providing additional coverage as compared to the 2018
year - end disclosure. Non - modelled exposures and management adjustments are excluded. Management adjustments can be found on page 54 .
The prior year comparative includes key principal portfolios amounting to circa 80% of total impairment allowance.
Model Exposures allocated to Stage 3 do not change in any of the scenarios as the transition criteria relies only on observable evidence of default as
at 31 December 2019 and not on macroeconomic scenarios.
The Downside 2 scenario represents a severe globa l recession with substantial falls in UK GDP. Unemployment rises towards 9% and there are
substantial falls in asset prices including housing.
Under the Downside 2 scenario, model exposure moves between stages as the economic environment weakens. This can be seen in the movement
of £17bn of model exposure into Stage 2 between the Weighted and Downside 2 scenario. ECL increases in Stage 2 predominantly due to
unsecured portfolios as economic conditions deteriorate.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 58
Scenarios
As at 31 December 2019
Weighted
Upside 2
Upside 1
Baseline
Downside 1
Downside 2
Stage 1 Model Exposure (£m)
Home loans
4,887
4,902
4,894
4,887
4,876
4,863
Credit cards, unsecured loans and other retail lending
37,599
37,361
37,534
37,269
37,921
38,414
Wholesale loans
141,272
142,393
142,125
141,806
139,227
126,882
Stage 1 Model ECL (£m)
Home loans
5
4
4
5
5
5
Credit cards, unsecured loans and other retail lending
350
344
347
342
349
356
Wholesale loans
184
141
152
164
244
268
Stage 1 Coverage (%)
Home loans
0.1
0.1
0.1
0.1
0.1
0.1
Credit cards, unsecured loans and other retail lending
0.9
0.9
0.9
0.9
0.9
0.9
Wholesale loans
0.1
0.1
0.1
0.1
0.2
0.2
Stage 2 Model Exposure (£m)
Home loans
511
496
505
512
522
535
Credit cards, unsecured loans and other retail lending
4,228
3,350
3,540
4,025
5,615
7,204
Wholesale loans
13,099
11,979
12,246
12,566
15,145
27,489
Stage 2 Model ECL (£m)
Home loans
36
32
34
35
41
47
Credit cards, unsecured loans and other retail lending
784
584
638
739
1,115
2,450
Wholesale loans
352
253
280
314
493
1,240
Stage 2 Coverage (%)
Home loans
7.1
6.6
6.7
6.8
7.8
8.8
Credit cards, unsecured loans and other retail lending
18.5
17.4
18.0
18.4
19.8
34.0
Wholesale loans
2.7
2.1
2.3
2.5
3.3
4.5
Stage 3 Model Exposure (£m)
Home loans
711
711
711
711
711
711
Credit cards, unsecured loans and other retail lending
1,697
1,697
1,697
1,697
1,697
1,697
Wholesale loans
a
279
279
279
279
279
279
Stage 3 Model ECL (£m)
Home loans
260
258
259
260
261
264
Credit cards, unsecured loans and other retail lending
1,382
1,367
1,374
1,380
1,395
1,418
Wholesale loans
a
3
2
2
3
4
5
Stage 3 Coverage (%)
Home loans
36.5
36.3
36.4
36.5
36.7
37.2
Credit cards, unsecured loans and other retail lending
81.5
80.5
81.0
81.3
82.2
83.6
Wholesale loans
a
1.0
0.8
0.9
0.9
1.3
1.9
Total Model ECL (£m)
Home loans
301
294
297
300
307
316
Credit cards, unsecured loans and other retail lending
2,516
2,295
2,359
2,461
2,859
4,224
Wholesale loans
a
539
396
434
481
741
1,513
Note
a
Material wholesale loan defaults are individually assessed across different recovery strategies. As a result, ECL of £398m is reported as non-
model led in the table below.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 59
Reconciliation to total ECL
£m
Total model ECL
3,355
ECL from non -modelled, individually assessed, and other
adjustments
630
ECL from management adjustments
(37)
Total ECL
3,948
The total weighted ECL represents a 4% uplift from the Baseline ECL, largely driven by wholesale loans.
Home loans:
Credit cards, unsecured loans and other retail lending:
reflecting the range of economic scenarios used, mainly impacted by Unemployment. Total ECL increases to £4,22 4 m under Downside 2 scenario,
mainly driven by Stage 2, wh ere coverage rates increase to 3 4.0 % from a weighted scenario approach of 18 .5% and a £ 3bn increase in model
exposure that meets the Significant Increase in Credit Risk criteria and tran sitions from Stage 1 to Stage 2.
Wholesale loans:
scenarios used, with exposures in the Investment Bank particularly sensitive to Downside 2 scenario.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 60
Scenarios
As at 31 December 2018
Weighted
Upside 2
Upside 1
Baseline
Downside 1
Downside 2
Stage 1 Gross Exposure (£m)
Credit cards, unsecured loans and other retail lending
15,399
16,345
15,629
15,437
15,063
12,125
Wholesale loans
80,835
81,346
81,180
80,941
80,517
73,715
Stage 1 ECL (£m)
Credit cards, unsecured loans and other retail lending
208
168
202
205
212
231
Wholesale loans
175
161
163
162
203
242
Stage 1 Coverage (%)
Credit cards, unsecured loans and other retail lending
1.4
1.0
1.3
1.3
1.4
1.9
Wholesale loans
0.2
0.2
0.2
0.2
0.3
0.3
Stage 2 Gross Exposure (£m)
Credit cards, unsecured loans and other retail lending
4,084
3,138
3,853
4,046
4,420
7,358
Wholesale loans
11,377
10,866
11,031
11,271
11,694
18,496
Stage 2 ECL (£m)
Credit cards, unsecured loans and other retail lending
937
719
830
901
1,111
2,414
Wholesale loans
323
277
290
302
397
813
Stage 2 Coverage (%)
Credit cards, unsecured loans and other retail lending
22.9
22.9
21.5
22.3
25.1
32.8
Wholesale loans
2.8
2.5
2.6
2.7
3.4
4.4
Stage 3 Gross Exposure (£m)
Credit cards, unsecured loans and other retail lending
1,396
1,396
1,396
1,396
1,396
1,396
Wholesale loans
a
1,165
n/a
n/a
1,165
n/a
n/a
Stage 3 ECL (£m)
Credit cards, unsecured loans and other retail lending
1,181
1,168
1,174
1,181
1,189
1,207
Wholesale loans
a
333
n/a
n/a
323
n/a
n/a
Stage 3 Coverage (%)
Credit cards, unsecured loans and other retail lending
84.6
83.7
84.1
84.6
85.2
86.5
Wholesale loans
a
28.6
n/a
n/a
27.7
n/a
n/a
Total ECL (£m)
Credit cards, unsecured loans and other retail lending
2,326
2,055
2,206
2,287
2,512
3,852
Wholesale loans
a
831
n/a
n/a
787
n/a
n/a
Note
a
Material corporate loan defaults are individually assessed across different recovery strategies which are impacted by the macroeconomic
variables. As a result, only the Baseline scenario is shown together with the weighted estimate which reflects alternative recovery paths.
Staging sensitivity (audited)
An increase of 1% (£1,4 53 m) of total gross exposure into Stage 2 (from Stage 1), would result in an increase in ECL impairment allowance of
£1 16 m based on applying the difference in Stage 2 and Stage 1 average impairment coverage ratios to the movement in gross exposure (refer to
Loans and advances at amo rtised cost by product on page 49 ).
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 61
Analysis of the concentration of credit risk
A concentration of credit risk exists when a number of counterparties are located in a common 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. Barclays Bank Group implements limits on concentrations in order to mitigate the risk. The analyses of
credit risk concentrations prese nted below are based on the location of the counterparty or customer or the ind ustry in which they are engaged .
Geographic concentrations
Exposure is concentrated in the Americas 43% (2018: 43%), in the UK 26% (2018: 26%) and Europe 24% (2018: 25 %).
Credit risk concentrations by geography (audited)
Barclays Bank Group
United
Kingdom
Americas
Europe
Asia
Africa and
Middle East
Total
As at 31 December 2019
£m
£m
£m
£m
£m
£m
On-balance sheet:
Cash and balances at central banks
29,791
28,273
52,003
15,128
745
125,940
Cash collateral and settlement balances
23,775
23,593
25,955
5,326
837
79,486
Loans and advances at amortised cost
62,568
45,863
24,450
5,881
2,874
141,636
Reverse repurchase agreements and other similar secured lending
12
15
401
470
833
1,731
Trading portfolio assets
11,538
27,249
12,922
4,786
763
57,258
Financial assets at fair value through the income statement
26,363
70,832
11,272
12,534
1,921
122,922
Derivative financial instruments
70,256
63,337
83,165
11,189
1,694
229,641
Financial assets at fair value through other comprehensive income
8,383
16,092
17,884
2,945
101
45,405
Other assets
407
124
81
2
-
614
Total on -balance sheet
233,093
275,378
228,133
58,261
9,768
804,633
Off-balance sheet:
Contingent liabilities
6,789
10,838
3,862
1,562
726
23,777
Loan commitments
39,247
192,857
33,182
3,130
1,611
270,027
Total off-balance sheet
46,036
203,695
37,044
4,692
2,337
293,804
Total
279,129
479,073
265,177
62,953
12,105
1,098,437
As at 31 December 2018
On-balance sheet:
Cash and balances at central banks
39,143
36,045
51,395
9,064
712
136,359
Cash collateral and settlement balances
24,611
22,184
22,309
4,872
376
74,352
Loans and advances at amortised cost
54,700
46,799
27,470
4,952
3,038
136,959
Reverse repurchase agreements and other similar secured lending
45
68
97
83
1,320
1,613
Trading portfolio assets
12,296
34,369
13,374
3,616
713
64,368
Financial assets at fair value through the income statement
30,305
73,475
20,984
13,556
1,758
140,078
Derivative financial instruments
69,943
58,699
80,003
12,172
1,866
222,683
Financial investments - debt securities
9,529
10,959
21,546
2,786
163
44,983
Other assets
448
110
137
3
1
699
Total on -balance sheet
241,020
282,708
237,315
51,104
9,947
822,094
Off-balance sheet:
Contingent liabilities
5,001
8,996
3,572
1,289
536
19,394
Loan commitments
42,224
175,951
34,447
3,310
1,836
257,768
Total off-balance sheet
47,225
184,947
38,019
4,599
2,372
277,162
Total
288,245
467,655
275,334
55,703
12,319
1,099,256
��
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 62
Industry concentrations
Total assets concentrated in banks and other financial institutions is 46% (2018: 4 6%), predominantly within derivative financial instruments and
financial assets. The proportion of the overall balance concentrated in gov ernments and central banks is 20% (2018: 21 %).
Credit risk concentrations by industry (audited)
Barclays Bank Group
Banks
Other
financial
insti-
tutions
Manu -
facturing
Const -
ruction
and
property
Govern-
ment and
central
bank
Energy
and
water
Wholesale
and retail
distribution
Business
and other
services
Home
loans
Cards,
unsecured
loans and
other
personal
lending
Other
Total
As at 31 December 2019
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
On -balance sheet:
Cash and balances at
central banks
4
-
-
-
125,936
-
-
-
-
-
-
125,940
Cash collateral and
settlement balances
16,638
54,582
516
64
6,122
536
51
642
-
-
335
79,486
Loans and advances at
amortised cost
9,185
20,230
7,940
13,610
11,402
5,278
8,226
14,588
10,986
33,560
6,631
141,636
Reverse repurchase
agreements and other
similar secured lending
1,172
486
-
-
73
-
-
-
-
-
-
1,731
Trading portfolio assets
2,806
9,050
2,787
1,053
32,298
2,996
842
3,158
-
-
2,268
57,258
Financial assets at fair value
through the income
statement
11,694
97,824
620
3,609
5,340
37
-
3,318
358
-
122
122,922
Derivative financial
instruments
125,612
83,286
2,049
2,273
7,811
3,077
562
1,635
-
2
3,334
229,641
Financial assets at fair value
through other
comprehensive income
13,158
2,938
-
208
28,489
-
-
415
-
-
197
45,405
Other assets
180
312
1
-
2
7
-
104
-
2
6
614
Total on -balance sheet
180,449
268,708
13,913
20,817
217,473
11,931
9,681
23,860
11,344
33,564
12,893
804,633
Off -balance sheet:
Contingent liabilities
1,250
8,043
3,549
703
1,231
3,318
1,072
2,831
-
109
1,671
23,777
Loan commitments
1,861
47,619
42,001
13,358
1,703
29,865
14,320
22,491
49
73,573
23,187
270,027
Total off -balance sheet
3,111
55,662
45,550
14,061
2,934
33,183
15,392
25,322
49
73,682
24,858
293,804
Total
183,560
324,370
59,463
34,878
220,407
45,114
25,073
49,182
11,393
107,246
37,751
1,098,437
As at 31 December 2018
On -balance sheet:
Cash and balances at
central banks
-
-
-
-
136,359
-
-
-
-
-
-
136,359
Cash collateral and
settlement balances
17,294
48,340
498
75
6,470
386
223
717
-
-
349
74,352
Loans and advances at
amortised cost
9,692
17,734
8,379
13,143
3,474
5,442
9,678
17,222
13,160
32,818
6,217
136,959
Reverse repurchase
agreements and other
similar secured lending
1,369
169
-
37
38
-
-
-
-
-
-
1,613
Trading portfolio assets
3,502
9,550
3,825
897
34,817
4,202
1,202
3,481
-
-
2,892
64,368
Financial assets at fair value
through the income
statement
30,374
96,708
-
5,371
5,295
31
13
1,881
405
-
-
140,078
Derivative financial
instruments
123,999
80,302
2,390
1,974
5,987
2,791
486
2,012
-
-
2,742
222,683
Financial assets at fair value
through other
comprehensive income
11,066
1,880
-
200
31,701
-
-
136
-
-
-
44,983
Other assets
288
411
-
-
-
-
-
-
-
-
-
699
Total on -balance sheet
197,584
255,094
15,092
21,697
224,141
12,852
11,602
25,449
13,565
32,818
12,200
822,094
Off -balance sheet:
Contingent liabilities
939
3,841
3,470
626
980
3,491
952
3,445
-
116
1,524
19,384
Loan commitments
1,265
42,844
39,827
12,280
1,629
26,520
14,127
21,702
1,409
71,781
24,384
257,768
Total off -balance sheet
2,204
46,685
43,297
12,906
2,609
30,011
15,079
25,147
1,409
71,897
25,908
277,162
Total
199,788
301,779
58,389
34,603
226,750
42,863
26,681
50,606
14,974
104,715
38,108
1,099,256
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 63
Approach to management and representation of credit quality
Asset credit quality
The credit quality distribution is based on the IFRS 9 12 month probability of default (PD) at the reporting date to ensure comparability with other
ECL disclosures on pages 49 to 54.
The Barclays Bank Group uses the following internal measures to determine credit quality for loans:
Retail and Wholesale
lending
Default Grade
Probability of default
Credit Quality Description
1 - 3
0.0 to < 0.05%
Strong
4 - 5
0.05 to < 0.15%
6 - 8
0.15 to < 0.30%
9 - 11
0.30 to < 0.60%
12 - 14
0.60 to < 2.15%
Satisfactory
15 - 19
19
20 - 21
Higher Risk
22
100%
Credit Impaired
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.
T hese credit quality descriptions can be summarised as follows:
Strong:
Satisfactory:
asset may not be collateralised, o r may relate to unsecured retail facilities. 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, mortgages with a high loan to value,
and unsecured retail loans operating outside normal product guidelines.
Higher risk:
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.
Debt securities
For assets held at fair value, the carryin g 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 Barclays Bank 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 Barclays Bank Group will use its own internal ratings for the
securities.
Balance sheet credit quality
The following tables present the credit quality of Barclays Bank Group assets exposed to credit risk.
Overview
As at 31 December 2019 , the ratio of the Barclays Bank Group’s on - balance sheet assets classified as strong (0.0 < 0.60%) remained stable at 85 %
(2018: 86 %) of total assets exposed to credit risk.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 64
Balance sh eet credit quality (audited)
Barclays Bank Group
PD Range
0.0 to
<0.60%
0.60 to
<11.35%
11.35% to
100%
Total
0.0 to
<0.60%
0.60 to
<11.35%
11.35% to
100%
Total
As at 31 December 2019
£m
£m
£m
£m
%
%
%
%
Cash and balances at central banks
125,940
-
-
125,940
100
-
-
100
Cash collateral and settlement balances
69,351
10,135
-
79,486
87
13
-
100
Loans and advances at amortised cost
Home loans
7,536
2,626
824
10,986
68
24
8
100
Credit cards, unsecured loans and other retail
lending
13,631
18,019
1,853
33,503
40
54
6
100
Wholesale loans
75,638
19,716
1,793
97,147
78
20
2
100
Total loans and advances at amortised cost
96,805
40,361
4,470
141,636
69
28
3
100
Reverse repurchase agreements and other
similar secured lending
1,642
89
-
1,731
95
5
-
100
Trading portfolio assets:
Debt securities
48,258
3,479
143
51,880
93
7
-
100
Traded loans
864
3,219
1,295
5,378
16
60
24
100
Total trading portfolio assets
49,122
6,698
1,438
57,258
85
12
3
100
Financial assets at fair value through the
income statement:
Loans and advances
11,030
7,880
227
19,137
58
41
1
100
Debt securities
4,786
404
30
5,220
91
8
1
100
Reverse repurchase agreements
63,411
34,232
180
97,823
65
35
-
100
Other financial assets
736
6
-
742
99
1
-
100
Total financial assets at fair value through the
income statement
79,963
42,522
437
122,922
65
35
-
100
Derivative financial instruments
216,508
13,012
121
229,641
94
6
-
100
Financial assets at fair value through other
comprehensive income
45,405
-
-
45,405
100
-
-
100
Other assets
501
113
-
614
82
18
-
100
Total on -balance sheet
685,237
112,930
6,466
804,633
85
14
1
100
As at 31 December 2018
Cash and balances at central banks
136,359
-
-
136,359
100
-
-
100
Cash collateral and settlement balances
67,585
6,763
4
74,352
91
9
-
100
Loans and advances at amortised cost
Home loans
8,993
3,220
947
13,160
69
24
7
100
Credit cards, unsecured loans and other retail
lending
14,893
17,489
1,409
33,791
44
52
4
100
Wholesale loans
65,080
23,562
1,366
90,008
72
26
2
100
Total loans and advances at amortised cost
88,966
44,271
3,722
136,959
65
32
3
100
Reverse repurchase agreements and other
similar secured lending
1,125
444
44
1,613
69
28
3
100
Trading portfolio assets:
Debt securities
51,747
4,998
389
57,134
90
9
1
100
Traded loans
1,903
4,368
963
7,234
27
60
13
100
Total trading portfolio assets
53,650
9,366
1,352
64,368
83
15
2
100
Financial assets at fair value through the
income statement:
Loans and advances
9,487
6,109
48
15,644
61
39
-
100
Debt securities
4,378
76
61
4,515
97
2
1
100
Reverse repurchase agreements
86,237
31,813
1,341
119,391
72
27
1
100
Other financial assets
524
4
-
528
99
1
-
100
Total financial assets at fair value through the
income statement
100,626
38,002
1,450
140,078
72
27
1
100
Derivative financial instruments
211,841
10,790
52
222,683
95
5
-
100
Financial assets at fair value through other
comprehensive income
44,835
148
-
44,983
100
-
-
100
Other assets
426
273
-
699
61
39
-
100
Total on -balance sheet
705,413
110,057
6,624
822,094
86
13
1
100
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 65
Credit exposures by internal PD grade
The below tables represents credit risk profile by PD grade for loans and advances at amortised cost, contingent liabilities and loan commitments.
Stage 1 higher risk assets, presented gross of associated collateral held, are of weaker credit quality but have not significantly deteriorated since
origination. Examples would include leveraged corporate loans or non - prime credit cards.
IFRS 9 Stage 1 and Stage 2 classification is not dependent solely on the absolute probability of default but on elements that determine a Significant
Increase in Credit Risk (see Note 7 on pg 115 ), including relative movement in probability of default since initial recognition. There is therefore no
direct relationship between credit quality and IFRS 9 stage classification.
Barclays Bank Group
As at 31 December 2019
Credit risk profile by internal PD grade for loans and advances at amortised cost (audited)
Gross carrying amount
Allowance for ECL
Net
exposure
Coverage
ratio
PD range
Credit quality
description
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Grading
%
£m
£m
£m
£m
£m
£m
£m
£m
£m
%
1 - 3
0.0 to < 0.05%
Strong
37,430
564
-
37,994
9
15
-
24
37,970
0.1
4 - 5
0.05 to < 0.15%
Strong
17,117
783
-
17,900
6
-
-
6
17,894
-
6 - 8
0.15 to < 0.30%
Strong
15,020
581
-
15,601
16
1
-
17
15,584
0.1
9 - 11
0.30 to < 0.60%
Strong
24,490
944
-
25,434
71
6
-
77
25,357
0.3
12 - 14
0.60 to < 2.15%
Satisfactory
24,211
1,740
-
25,951
134
102
-
236
25,715
0.9
15 - 19
2.15 to < 10%
Satisfactory
7,491
5,450
-
12,941
185
339
-
524
12,417
4.0
19
10 to < 11.35%
Satisfactory
1,945
339
-
2,284
21
34
-
55
2,229
2.4
20 - 21
11.35 to < 100%
Higher Risk
641
2,238
-
2,879
50
561
-
611
2,268
21.2
22
100%
Credit
Impaired
-
-
4,348
4,348
-
-
2,146
2,146
2,202
49.4
Total
128,345
12,639
4,348
145,332
492
1,058
2,146
3,696
141,636
2.5
As at 31 December 2018
Credit risk profile by internal PD grade for loans and advances at amortised cost (audited)
Gross carrying amount
Allowance for ECL
Net
exposure
Coverage
ratio
PD range
Credit quality
description
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Grading
%
£m
£m
£m
£m
£m
£m
£m
£m
£m
%
1 - 3
0.0 to < 0.05%
Strong
27,116
434
-
27,550
21
7
-
28
27,522
0.1
4 - 5
0.05 to < 0.15%
Strong
17,651
556
-
18,207
2
1
-
3
18,204
-
6 - 8
0.15 to < 0.30%
Strong
12,531
353
-
12,884
19
7
-
26
12,858
0.2
9 - 11
0.30 to < 0.60%
Strong
29,577
880
-
30,457
64
11
-
75
30,382
0.2
12 - 14
0.60 to < 2.15%
Satisfactory
28,638
3,344
-
31,982
178
139
-
317
31,665
1.0
15 - 19
2.15 to < 10%
Satisfactory
5,696
5,101
-
10,797
163
404
-
567
10,230
5.3
19
10 to < 11.35%
Satisfactory
1,141
1,307
-
2,448
15
57
-
72
2,376
2.9
20 - 21
11.35 to < 100%
Higher Risk
239
2,049
-
2,288
27
629
-
656
1,632
28.7
22
100%
Credit
Impaired
-
-
4,189
4,189
-
-
2,099
2,099
2,090
50.1
Total
122,589
14,024
4,189
140,802
489
1,255
2,099
3,843
136,959
2.7
As at 31 December 2019
Credit risk profile by internal PD grade for contingent liabilities
a
Gross carrying amount
Allowance for ECL
Net
exposure
Coverage
ratio
PD range
Credit quality
description
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Grading
%
£m
£m
£m
£m
£m
£m
£m
£m
£m
%
1 - 3
0.0 to < 0.05%
Strong
6,198
118
-
6,316
1
-
-
1
6,315
-
4 - 5
0.05 to < 0.15%
Strong
4,199
40
-
4,239
1
-
-
1
4,238
-
6 - 8
0.15 to < 0.30%
Strong
2,953
103
-
3,056
1
-
-
1
3,055
-
9 - 11
0.30 to < 0.60%
Strong
4,551
136
-
4,687
2
2
-
4
4,683
0.1
12 - 14
0.60 to < 2.15%
Satisfactory
2,529
654
-
3,183
7
8
-
15
3,168
0.5
15 - 19
2.15 to < 10%
Satisfactory
663
244
-
907
4
8
-
12
895
1.3
19
10 to < 11.35%
Satisfactory
421
172
-
593
9
9
-
18
575
3.0
20 - 21
11.35 to < 100%
Higher Risk
117
282
-
399
-
30
-
30
369
7.5
22
100%
Credit
Impaired
-
-
354
354
-
-
5
5
349
1.4
Total
21,631
1,749
354
23,734
25
57
5
87
23,647
0.4
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 66
As at 31 December 2018
Credit risk profile by internal PD grade for contingent liabilities
a
Gross carrying amount
Allowance for ECL
Net
exposure
Coverage
ratio
PD range
Credit quality
description
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Grading
%
£m
£m
£m
£m
£m
£m
£m
£m
£m
%
1 - 3
0.0 to < 0.05%
Strong
5,763
38
-
5,801
2
-
-
2
5,799
-
4 - 5
0.05 to < 0.15%
Strong
3,687
129
-
3,816
1
-
-
1
3,815
-
6 - 8
0.15 to < 0.30%
Strong
1,433
55
-
1,488
1
-
-
1
1,487
0.1
9 - 11
0.30 to < 0.60%
Strong
3,206
222
-
3,428
1
3
-
4
3,424
0.1
12 - 14
0.60 to < 2.15%
Satisfactory
2,544
509
-
3,053
4
5
-
9
3,044
0.3
15 - 19
2.15 to < 10%
Satisfactory
464
252
-
716
1
3
-
4
712
0.6
19
10 to < 11.35%
Satisfactory
534
203
-
737
6
5
-
11
726
1.5
20 - 21
11.35 to < 100%
Higher Risk
48
229
-
277
-
11
-
11
266
4.0
22
100%
Credit
Impaired
-
-
74
74
-
-
2
2
72
2.7
Total
17,679
1,637
74
19,390
16
27
2
45
19,345
0.2
As at 31 December 2019
Credit risk profile by internal PD grade for loan commitments
a
Gross carrying amount
Allowance for ECL
Net
exposure
Coverage
ratio
PD range
Credit quality
description
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Grading
%
£m
£m
£m
£m
£m
£m
£m
£m
£m
%
1 - 3
0.0 to < 0.05%
Strong
77,725
990
-
78,715
4
-
-
4
78,711
-
4 - 5
0.05 to < 0.15%
Strong
53,910
1,480
-
55,390
3
-
-
3
55,387
-
6 - 8
0.15 to < 0.30%
Strong
43,728
811
-
44,539
6
1
-
7
44,532
-
9 - 11
0.30 to < 0.60%
Strong
28,813
1,294
-
30,107
10
2
-
12
30,095
-
12 - 14
0.60 to < 2.15%
Satisfactory
27,115
2,066
-
29,181
26
9
-
35
29,146
0.1
15 - 19
2.15 to < 10%
Satisfactory
4,322
2,050
-
6,372
7
21
-
28
6,344
0.4
19
10 to < 11.35%
Satisfactory
3,454
1,814
-
5,268
4
7
-
11
5,257
0.2
20 - 21
11.35 to < 100%
Higher Risk
594
1,852
-
2,446
-
15
-
15
2,431
0.6
22
100%
Credit
Impaired
-
-
349
349
-
-
50
50
299
14.3
Total
239,661
12,357
349
252,367
60
55
50
165
252,202
0.1
As at 31 December 2018
Credit risk profile by internal PD grade for loan commitments
a
Gross carrying amount
Allowance for ECL
Net
exposure
Coverage
ratio
PD range
Credit quality
description
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Grading
%
£m
£m
£m
£m
£m
£m
£m
£m
£m
%
1 - 3
0.0 to < 0.05%
Strong
71,089
1,590
-
72,679
4
1
-
5
72,674
-
4 - 5
0.05 to < 0.15%
Strong
50,221
1,368
-
51,589
3
1
-
4
51,585
-
6 - 8
0.15 to < 0.30%
Strong
24,109
581
-
24,690
3
1
-
4
24,686
-
9 - 11
0.30 to < 0.60%
Strong
26,740
1,045
-
27,785
7
1
-
8
27,777
-
12 - 14
0.60 to < 2.15%
Satisfactory
41,076
2,766
-
43,842
31
10
-
41
43,801
0.1
15 - 19
2.15 to < 10%
Satisfactory
16,089
4,388
-
20,477
23
23
-
46
20,431
0.2
19
10 to < 11.35%
Satisfactory
919
596
-
1,515
1
7
-
8
1,507
0.5
20 - 21
11.35 to < 100%
Higher Risk
668
2,473
-
3,141
3
33
-
36
3,105
1.1
22
100%
Credit
Impaired
-
-
347
347
-
-
20
20
327
5.8
Total
230,911
14,807
347
246,065
75
77
20
172
245,893
0.1
Note
a Excludes loan commitments and financial guarantees carried at fair value of £17.7bn (2018: £11.7 bn) for Barclays Bank Group .
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 67
Analysis of specific portfolios and asset types
Credit cards, unsecured loans and other retail lending
The principal portfolios listed below accounted for 83% (2018: 82% ) of Barclays Bank Group’s total credit cards, unsecured loans and other retail
lending.
Credit cards and unsecured loans principal portfolios
Gross exposure
30 day arrears
rate, excluding
recovery book
90 day arrears
rate, excluding
recovery book
Annualised gross
write-off rate
Annualised net
write-off rate
£m
%
%
%
%
As at 31 December 2019
US cards
22,041
2.7
1.4
4.5
4.4
Barclays Partner Finance
4,134
0.9
0.3
1.7
1.7
Germany consumer lending
3,683
1.7
0.7
1.1
1.0
As at 31 December 2018
US cards
22,178
2.7
1.4
3.6
3.4
Barclays Partner Finance
4,216
1.1
0.4
1.7
1.7
Germany consumer lending
3,545
1.9
0.8
1.2
1.1
US cards:
30 and 90 - day arrears rates remained stable. The annualised gross and net write- off rates increased to 4.5% (2018: 3.6%) and 4.4%
(2018: 3.4%) respectively primarily driven by an increase in charge - offs in 2018. The percentage of write- offs to charge - offs was stable year on
year.
Barclays Partner Finance:
Improvement in 30 and 90 days arrears was driven by better arrears management and improved customer selection.
Annualised write- off rates remained flat.
Germany consumer lending:
Improvement in 30 and 90 days arrears was driven by better collections performance across all products.
Risk review
Risk performance
Market risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 68
Summary of Contents
Page
◾
Market risk overview and summary of performance
69
Outlines key measures used to summarise the market risk profile of
the bank such as value at risk (VaR).
◾
Traded market risk
◾
Review of management measures
-
The daily average, maximum and minimum values of
management VaR
-
Business scenario stresses
69
69
69
70
The Barclays Bank 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 the macroeconomic conditions modelled as
part of the Barclays Bank Group’s risk management framework.
Risk review
Risk performance
Market risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 69
All disclosures in this section (pages 69 to 70 ) are unaudited unless otherwise stated.
Overview
This section contains key statistics describing the market risk profile of Barclays Bank Group :
●
page 39 covers the management of market risk. Management measures are shown on page 69.
Measures of market risk in the Barclays Bank 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.
Summary of performance in the period
Overall, the Barclays Bank Group has maintained a steady market risk profile. Average management VaR increased by 15% to £23m in 2019 (2018:
£20m) and remained relatively stable during the period. The increase in average management VaR in 2019 was driven by a small increase in equity
risk and credit risk, partially offset by a slight decrease in interest rate risk compared to 2018.
Traded market risk review
Review of management measures
The following disclosures provide details on management measures of market risk.
The table below shows the total management VaR on a diversified basis by risk factor. Total management VaR includes all trading positions in CIB
and the supporting Barclays Bank Group Treasury desks.
Limits are applied against each risk factor VaR as well as total Management VaR, which are then cascaded further by risk managers to each
business.
The daily average, maximum and minimum values of management VaR
Management VaR (95%, one day) (audited)
2019
2018
Average
High
b
Low
b
Average
High
b
Low
b
For the year ended 31 December
a
£m
£m
£m
£m
£m
£m
Credit risk
12
17
8
11
16
8
Interest rate risk
6
11
3
8
18
3
Equity risk
10
22
5
7
14
4
Basis risk
8
11
6
6
8
4
Spread risk
4
5
3
6
9
3
Foreign exchange risk
3
5
2
3
7
1
Commodity risk
1
2
-
1
2
-
Inflation risk
2
3
1
3
4
2
Diversification effect
b
(23)
n/a
n/a
(25)
n/a
n/a
Total management VaR
23
29
16
20
27
15
Notes
a
Excludes BAGL from 23 July 2018.
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 area. Historical 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 balance fo r the high and low VaR
figures would not be meaningful and is therefore omitted from the above table.
Risk review
Risk performance
Market risk
0
20
40
60
Jan 2018
Jan 2019
Dec 2019
Barclays Bank PLC 2019 Annual Report on Form 20-F 70
Barclays Bank Group Management VaR
a
a
Excludes BAGL from 23 July 2018.
Business scenario stresses
As part of the Barclays Bank Group’s ri sk management framework, on a regular basis the performance of the trading business in hypothetical
scenarios characterised by severe macroeconomic conditions is modelled. Up to seven global scenarios are modelled on a regular basis, for
example, a sharp deterioration in liquidity, a slowdown in the global economy, global recession, and a sharp increase in economic growth.
In 2019, the scenario analyses showed that the largest market risk related impacts would be due to a severe deterioration in financial liquidity and a
global recession.
Risk review
Risk performance
Treasury and Capital risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 71
Summary of Contents
Page
Liquidity risk performance
◾
Liquidity risk overview
◾
Liquidity risk stress testing
72
72
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
.
This section provides an overview of the Barclays Bank Group’s
liquidity risk.
◾
Contractual maturity of financial assets and liabilities
72
Provides details on the contractual maturity of all financial
instruments and other assets and liabilities.
Capital risk performance
◾
Capital risk overview
- Capital ratios
- Capital resources
- Capital Requirements Regulation leverage ratio
77
77
77
77
Capital risk is 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 also includes
the risk from the firm’s pe nsion plans.
This section details Barclays Bank Group ’s capital and leverage
position.
◾
Foreign exchange risk
-
Transactional foreign currency exposure
-
Translational foreign exchange exposure
-
Functional currency of operations
78
78
78
78
Barclays Bank Group discloses the two sources of
foreign exchange risk that it is exposed to.
◾
Pension risk review
-
Assets and liabilities
-
IAS 19 position
-
Risk measurement
79
79
80
80
A review focusing on the UK retirement fund, which represents the
majority of Barclays Bank Group’s total retirement benefit obligation.
Interest rate risk in the banking book performance
◾
Interest rate risk in the banking book overview and summary of
performance
◾
Net interest income sensitivity
◾
Analysis of equity sensitivity
◾
Volatility of the FVOCI portfolio in the liquidity pool
81
81
82
83
A description of the non - traded market risk framework is provided.
Barclays Bank Group discloses a sensitivity analysis on pre - tax net
interest income for non - trading financial assets and liabilities. The
analysis is carried out by currency.
Barclays Bank Group discloses the overall impact of a parallel shift in
interest rates on other comprehensive income and cash flow hedges.
Barclays Bank Group measures the volatility of the value of the FVOCI
instruments in the liquidity pool through non - traded market risk VaR.
Risk review
Risk performance
Treasury and Capital risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 72
Liquidity risk
All disclosures in this section (pages 72 to 76 ) are unaudited unless otherwise stated.
Overview
The liquidity pool decreased to £ 169 bn (December 201 8 : £1 82bn). The liquidity pool, LCR and surplus have been managed down through the
course of the year, supporting increased business funding requirements while maintaining a prudent liquidity position.
For the purpose of liquidity management, Barclays Bank PLC and its subsidiary Barclays Capital Securities Limited, a UK broker dealer entity, are
monitored on a combined basis by the PRA under a Domestic Liquidity Sub - Group (Barclays Bank PLC DoLSub) arrangement.
Liquidity risk stress testing
The liquidity risk assessment measures the potential contractual and contingent stress outflows under a range of stress 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 scenarios include a
30 day Barclays - specific stress event, a 90 day market - wide stress event and a 30 day combined scenario consisting of both a Barclays specific and
market - wide stress event.
The CRR (amended by CRRII) Liquidity Co verage Ratio ( LCR) requirement takes into account the relative stability of different sources of funding
and potential incremental funding requirements in a stress. The LCR is designed to promote short - term resilience of a bank’s liquidity risk profile by
holding sufficient high quality liquid assets to survive an acute stress scenario lasting for 30 days.
As at
As at
31.12.19
31.12.18
£bn
£bn
Barclays Bank Group liquidity pool
169
182
Contractual maturity of financial assets and liabilities
The table on the next page provides detail on the contractual maturity of all financial instruments and other assets and liabilities. Derivatives (other
than those designated in a hedging relationsh ip) 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.
Risk review
Risk performance
Treasury and Capital risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 73
Contractual maturity of financial assets and liabilities (audited)
Barclays Bank Group
On
demand
Not more
than three
months
Over three
months but
not more
than six
months
Over six
months but
not more
than nine
months
Over nine
months but
not more
than one
year
Over one
year
but not
more than
two years
Over two
years but
not more
than three
years
Over three
years but
not more
than five
years
Over five
years but
not more
than ten
years
Over ten
years
Total
As at 31 December
2019
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Assets
Cash and balances at
central banks
125,065
766
109
–
–
–
–
–
–
–
125,940
Cash collateral and
settlement balances
2,122
77,361
3
–
–
–
–
–
–
–
79,486
Loans and advances
at amortised cost
11,396
10,376
9,764
4,513
6,227
17,780
18,460
26,294
14,565
22,261
141,636
Reverse repurchase
agreements and
other similar secured
lending
13
1,449
–
–
–
77
190
–
–
2
1,731
Trading portfolio
assets
113,337
–
–
–
–
–
–
–
–
–
113,337
Financial assets at
fair value through the
income statement
14,257
90,292
13,969
3,431
1,150
1,082
313
888
1,803
2,285
129,470
Derivative financial
instruments
229,460
49
–
–
–
7
21
1
78
25
229,641
Financial assets at
fair value through
other comprehensive
income
–
3,176
1,672
817
455
3,510
4,305
9,737
17,544
4,190
45,406
Other financial assets
307
168
126
–
13
–
–
–
–
–
614
Total financial assets
495,957
183,637
25,643
8,761
7,845
22,456
23,289
36,920
33,990
28,763
867,261
Other assets
9,411
Total assets
876,672
Liabilities
Deposits at amortised
cost
158,218
39,831
7,127
2,291
3,147
1,102
536
530
545
554
213,881
Cash collateral and
settlement balances
3,077
64,592
13
–
–
–
–
–
–
–
67,682
Repurchase
agreements and
other similar secured
borrowing
7
1,489
–
–
–
–
–
470
–
66
2,032
Debt securities in
issue
–
12,418
4,601
3,262
3,036
2,989
131
3,444
3,366
289
33,536
Subordinated
liabilities
–
207
834
397
832
7,999
6,836
7,627
4,784
3,909
33,425
Trading portfolio
liabilities
35,212
–
–
–
–
–
–
–
–
–
35,212
Financial liabilities
designated at fair
value
13,952
128,078
10,890
6,519
3,797
6,968
6,235
7,702
7,127
13,178
204,446
Derivative financial
instruments
228,338
–
–
8
–
36
41
42
88
387
228,940
Other financial
liabilities
217
1,388
19
18
16
777
29
86
183
70
2,803
Total financial
liabilities
439,021
248,003
23,484
12,495
10,828
19,871
13,808
19,901
16,093
18,453
821,957
Other liabilities
4,100
Total liabilities
826,057
Cumulative liquidity
gap
56,936
(7,430)
(5,271)
(9,005)
(11,988)
(9,403)
78
17,097
34,994
45,304
50,615
Risk review
Risk performance
Treasury and Capital risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 74
Contractual maturity of financial assets and liabilities (audited)
Barclays Bank Group
On
demand
Not more
than three
months
Over three
months but
not more
than six
months
Over six
months but
not more
than nine
months
Over nine
months but
not more
than one
year
Over one
year
but not
more than
two years
Over two
years but
not more
than three
years
Over three
years but
not more
than five
years
Over five
years but
not more
than ten
years
Over ten
years
Total
As at 31 December
2018
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Assets
Cash and balances at
central banks
134,824
1,353
118
64
136,359
Cash collateral and
settlement balances
2,388
71,909
27
22
2
4
74,352
Loans and advances at
amortised cost
8,902
9,674
6,047
3,882
5,497
19,601
18,900
25,858
15,019
23,579
136,959
Reverse repurchase
agreements and other
similar secured lending
31
550
586
446
1,613
Trading portfolio assets
104,038
104,038
Financial assets at fair
value through the
income statement
13,590
112,648
7,108
3,124
2,279
3,921
154
286
535
1,605
145,250
Derivative financial
instruments
222,522
6
1
4
14
11
11
93
21
222,683
Financial investments
–
Financial assets at fair
value through other
comprehensive income
11
2,474
1,361
1,119
2,041
5,535
2,402
7,290
17,387
5,374
44,994
Other financial assets
333
303
56
7
699
Total financial assets
486,639
198,911
14,723
8,126
9,914
29,659
21,913
33,449
33,034
30,579
866,947
Other assets
10,753
Total assets
877,700
Liabilities
Deposits at amortised
cost
155,788
29,273
6,062
2,410
2,314
1,160
694
541
349
746
199,337
Cash collateral and
settlement balances
3,446
64,283
5
2
67,736
Repurchase
agreements and other
similar secured
borrowing
1,331
5,560
3
484
7,378
Debt securities in issue
26
13,718
5,740
4,361
4,235
4,373
982
1,152
4,278
198
39,063
Subordinated liabilities
306
78
45
1,951
8,269
11,850
5,940
6,888
35,327
Trading portfolio
liabilities
36,614
36,614
Financial liabilities
designated at fair value
14,280
144,561
6,809
9,050
3,577
10,365
5,689
7,116
4,415
11,879
217,741
Derivative financial
instruments
219,527
10
3
3
3
3
43
219,592
Other financial
liabilities
141
1,982
343
2,466
Total financial
liabilities
431,153
259,693
18,616
15,901
10,171
18,198
15,637
20,662
15,469
19,754
825,254
Other liabilities
4,735
Total liabilities
829,989
Cumulative liquidity
gap
55,486
(5,296)
(9,189)
(16,964)
(17,221)
(5,760)
516
13,303
30,868
41,693
47,711
Risk review
Risk performance
Treasury and Capital risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 75
Expected maturity date may differ from the contractual dates, to account for:
◾
Tr ading portfolio assets and liabilities and derivative financial instruments, which may not be held to maturity as part of Barclays Bank Group’s
trading strategies
◾
Corporate and retail deposits, reported under deposits at amortised cost, are repayable on demand or at short notice on a contractual basis. In
practice, their behavioural maturity is typically longer than their contractual maturity, and therefore provide stable funding for Barclays Bank
Group’s operations and liquidity needs .
◾
Loans to corporate and retail customers, which are included within loans and advances at amortised cost and financial assets at fair value, may be
repaid earlier in line with terms an d conditions of the contract
◾
Debt securities in issue, subordinated liabilities, and financial liabilities designated at fair value, may include early redemption features.
Contractual maturity of financial liabilities on an undiscounted basis
The table below presents the cash flows payable by the Barclays Bank 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.
Contractual maturity of financial liabilities - undiscounted (audited)
Barclays Bank Group
On
demand
Not more
than three
months
Over three
months but
not more
than six
months
Over six
months but
not more
than one
year
Over one
year
but not
more than
three years
Over three
years but
not more
than five
years
Over five
years but
not more
than ten
years
Over ten
years
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
As at 31 December 2019
Deposits at amortised cost
158,218
39,844
7,138
5,457
1,648
532
554
595
213,986
Cash collateral and settlement
balances
3,077
64,614
13
–
–
–
–
–
67,704
Repurchase agreements and
other similar secured borrowing
7
1,491
–
–
–
485
–
149
2,132
Debt securities in issue
–
12,473
4,627
6,332
3,229
3,582
3,508
290
34,041
Subordinated liabilities
–
207
845
1,302
18,750
9,875
6,364
8,617
45,960
Trading portfolio liabilities
35,212
–
–
–
–
–
–
–
35,212
Financial liabilities designated at
fair value
13,952
128,203
11,020
10,597
13,500
8,054
7,519
19,392
212,237
Derivative financial instruments
228,338
–
–
8
79
45
99
396
228,965
Other financial liabilities
217
1,388
19
34
819
99
197
98
2,871
Total financial liabilities
439,021
248,220
23,662
23,730
38,025
22,672
18,241
29,537
843,108
As at 31 December 2018
Deposits at amortised cost
155,788
29,301
6,066
4,739
1,887
568
412
816
199,577
Cash collateral and settlement
balances
3,446
64,295
5
2
–
–
–
–
67,748
Repurchase agreements and
other similar secured borrowing
1,331
5,561
–
–
3
–
486
–
7,381
Debt securities in issue
26
13,749
5,779
8,637
5,454
1,195
4,519
229
39,588
Subordinated liabilities
–
306
–
123
10,477
12,420
6,867
10,393
40,586
Trading portfolio liabilities
36,614
–
–
–
–
–
–
–
36,614
Financial liabilities designated at
fair value
14,280
144,693
6,948
12,731
16,528
7,679
5,008
17,621
225,488
Derivative financial instruments
219,527
13
–
–
6
3
4
59
219,612
Other financial liabilities
141
1,982
–
–
343
–
–
–
2,466
Total financial liabilities
431,153
259,900
18,798
26,232
34,698
21,865
17,296
29,118
839,060
Risk review
Risk performance
Treasury and Capital risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 76
Maturity of off-balance sheet commitments received and given
The table below presents the maturity split of the Barclays Bank Group’s off - 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 (audited)
On
demand
Not more
than three
months
Over three
months but
not more
than six
months
Over six
months but
not more
than nine
months
Over nine
months but
not more
than one
year
Over one
year but
not more
than two
years
Over two
years but
not more
than three
years
Over three
years but
not more
than five
years
Over five
years but
not more
than ten
years
Over ten
years
Total
Barclays Bank Group
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
As at 31 December 2019
Guarantees, letters of
credit and credit
insurance
5,205
106
22
81
–
11
12
21
12
34
5,504
Other commitments
received
91
–
–
2,373
–
–
–
–
–
–
2,464
Total off-balance sheet
commitments received
5,296
106
22
2,454
–
11
12
21
12
34
7,968
As at 31 December 2018
Guarantees, letters of
credit and credit
insurance
5,581
110
20
13
16
65
10
33
10
5
5,863
Other commitments
received
93
42
–
–
–
–
–
–
–
–
135
Total off -balance sheet
commitments received
5,674
152
20
13
16
65
10
33
10
5
5,998
Maturity analysis of off-balance sheet commitments given (audited)
On
demand
Not more
than three
months
Over three
months but
not more
than six
months
Over six
months but
not more
than nine
months
Over nine
months but
not more
than one
year
Over one
year but
not more
than two
years
Over two
years but
not more
than three
years
Over three
years but
not more
than five
years
Over five
years but
not more
than ten
years
Over ten
years
Total
Barclays Bank Group
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
As at 31 December
2019
Contingent liabilities
22,836
366
86
125
140
143
42
28
3
8
23,777
Documentary credits and
other short -term trade
related transactions
1,287
3
1
–
–
–
–
–
–
–
1,291
Standby facilities, credit
lines and other
commitments
264,346
1,134
792
973
638
118
98
273
139
225
268,736
Total off-balance sheet
commitments given
288,469
1,503
879
1,098
778
261
140
301
142
233
293,804
As at 31 December
2018
Contingent liabilities
15,435
1,102
553
145
170
415
435
641
319
179
19,394
Documentary credits and
other short -term trade
related transactions
70
1,263
325
55
14
11
3
–
–
–
1,741
Standby facilities, credit
lines and other
commitments
250,802
1,734
1,311
397
667
311
257
424
19
105
256,027
Total off-balance sheet
commitments given
266,307
4,099
2,189
597
851
737
695
1,065
338
284
277,162
Risk review
Risk performance
Treasury and Capital risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 77
Capital risk
All disclosures in this section (pages 77 to 80) are unaudited unless otherwise stated.
Overview
Barclays Bank PLC is currently regulated by the PRA on a solo- consolidated basis. Barclays Bank PLC solo- consolidated comprises Barclays Bank
PLC plus certain additional subsidiaries, subject to PRA approval. The disclosures below provide key capital metrics for Barclays Bank PLC solo-
consolidated with further information on its risk profile to be included in the Barclays PLC Pillar 3 Report FY 2019 , available at
home.barclays/investor - r elations/repor ts-and - events/annual-reports.
On 27 June 2019, CRR II came into force amending CRR. As an amending regulation, the existing provisions of CRR apply unless they are amended
by CRR II.
Certain provisions took immediate effect. Amendments within this section include changes to qualifying criteria for CET1, Additional Tier 1 ( AT1 )
and Tier 2 instruments, and an amendment to the treatment of deferred tax assets. Other CRR II amendments are expected to take effect from 28
June 2021 .
Certain aspects of CRR II ar e dependent on final technical standards to be issued by the European Banking Authority (EBA) and adopted by the
European Commission as well as UK implementation of the rules. The disclosures in the following section reflect Barclays’ interpretation of the
current rules and guidance.
As at 31 December 201 9 , Barclays Bank PLC Solo’s transitional CET1 ratio was 13.9% which exceeded the 2019 minimum requirement.
Capital ratios
a,b,c
As at 31 December
2019
2018
CET1
13.9%
13.5%
Tier 1 (T1)
18.1%
18.4%
Total regulatory capital
22.1%
22.2%
Capital resources (audited)
2019
2018
As at 31 December
£bn
£bn
CET1 capital
22.1
23.4
T1 capital
28.6
31.9
Total regulatory capital
35.0
38.4
Total risk weighted assets (RWAs) (unaudited)
158.4
173.2
Capital Requirements Regulation (CRR) leverage ratio
a
2019
2018
As at 31 December
£bn
£bn
CRR leverage ratio
3.9%
4.0%
T1 capital
28.6
31.9
CRR leverage exposure
732
791
Notes
a
Capital, RWAs and leverage are calculated applying the transitional arrangements of the CRR as amended by CRR II applicable as at the reporting date. This includes IFRS 9
t ransitional arrangements and the grandfathering of CRR and CRR II non -compliant capital instruments .
b
The fully loaded CET1 ratio was 13.6%, with £21.4bn of CET1 capital and £157.8bn of RWAs, calculated without applying the transitional arrangements of the CRR as amended
by CRR II applicable as at the reporting date.
c
The Barclays PLC CET1 ratio, as is relevant for assessing against the convers ion trigger in Barclays Bank PLC Tier 2 Contingent Capital Notes, was 13.8%. For this calculation
CET1 capital and RWAs are calculated applying the transitional arrangements under the CRR, including the IFRS 9 transitional arrangements. The benefit of the Financial
Services Authority (FSA) October 2012 interpretation of the transitional provisions, relating to the implementation of CRD IV, expired in December 2017.
Risk review
Risk performance
Treasury and Capital risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 78
Foreign exchange risk (audited)
Barclays Bank Group is exposed to two sources of foreign exchange risk.
a) Transactional foreign currency exposure
Transactional foreign currency exposures represent exposure on banking assets and liabilities, denominated in currencies other than the
functional currency of the transacting entity.
Barclays Bank Group risk management policies are designed to prevent the holding of significant open positions in foreign currencies outside
the trading portfolio managed by Barclays International which is monitored through VaR.
Banking book transactional foreign exchange risk outside of Barclays International is monitored on a daily basis by the market risk function and
minimised by the businesses.
b) Translational foreign exchange exposure
Barclays Bank Group investments in overseas subsidiaries and branches create capital resources denominated in foreign currencies, principally USD
and EUR . 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.
Barclays Bank Group strategy is to minimise the volatility of the capital ratios caused by foreign exchange movements, by matching the
CET1 capital movements to the revaluation of Barclays Bank Group foreign currency RWA exposures.
Functional currency of operations (audited)
Foreign
currency
net
investments
Borrowings
which hedge
the net
investments
Derivatives
which hedge
the net
investments
Structural
currency
exposures
pre - economic
hedges
Economic
hedges
Remaining
structural
currency
exposures
£m
£m
£m
£m
£m
£m
As at 31 December 2019
USD
25,628
(8,073)
(1,111)
16,443
(5,339)
11,104
EUR
2,987
(3)
-
2,984
(1,122)
1,862
JPY
533
-
-
533
-
533
Other
1,741
-
(34)
1,707
-
1,707
Total
30,889
(8,076)
(1,145)
21,667
(6,461)
15,206
As at 31 December 2018
USD
28,857
(12,322)
(2,931)
13,604
(4,827)
8,777
EUR
2,672
(3)
-
2,669
(2,146)
523
JPY
489
-
-
489
-
489
Other
2,026
-
(37)
1,989
-
1,989
Total
34,044
(12,325)
(2,968)
18,751
(6,973)
11,778
Economic hedges relate to exposures arising on foreign currency denominated preference share and AT1 instruments. These are accounted for
at historical cost under IFRS and do not qualify as hedges for accounting purposes. The gain or loss arising from changes in the GBP value of
these instruments is recognised on redemption in retained earnings.
During 2019, total structural currency exposure net of hedging instruments increased by £3.4bn to £15.2bn (2018: £11.8bn). For eign currenc y
net investments de creased by £ 3.1 bn to £ 30.9 bn (2018: £34 .0bn) driven predominantly by a £3. 3bn de crease in US Dollars and a £ 0.2 bn decrease
in other currencies offset by a £0.3bn increase in Euro . The hedges associated with these investments decreased by £6 .1 bn to £9 .2bn (2018:
£15.3bn).
Risk review
Risk performance
Treasury and Capital risk
1.1%
5.8%
13.6%
24.7%
29.9%
24.9%
0-10 Years
11-20 Years
21-30 Years
31-40 Years
41-50 Years
51 Years +
Barclays Bank PLC 2019 Annual Report on Form 20-F 79
Pension risk review
The UKRF represents approximately 97 % (2018: 9 7 %) of the Barclays Bank Group’s total retirement benefit obligations globally. As such this risk
review section focuses exclusively on the UKRF. The UKRF is closed to new 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 market value of the
pension fund assets may decline, investment returns may reduce or the estimated value of the pension liabilities may increase.
Assets
The Trustee Board of the UKRF defines its overall long - term investment strategy with investments across a broad range of asset classes. T his
results in an appropriate mix of return seeking assets as well as liability matching assets to better match future pension obligations. The two largest
market risks within the asset portfolio are interest rates and equities. The split of scheme assets is shown within Note 32. The fair value of the UKRF
assets was £31.4bn as at 31 December 2019 (2018: £29.0bn).
Liabilities
The UKRF retirement benefit obligations are a series of future cash flows with relatively long duration. On an IAS 19 basis these cash flows are
sensitive to changes in the expected long - term price inflation rate (RPI) and the discount rate (GBP AA corporate bond yield):
◾
An increase in long - term expected inflation corresponds to an increase in liabilities
◾
A decrease in the discount rate corresponds to an increase in liabilities.
Pension risk is generated through the Barclays Bank Group’s defined benefit schemes and this risk is set to reduce over time as the main defined
benefit scheme is closed to new entrants. The chart below outlines the shape of the UKRF’s liability cash flow profile as at 31 December 2019 that
takes account of the future inflation indexing of payments to beneficiaries. The majority of the cash flows (approximately 93%) fall between 0 and
40 years, peaking between 11 and 20 years and reducing thereafter. The shape may vary depending on changes to inflation and longevity
expectations and any members who elect to transfer out. Transfers out will bring forward the liability cash flows.
For more detail on the UKRF’s financial and demographic assumptions see Note 32
to the financial statements.
Proportion of liability cash flows
Risk review
Risk performance
Treasury and Capital risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 80
IAS 19 pension position in 2019
The graph above shows the evolution of the UKRF’s net IAS 19 position over the last two years. During 2019 the net improvement in the IAS 19
position was largely driven by bank contributions. Credit spreads tightening during the year had a negative impact which was broadly offset by
changes in other market levels, in particular equity prices and interest rates, and updates to demographic assumptions.
Refer to Note 32 for the sensitivity of the UKRF to changes in key assumptions.
Risk measurement
In line with the Barclays Bank Group’s risk management framework the assets and liabilities of the UKRF are modelled within a VaR framework to
show the volatility of the pension position at a total portfolio level. This enables the risks, diversification and liability matching characteristics of the
UKRF obligations and inv estments to be adequately captured. VaR is measured and monitored on a monthly basis. Risks are reviewed and reported
regularly at forums including the Barclays PLC BRC, the Barclays Group Risk Committee, the Pensions Management Group and the Pension
Execu tive Board. The VaR model takes into account the valuation of the liabilities on an IAS 19 basis (see Note 32). The Trustee receives quarterly
VaR measures on a funding basis.
The pension liability is also sensitive to post- retirement mortality assumptions which are reviewed regularly. See Note 32 for more details.
In addition, the impact of pension risk to the Barclays Bank Group is taken into account as part of the stress testing process. Stress testing is
performed internally on at least an annual basis. The UKRF exposure is also included as part of regulatory stress tests.
The Barclays Bank Group’s defined benefit pension schemes affects capital in two ways:
◾
An IAS 19 deficit is treated as a liability on the Barclays Bank 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 IAS 19 surplus is treated as an asset on the balance sheet and increases shareholders’ equity; however, it is deducted for the purposes of
determining CET1 capital.
◾
In the Barclays Bank Group’s statutory balance sheet an IAS 19 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 Barclays Bank Group at
the particular time.
Pen sion risk is taken into account in the Pillar 2A capital assessment undertaken by the PRA at least annually. The Pillar 2A requirement forms part
of the Barclays Bank Group’s overall regulatory minimum requirement for CET1 capital, Tier 1 capital and total capital.
Risk review
Risk performance
Treasury and Capital risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 81
Interest rate risk in the banking book
All disclosure s in this section (pages 81 to 83 ) are unaudited unless otherwise stated.
Overview
The treasury and capital risk framework covers interest rate sensitive exposures held in the banking book, mostly relating to accrual accounted and
FVOCI instruments. The potential volatility of net interest income is measured by an Annual Earnings at Risk (AEaR) metric which is monitored
regularly and reported to senior management and the Barclays Bank PLC Boa rd Risk Committee as part of the limit monitoring framework.
Summary of performance in the period
◾
Annual Earnings at Risk (AEaR), is a key measure of interest rate risk in the banking book (IRRBB).
Key metrics
+£25m
AEaR across the Barclays Bank Group from a positive 25bps shock to forward interest rate curves.
Net interest income sensitivity
The table below shows a sensitivity analysis on pre - tax net interest income for non - traded financial assets and liabilities, including the effect of any
hedging. NII sensitivity uses the Annual Earnings at Risk (AEaR) metric. Note that this metric assumes an instantaneous parallel change to forward
interest rate curves. The model does not apply floors to shocked market rates, but does recogni se contractual product specific interest rate floors
where relevant. The main model assumptions are: (i) one - year ahead time horizon; (ii) balance sheet is held constant; (iii) balances are adjusted for
assumed behavioural profiles (i.e. considers that customers may prepay the mortgages before the contractual maturity); and (iv) behavioural
assumptions are kept unchanged in all rate scenarios.
Net Interest Income Sensitivity (AEaR) by currency
a, b
(audited)
2019
2018
+25 basis
points
-25 basis
points
+25 basis
points
-25 basis
points
Barclays Bank Group
£m
£m
£m
£m
GBP
19
(34)
23
(36)
USD
29
(32)
39
(40)
EUR
(14)
(16)
(8)
6
Other currencies
(9)
8
1
(3)
Total
25
(74)
55
(73)
Notes
a
Excludes minor investment banking business.
b
NII sensitivity for December 2018 restated due to increased portfolio coverage, primarily the inclusion of the Treasury portfolio.
NII asymmetry arises due to the current low interest rate levels as some customer products have embedded floors . NII sensiti vity to a +25bp shock to rates has decreased year on
year as a result of increased bond holding s outright in the liquidity pool.
Risk review
Risk performance
Treasury and Capital risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 82
Analysis of equity sensitivity
Equity sensitivity table measures the overall impact of a +/ - 25bps movement in interest rates on retained earnings, fair value through other
comprehensive income (FVOCI), cash flow hedge reserves and pensions. For non - NII items a DV01 metric is used, which is an indicator of the shift
in value for a 1 basis point movement in the yield curve.
Analysis of equity sensitivity
a
31 December 2019
31 December 2018
+25 basis
points
-25 basis
points
+25 basis
points
-25 basis
points
Barclays Bank Group
£m
£m
£m
£m
Net interest income
25
(74)
55
(73)
Taxation effects on the above
(6)
18
(14)
19
Effect on profit for the year
19
(56)
41
(54)
As percentage of net profit after tax
0.7%
(2.0%)
4.1%
(5.3%)
Effect on profit for the year (per above)
19
(56)
41
(54)
Fair value through other comprehensive income reserve
(295)
303
(238)
245
Cash flow hedge reserve
(497)
497
(446)
446
Taxation effects on the above
198
(200)
171
(173)
Effect on equity
(575)
544
(472)
464
As percentage of equity
(1.1%)
1.1%
(1.0%)
1.0%
Note
a
December 2018 sensitivities restated due to increased portfolio coverage, primarily the inclusion of the Treasury portfolio.
Movements in the FVOCI reserve impact CET1 capital. However, movements in the cash flow hedge reserve and pensions remeasurement reserve
recognised in FVOCI do not affect CET1 capital.
Risk review
Risk performance
Treasury and Capital risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 83
Volatility of the FVOCI portfolio in the liquidity pool
Changes in value of FVOCI exposures flow directly through capital via the FVOCI reserve. The volatility of the value of the FVOCI investments in the
liquidity pool is captured and managed through a va lue measure rather than an earning measure, i.e. non - traded market risk VaR.
Although the underlying methodology to calculate the non -traded VaR is identical to the one used in traded management VaR, the two measures are
not directly comparable. The non- traded VaR represents the volatility to capital driven by the FVOCI exposures. These exposures are in the banking
book and do not meet the criteria for trading book treatment.
Analysis of volatility of the FVOCI portfolio in the liquidity pool
2019
2018
Average
High
Low
Average
High
Low
For the year ended 31 December
£m
£m
£m
£m
£m
£m
Non - traded market value at risk (daily, 95%)
42
49
34
42
56
27
DVaR trended upwards for the first 3 quarters of 2019 as outright duration and asset swap spread risk increased. The liquidity pool de - risked
substantially in early Q4, causing an associated reduction in DVaR.
Risk review
Risk performance
Operational risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 84
All disclosures in this section are unaudited unless otherwise stated.
Overview
Operational risks are inherent in the Barclays Bank Group’s business activities and it is not cost effective or possible to attempt to eliminate all
operational risks. The Operational Risk Framework is therefore focused on identifying operational risks, assessing them and managing them within
the Barclays Bank Group’s approved risk appetite.
The Operational Risk principal risk comprises the followi ng risks: Data Management & Information Risk; Financial Reporting Risk; Fraud Risk;
Payments Process Risk; People Risk; Premises Risk; Physical Security Risk; Supplier Risk; Tax Risk; Technology Risk; Transaction Operations Risk and
Execution Risk. The ope rational risk profile is also informed by a number of risk themes: Cyber, Data and Resilience. These represent threats to the
Barclays Bank Group that extend across multiple risk types, and therefore require an integrated risk management approach.
For definitions of these risks refe r to pages 199 to 200 of the Barclays PLC Pillar 3 Report 2019. In order to provide complete coverage of the
potential adverse impacts on the Barclays Bank Group arising from operational risk, the operational risk taxonomy extend s beyond the risks listed
above to cover operational risks associated with other principal risks too.
This section provides an analysis of the Barclays Bank Group’s operational risk profile, including events above the Barclays Bank Group’s reportable
thres hold, which have had a financial impact in 2019. The Barclays Bank Group’s operational risk profile is informed by bottom - up risk assessments
undertaken by each business unit and top - down qualitative review by the Operational Risk specialists for each risk type. Fraud, Transaction
Operations and Technology continue to be highlighted as key operational risk exposures.
For information on conduct risk please see page 42 .
Summary of performance in the period
During 2019 , total operational risk losses
a
b
: £127m) and the number of recorded events for 2019 decreased to 1,057
from 1,363 events recorded during the prior year. The total operational risk losses for the year were mainly driven by events falling within the
Execution, Delivery and Process Management and External Fraud categories, which tend to be high volume but low impact events.
Key metrics
79%
of the Barclays Bank Group’s net reportable operational risk events had a loss value of £50,000 or less
51%
of events by number are due to external fraud
66%
of losses are from events aligned to Execution, Delivery and Process Management
Operational risk profile
Within operational risk, there are a large number of small risk events. In 2019, 79% (2018: 81%) of the Barclays Bank Group’s reportable
operational risk events by volume had a value of less than £50,000 each. Cumulatively, events under this £50,000 threshold accounted for only
13% (2018: 17%) of the Barclays Bank Group’s total net operational risk losses. A small proport ion of operational risk events have a material impact
on the financial results of the Barclays Bank Group.
The analysis below presents the Barclays Bank Group’s operational risk events by Basel event category:
Notes
a
The data disclosed includes operational risk losses for reportable events impacting the Barclays Bank Group business areas, having impact of > £10,000 and excludes Gain or
Insurance Recovery impacts, events that are Conduct or Legal risk, aggregate and boundary events. A boundary event is an operational risk event that results in a credit risk
impact. Due to the nature of risk events that keep evolving, prior year losses are updated.
b
Amendment s were made to the combination of organisational units that make up this entity at the end of Q1 2018, which will impact comparison against prior year values.
Risk review
Risk performance
Operational risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 85
◾
Execution, Delivery and Process Management impacts decreased to £78m (2018: £91m) and accounted for a reduced level of 66% (2018: 72%)
of total 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, mapping mainly to Barclays Transaction Operations risk type. The overall frequency of events in this category
increased slightly in 2019 to 41% of total events by volume (2018: 36%), the decrease in total impacts was due to a lower number of events with
high loss values compared to the prior yea r.
◾
External Fraud remains the category with the highest frequency of events at 51% of total events in 2019, although down from 56% in prior year.
In this category, high volume, low value events are driven by transactional fraud often related to debit and credit card usage. Ratio of losses in
this category increased to 22% of total 2019 losses (2018: 17%), driven mainly by increased fraud attacks on the Barclays Bank Group’s systems
following implementation of Cheque Imaging as part of the clearing process.
◾
Business Disruption and System Failures impacts remained broadly stable at £14m (2018: £12m) and, while the count of events decreased
slightly year - on - year to 71 (2018: 81), losses in this category accounted for 12% of total losses, slightly increased fro m the previous year (2018:
10%).
Investment continues to be made in improving the control environment across the Barclays Bank Group. Particular areas of focus include new and
enhanced fraud prevention systems and tools to combat the increasing level of fr aud attempts being made and to minimise any disruption to
genuine transactions. Fraud remains an industry wide threat and the Barclays Bank Group continues to work closely with external partners on
various prevention initiatives.
Operational Resilience is a key area of focus for the Barclays Bank Group. Disruption to our business activities is a material inherent risk within the
Group and across the financial services industry, whether arising through impacts on our technology systems, our real estate serv ices, availability of
personnel or services supplied by third parties. Failure to build resilience and recovery capabilities into our business activities may result in
significant customer detriment, costs to reimburse losses incurred by the Barclays Bank Group’s customers, market impact and reputational
damage. In common with the rest of the Financial Services industry, the Barclays Bank Group expects continued regulatory scrutiny in relation to
resilience. Technology, resilience and cyber security risks evolve rapidly so the Barclays Bank Group maintains continued focus and 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 Barcl ays Bank Group.
Cyber - attacks are a global threat that are inherent across all industries. The financial sector remains a primary target for cyber criminals, hostile
nation states, opportunists and hacktivists. There are high levels of sophistication in criminal hacking for the purpose of stealing money, stealing,
destroying or manipulating data (including customer data) and/or disrupting operations, where multiple threats exist including threats arising from
malicious emails, distributed denial of service (DDoS) attacks, payment system compromises, insider attackers, supply chain and vulnerability
Risk review
Risk performance
Operational risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 86
exploitation. Cyber events can have a compounding impact on services and customers, e.g. data breaches in social networking sites, retail
co mpanies and payments networks.
The threat of cyber - attack is recognised by the Barclays Bank Group along with the significant potential impact on all areas of its business ranging
from operational matters to its scrutiny of its relationships with its suppliers, customers and other external stakeholders. Regulators in the UK, US
and Europe continue to focus on cyber - security risk management in the financial sector and have highlighted the need for financial institutions to
improve their monitoring and control of, and resilience (particularly of critical services) to cyber - attacks, and to provide timely notification of them,
as appropriate. This has resulted in a number of proposed laws, regulations and other requirements that necessitate implementation of a variety of
increased controls and enhancement activities for regulated Barclays Bank Group entities. These include, among others, the adoption of cyber
security policies and procedures meeting specified criteria, minimum required security measures, controls and procedures for enhanced reporting
and public disclosures, compliance certification requirements, and other cyber and information risk governance measures. The Barclays Bank
Group continues to use an intelligence-driven approach, analysing external events for curr ent and emerging cyber threats which allows the
��
defencedelivery of proactive counter measures; the Barclays Bank Group also completes cyber threat scenarios and incident playbooks to assess our
security posture and business impacts and runs an internal adversaria l capability which simulates hackers to proactively test controls and
responses. The increased control environment will continue to enhance our security posture and our ability to better protect the organisation and
our customers. Cyber - attacks however are increasingly sophisticated and there can be no assurance that the measures implemented will be fully
effective to prevent or mitigate future attacks, the consequences of which could be significant to the Barclays Bank Group. Furthermore, such
measures hav e resulted and will result in increased technology and other costs in connection with cyber security mitigation and compliance for the
Barclays Bank Group.
For further information, see operational risk management section (pages 41 to 42).
Risk review
Risk performance
Model risk, Conduct risk, Reputation risk, Legal risk
Barclays Bank PLC 2019 Annual Report on Form 20-F 87
All disclosures in this section are unaudited unless otherwise stated.
Model risk
Since the inception of model risk as a principal risk, key achievements to date include creating a complete model inventory across the firm, roll out
of a robust Model Risk Management (MRM) framework and the validation of all high material models. In 2019 the framework and governance of
model risk was further improved by:
◾
enhancing the Barclays Bank PLC Board oversight of model risk, through the reporting of the model risk tolerance framework and periodic
updates to the Barclays Bank PLC Board on the progress of the MRM implementation ;
◾
v alidating a third of the po pulation of low material models;
◾
strengthening the model inventory identification process, including enhancing the model lifecycle technology platform ; and
◾
b etter alignment of documentation re quirements to model materiality.
Conduct risk
The Barclays Bank Group is committed to continuing to drive the right culture throughout all levels of the organisation. The Barclays Bank Group will
continue to enhance effective management of conduct risk and appropriately consider the relevant tools, go vernance and management information in
decision - making processes. Focus on management of conduct risk is ongoing and the Barclays Bank Group Conduct Dashboards are a key component
of this.
The Barclays Bank Group continues to review 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. As part of the 2019 Medium-Term Planning
Process, material con duct risks associated with strategic and financial plans were assessed.
Throughout 2019, conduct risks were raised by each business area for consideration by the Barclays Bank PLC Board Risk Committee. The Committee
reviewed the risks raised and whether m anagement’s proposed actions were appropriate to mitigate the risks effectively. The Barclays Bank PLC Board
Risk Committee received regular updates with regards to key risks and issues including those relating to structural reform and regulatory change.
Although certain legacy litigation and conduct issues have been resolved, the Barclays Bank Group continued to incur costs in relation to litigation and
conduct matters, please refer to Note 25 Legal, competition and regulatory matters and Note 23
Provisions, for further details. Costs include customer
redress and remediation, as well as fines and settlements. Resolution of these matters remains a necessary and important part of delivering the Barclays
Bank Group strategy and an ongoing commitment to improve oversight of culture and conduct.
The Barclays Bank Group has operated at the overall set tolerance for conduct risk throughout 2019. The tolerance is assessed by the business through
Key Indicators which are aggregated and provide an overall rating which is reported to the Barclays Bank PLC Board Risk Comm ittee as part of the
Conduct Dashboard.
Reputation risk
The Barclays Bank Group is committed to continuing to drive the right culture throughout all levels of the organisation. The Barclays Bank Group will
continue to enhance effective m anagement of reputation risk and appropriately consider the relevant tools, governance and management information
in decision - making processes.
The Barclays Bank PLC Board considers reputation risks raised by businesses. The Board has also considered whether management’s proposed actions
have been appropriate to mitigate the risks effectively.
Barclays Bank Group continued to incur costs in relation to litigation and conduct matters, please refer to Note 25 Legal, competition and regulatory
matters and N ote 23 Provisions, for further details. Costs include customer redress and remediation, as well as fines and settlements. Resolution of
these matters is an ongoing commitment to improve oversight of culture and conduct and management of reputation risks ar ising.
The Barclays Bank Group remains focused on the continuous improvements being made to manage risk effectively, with an emphasis on enhancing
governance and management information to help identify risks at earlier stages.
Legal risk
The Barclays Bank Group remains committed to continuous improvements to manage legal risk effectively. A number of enhancements have been
implemented during 2019, including updating the Barclays Group framework for managing legal risk and associated policies as well as reviewing
legal risk tolerances and risk appetite. Updated legal risk m andatory training was also implemented across the Barclays Group, reinforced by
ongoing engagement and education of the Barclays Group’s businesses and functions.
Throughout 2019, the Barclays Bank Group operated within set tolerances for legal risk. Tolerance adherence is assessed through key indicators,
which are reviewed through the relevant risk and control committees. In addition to ongoing monitoring, legal risk controls are reviewed and
assessed annually as part of the Risk and Control Self-Assessment process.
Risk review
Supervision and regulation
Barclays Bank PLC 2019 Annual Report on Form 20-F 88
Supervision of the Barclays Bank Group
The Barclays Bank Group’s operations, including its overseas branches, subsidiaries and associates, are subject to a large number of rules and
regulations that are a condition for authorisation to conduct banking and financial services business in each of the jurisdictions in which the
Barclays Bank Group operates. These apply to business operations, impact financial returns and include capital, leverage and liquidity requirements,
authorisation, registration and reporting requirements, restrictions on cert ain activities, conduct of business regulations and many others.
Regulatory developments impact the Barclays Bank Group globally. We focus particularly on EU, UK and US regulation due to the location of the
Barclays Bank Group’s principal areas of business. Regulations elsewhere may also have a significant impact on the Barclays Bank Group due to the
location of its branches, subsidiaries and, in some cases, clients. For more information on the risks related to the supervision and regulation of the
Barclay s Bank Group, including regulatory change, see the Risk Factor entitled ‘Regulatory Change agenda and impa ct on Business Model’ on page
29 .
Supervision in the UK and EU
The Barclays Bank Group’s operations in Europe are authorised and regulated by a com bination of its UK home regulators and host regulators in
the European countries where the Barclays Group operates. 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 finally determined. In the UK, day - to- day regulation and supervision of the Barclays
Bank Group is divided between the Prudential Regulation Authority (PRA) (a division of the Bank of England (BoE)) and the Financial Conduct
Authority (FCA). In addition, the Financial Policy Committee (FPC) of the BoE has influence on the prudential requirements that may be imposed on
the banking system through its powers of direction and recommendation.
Barclays Bank PLC is an authorised credit institution and subject to solo- consolidated prudential supervision by the PRA, which comprises Barclays
Bank PLC plus certain additional subsidiaries, and subject to conduct regulation and supervision by the FCA. The Barclays Group is also subject to
prudential supervision by the PRA on a group consolidated basis. Barclays Capital Securities Limited is authorised and supervised by the PRA as a
PRA - designated investment firm and subject to conduct regulation and supervision by the FCA. Barclays Services Limited is an appointed
representative of Barclays Bank PLC and Clydesdale Financial Services Limited.
Barclays Bank Ireland PLC is licensed as a credit institution by the Central Bank of Ireland (CBI) and is designated as a significant institution falling
under direct supervision on a solo basis by the European Central Bank (ECB). Barclays Bank Ireland PLC’s EU branches are supervised by the ECB
and are also subject to direct supervision for local conduct purposes by national supervisory authorities in the jurisdictions where they are
established.
The Barclays Bank Group is also subject to regulatory initiatives undertaken by the UK Payment Systems Regulator (PSR), as a participant in
payment systems regulated by the PSR.
The PRA’s continuing supervision of the Barclays Group is conducted through a variety of regulatory tools, including the collection of information
by way of prudential returns or cross - firm reviews, reports obtained from skilled persons, regular supervisory visits to firms and regular meetings
with management an d directors to discuss issues such as strategy, governance, financial resilience, operational resilience, risk management, and
recovery and resolution.
Parliament gave the FCA a single strategic objective – to ensure that relevant markets function well – and three operational objectives: to protect
consumers, enhance market integrity and promote competition. The FCA’s supervision of the UK firms in the Barclays Bank Group is carried out
through a combination of proactive engagement, regular thematic work 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.
Both the PRA and the FCA apply 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 FCA has focused on conduct risk and on customer outcomes and will continue to do so. This has included a focus on the design and op eration
of products, the behaviour of customers and the operation of markets. The FCA is conducting on - going work on fair pricing in financial services,
affordability and fair treatment of vulnerable customers. These initiatives may impact future revenues and increase conduct costs and costs of
remediation.
The FCA and the PRA also apply the Senior Managers and Certification Regime (the SMCR) which imposes a regulatory approval, individual
accountability and fitness and propriety framework in respect of senior or key individuals within relevant firms.
Supervision in the US
The Barclays Bank Group’s 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 and self-regulatory
organisations (SROs). Barclays PLC, Barclays Bank PLC and its US branches and subsidiaries are subject to a comprehensive regulatory framework
invo lving numerous statutes, rules and regulations. In some cases, US requirements may impose restrictions on the Barclays Bank Group’s global
activities, in addition to its activities in the US.
Barclays PLC, Barclays Bank PLC and Barclays US LLC (BUSL) are regulated as bank holding companies (BHCs) by the FRB. BUSL is the Barclays
Bank Group’s top - tier US holding company that holds substantially all of the Barclays Bank Group’s US subsidiaries (including Barclays Capital Inc.
and Barclays Bank Delaware). BUS L is subject to requirements in respect of capital adequacy, capital planning and stress testing, risk management
and governance, liquidity, leverage limits, large exposure limits, activities restrictions and financial regulatory reporting. Barclays Bank P LC’s US
branches are also subject to enhanced prudential supervision requirements relating to, among other things, liquidity and risk management.
Barclays PLC, Barclays Bank PLC and BUSL have elected to be treated as financial holding companies (FHCs) und er the Bank Holding Company Act
of 1956. FHC status allows these entities to engage in a variety of financial and related activities, directly or through subsidiaries, including
underwriting, dealing and market making in securities. Failure to maintain FHC status could result in increasingly stringent penalties and ultimately,
in the closure or cessation of certain operations in the US.
In addition to umbrella oversight by the FRB, many of the Barclays Bank Group’s branches and subsidiaries are regulated b y additional authorities
based on the location or activities of those entities. The New York and Florida branches of Barclays Bank PLC are subject to supervision and
regulation by, respectively, the New York State Department of Financial Services (NYSDFS) and the Florida Office of Financial Regulation, as well as
the applicable Federal Reserve Banks. Barclays Bank Delaware, a Delaware chartered commercial bank, is subject to supervision and regulation by
the Delaware Office of the State Bank Commissioner, the Federal Deposit Insurance Corporation (FDIC), and the Consumer Financial Protection
Risk review
Supervision and regulation
Barclays Bank PLC 2019 Annual Report on Form 20-F 89
Bureau (CFPB). The deposits of Barclays Bank Delaware are insured by the FDIC and Barclays PLC, Barclays Bank PLC and BUSL are required to act
as a source of strength fo r Barclays Bank Delaware. This could, among other things, require these entities to inject capital into Barclays Bank
Delaware if it fails to meet applicable regulatory capital requirements. Barclays Bank Delaware is subject to direct supervision and regul ation by the
CFPB, which has the authority to examine and take enforcement action related to compliance with US federal consumer financial laws and
regulations.
The Barclays Bank Group’s US securities broker/dealer and investment banking operations, primarily conducted through Barclays Capital Inc., 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 SROs under US federal and state securities laws.
The Barclays Bank Group’s US commodity futures, commodity options and swaps- related and client clearing operations are subject to ongoing
supervision and regulation by the Commodity Futures Trading Commission (CFTC), the National Futures Association and other SROs. Barclays
Bank PLC is also a US registered swap dealer and is subject to the FRB swaps rules with respect to margin and capital requirements.
Supervision in Asia Pacific
The Barclays Bank Group’s operations in Asia Pacific are supervised and regulated by a broad range of national banking and financial services
regulators.
Brexit
There remains much uncertainty regarding the state of the future relationship between the UK and the EU and therefore the potential impact of the
UK's withdrawal from the EU on the financial re gulatory framework in the UK. Following the UK’s withdrawal from the EU on 31 January 2020
pursuant to the withdrawal agreement negotiated between the UK and the EU in October 2019, firms incorpo rated and authorised in the UK are
able to continue to provide services into the EU27, and firms incorporated and authorised in the EU27 are able to continue to provide services into
the UK in accordance with the terms of the withdrawal agreement for the d uration of the transition period set out in the agreement. Following the
expiry of that transitional period in December 2020, the ability of UK firms to access the EU market and vice versa would depend upon the terms of
any future trade deal between the UK and the EU, including whether such deal provides for any access rights in respect of financial services. It
would also depend upon whether the EU grants equivalence to the UK as a third country pursuant to equivalence regimes in existing EU financial
serv ices legislation. If, after the expiry of the transitional period in December 2020, there is no deal or arrangement covering financial services in
place, with no ability to passport, and assuming no third country "equivalence" - based recognition in place, the Barclays Bank Group entities in the
UK would no longer be able to provide certain of their services from the UK into the EU27 in the way in which these services are currently provided.
As a result of the onshoring of EU legislation in the UK, UK firms w ould (at least initially) be subject to substantially the same rules and regulations
as before Brexit. The UK may seek to make changes to these rules going forward, particularly in the event of no deal or arrangement covering
financial services, where they are not subject to any requirements to maintain particular rules or standards for equivalence purposes.
Financial regulatory framework
(a) Prudential regulation
Certain Basel III standards were implemented in EU law through the Capital Requirements Regulation (CRR) and the Capital Requirements Directive
IV (CRD IV). Beyond the minimum standards required by CRD IV, the PRA has expected the Barclays Group, in common with other major UK banks
and building societies, to meet a 7% Common Equity Tier 1 (CET1) ratio at the level of the consolidated group since 1 January 2016.
Global systemically important banks (G - SIBs), such as the Barclays Group, are subject to a number 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 of
the G - SIB buffer is set by the Financial Stability Board (FSB) according to a bank’s systemic importance and can range from 1% to 3.5% of risk-
weighted assets (RWAs). The G - SIB buffer must be met with CET1.
In November 2019, the FSB published an update to its list of G - SIBs, maintaining the 1.5% G - SIB buffer that applies to the Barclays Group.
The Barclays Group is also subject to a ‘combined buffer requirement’ consisting of (i) a capital conservation buffer, and (ii) a countercyclical
capital buffer (CCyB). The CCyB is based on rates determined by the regulatory authorities in each jurisdiction in which the Barclays Group
maintains exposures . These rates may vary in either direction. In December 2019, the FPC raised the UK CCyB rate from 1% to 2% with binding
effect from December 2020.
The PRA requires UK firms to hold additional capital to cover risks which the PRA assesses are not fully captured by the Pillar 1 capital requirement.
The PRA sets this additional capital requirement (Pillar 2A) at least annually, derived from each firm's individual capital guidance. Under current
PRA rules, the Pillar 2A must be met with at least 56% CET1 capital and no more than 25% tier 2 capital. In addition, the capital that firms use to
meet their minimum requirements (Pillar 1 and Pillar 2A) cannot be counted towards meeting the combined buffer requirement.
The PRA may also impose a 'PRA buffer' to cove r risks over a forward looking planning horizon, including with regard to firm - specific stresses or
management and governance weaknesses. If the PRA buffer is imposed on a specific firm, it must be met separately to the combined buffer
requirement, and mus t be met fully with CET1 capital.
Final BCBS standards on counterparty credit risk, leverage, large exposures and a Net Stable Funding Ratio (NSFR) are being implemented under EU
law via the Risk Reduction Measures package, which was published in the Official Journal in June 2019 and includes the CRR II regulation, the CRD
V directive and the BRRD II directive.
The BCBS’s finalisation of ‘Basel III – post- crisis regulatory reforms’ in December 2017, among other things, eliminated model - based approaches for
certain categories of RWAs, revised the standardised approach’s risk weights for a variety of exposure categories, replaced the four current
approaches for operational risk (including the advanced measurement approach) with a single standardised measureme nt approach, established
72.5% of standardised approach RWAs for exposure categories as a floor for RWAs calculated under advanced approaches (referred to as the
‘output floor’), and for G - SIBs introduced a leverage ratio buffer in an amount equal to 50% o f the applicable G - SIB buffer used for RWA purposes
(meaning, for the Barclays Group, a leverage ratio buffer of 0.75%). The majority of the final Basel III changes are due to be implemented
commencing 1 January 2022, with a five- year phase - in period for the output floor, although the precise timing as it applies to the Barclays Group
depends on national and EU legislative processes. The new market risk framework, including rules made as a result of the ‘fundamental review of
Risk review
Supervision and regulation
Barclays Bank PLC 2019 Annual Report on Form 20-F 90
the trading book’, is expected to be implemented in the UK first as a reporting requirement, with further legislation needed to replace the existing,
binding market risk requirements.
In the US, in October 2019, the FRB and other US regulatory agencies released final rules to tailor the applicability of prudential requirements for
large domestic US banking organisations, foreign banking organisations and their intermediate holding companies (IHCs), including BUSL.
In the
final rule, BUSL is a “Category III” IHC. BUSL is therefore subjec t to full standardised liquidity requirements, including the liquidity coverage ratio,
which has been implemented by the US regulatory agencies, and the NSFR, which has been proposed by the US regulatory agencies but does not
have a clear timeframe for finalisation.
In June 2018 and October 2019, the FRB finalised rules regarding single counterparty credit limits (SCCL). The SCCL apply to the largest US BHCs
and foreign banks’ (including the Barclays Bank Group’s) US operations. The SCCL creates two separat e limits for foreign banks, the first on
combined US operations (CUSO) and the second on the US IHC (BUSL). The SCCL for US BHCs, including BUSL, will go into effect in 2020 and
requires that exposure to an unaffiliated counterparty of BUSL not exceed 25% of BUSL’s tier 1 capital. With respect to the CUSO, the SCCL rule
allows certification to the FRB that a foreign bank complies with comparable h ome country regulation.
In November 2019, the FRB issued a proposal to extend by 18 months the initial compliance date for foreign banks' CUSO to allow the home
countries of foreign banks time to finalize comparable home country regulation. Under the propo sal, Barclays Bank PLC would not need to comply
with the CUSO requirement until July 1, 2021. In order to give the FRB time to finalize the November proposal, in December 2019 the FRB
separately granted Barclays Bank PLC relief from the SCCL CUSO requirem ent through a letter indicating that Barclays Bank PLC is not required to
provide the CUSO certification until 1 July 2020.
Stress testing
The Barclays Group and certain of its members, including Barclays Bank PLC, are subject to supervisory stress testing exercises in a number of
jurisdictions, 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 such elements as data provision, stress testing capability including model risk management
and internal management processes and controls.
(b) Recovery and Resolution
Stabilisation and resolution framework
The 2014 Bank Recovery and Resolution Directive (BRRD) established a framework for the recovery and resolution of EU credit institutions and
investment firms. Amendments to BRRD (referred to as BRRD II) were made via the finalisation of the EU Risk Reduction Measures. Member states
are required to transpose BRRD II into national law by 28 December 2020 (subject to certain exceptions).
On 28 December 2017, a related EU directive c ame into force harmonising the priority ranking of unsecured debt instruments under national
insolvency laws. The directive has been transposed into national law in the UK, dividing a financial institution’s non - preferred debts into three
classes in a descending ranking order (ordinary, secondary and tertiary non - preferential debts).
UK resolution authorities are empowered by law to intervene in and resolve a UK financial institution that is failing or likely to fail. 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,
including, for example, to transfer some or all of the securities or business of the bank to a commercial purchaser or a ‘bridge ban k’ owned by the
BoE or to transfer the banking institution into temporary public ownership. When exercising any of its stabilisation powers, the BoE must generally
provide that shareholders bear first losses, followed by creditors in accordance with the pr iority of their claims in insolvency.
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, or override events of default or termination rights that might otherwise be invoked as a result of a resolution action and modify
contractual arrangements in certain circumstances (including a variation of the terms of any securities). In addition, the BoE has 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. HM Treasury may also am end the
law for the purpose of enabling it to use its powers under this regime effectively, potentially with retrospective effect. These powers apply
regardless of any contractual restrictions and compensation that may be payable.
In addition, the BoE is required by law to permanently write- down, or convert into equity, tier 1 capital instruments and tier 2 capital instruments at
the point of non - viability of the bank. This power will be extended to include eligible liabilities (such as liabilities under M REL instruments (see TLAC
and MREL below)) once BRRD II is implemented.
The BoE’s preferred approach for the resolution of the Barclays Group is a bail- in strategy with a single point of entry at 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 Barclays Group and allow for the continued provision of services and operations throughout the resolution. The order in
which the bail- in tool is applied reflects the hierarchy of capital instruments. Accordingly, the more subordinated the claim, the more likely losses
will be suffered.
The PRA has made rules that require authorised firms to draw up recovery plans and resolution packs, as required by the BRRD. Recovery plans are
designed to outline credible actions that authorised firms could implement in the event of severe stress in order to restore their business to a stable
and sustainable condition. Removal of potential impediments to an orderly resolution of a banking group or one or more of its subsidiaries is
considered as part of the BoE’s and PRA’s supervisory strategy for each firm, and the PRA can require firms to make significant changes in order to
enh ance resolvability. The Barclays Group currently provides the PRA with a recovery plan annually and with a resolution pack as requested.
In July 2019, the BoE and PRA published final policies on the Resolvability Assessment Framework (RAF), designed to increase transparency and
accountability and clarify the responsibilities on firms with respect to resolution. The RAF consists of three components: (i) how the BoE will assess
resolvability; (ii) the requirement for certain firms to perform an assessment of their preparations for resolution, submit a report to the PRA and
publish a summary of their most recent report; and (iii) the BoE’s publication of a statement concerning the resolvability of each in- scope firm. The
BoE will assess firms against three res olvability outcomes they must meet by 2022: (i) adequate financial resources; (ii) being able to continue to do
business through resolution and restructuring; and (iii) being able to communicate and coordinate within the firm and with authorities.
While regulators in many jurisdictions have indicated a preference for single point of entry resolution for the Barclays Group, additional resolution
or bankruptcy provisions may apply to certain Barclays Bank Group entities or branches.
Risk review
Supervision and regulation
Barclays Bank PLC 2019 Annual Report on Form 20-F 91
In the US, BUSL is subject to the Orderly Liquidation Authority established by Title II of the Dodd - Frank Act, a regime for the orderly liquidation of
systemically important financial institutions by the FDIC, as an alternative to proceedings under the US Bankruptcy Code. In add ition, the licensing
authorities of each US branch of Barclays Bank PLC and of Barclays Bank Delaware have the authority to take possession of the business and
property of the applicable branch or entity they license and/or to revoke or suspend such licence.
In the US, Title I of the DFA, as amended, and the implementing regulations issued by the FRB and the FDIC require each bank holding company
with assets of $250bn or more, including those within the Barclays Group, to prepare and submit a plan for the orderly resolution of subsidiaries
and operations in the event of future material financial distress or failure. The Barclays Group’s next submission of the US Resolution Plan in respect
of its US operations will be due on 1 July 2020.
Barclays Bank Ireland PLC, as a significant institution under the Single Resolution Mechanism Regulation (SRMR), is subject to the powers of the
Single Resolution Board (SRB) as the Eurozone resolution authority. The CBI and the ECB require Barclays Bank I reland PLC to submit a standalone
BRRD - compliant recovery plan on an annual basis. The SRB has the power to require data submissions specific to Barclays Bank Ireland PLC under
powers conferred upon it by the BRRD and the SRMR. The SRB will exercise these powers to determine the optimal resolution strategy for Barclays
Bank Ireland PLC in the context of the BoE’s preferred resolution strategy of single point of entry with bail- in at Barclays PLC. The SRB also has the
power under the BRRD and the SRMR to dev elop a resolution plan for Barclays Bank Ireland PLC.
TLAC and MREL
The BRRD requires competent authorities to impose a Minimum Requirement for own funds and Eligible Liabilities (MREL) on financial institutions
to facilitate their orderly resolution without broader financial disruption or recourse to public funds. In November 2015, the FSB finalised its
proposals to enhance the loss-absorbing capacity of G - SIBs and set a new minimum requirement for ‘total loss-absorbing capacity’ (TLAC). The
FSB also pub lished guiding principles on internal TLAC in July 2017.
The EU is implementing the TLAC standard (including internal TLAC) via the MREL requirement for G - SIBs and the relevant amendments are
contained in the Risk Reduction Measures package. Under the BoE’s 2018 statement of policy on MREL, the BoE will set MREL for UK G - SIBs as
necessary to implement the TLAC standard and institution or group - specific MREL requirements will depend on the preferred resolution strategy
for that institution or group. Int ernal MREL for operating subsidiaries will be scaled within a 75 - 90% range of the external requirement that would
apply to the subsidiary if it were a resolution entity. The starting point for the scalar will be 90% for ring - fenced bank sub - groups.
The MREL requirements are being phased in as from 1 January 2019. From 1 January 2020, G - SIBs with resolution entities incorporated in the UK,
including the Barclays Group, will be subject to an MREL requirement equivalent to the higher of: (i) the sum of two times the Pillar 1 requirement
and one times the Pillar 2A requirement; or (ii) the higher of two times the leverage ratio or 6% of leverage exposures. The MREL requirements will
be fully implemented by 1 January 2022, at which time such G - SIBs will be requi red to meet an MREL equivalent to the higher of: (i) two times the
sum of their Pillar 1 and Pillar 2A requirements; or (ii) the higher of two times their leverage ratio or 6.75% of leverage exposures.
Barclays Bank Ireland PLC is subject to the SRB’s MREL policy, as issued in January 2019, in respect of the internal MREL that it will be required to
issue to Barclays Bank Group. The SRB’s MREL policy will be revised in the near future to reflect the implementation of the Risk Reduction Measures
package in the EU. The SRB’s current calibration of MREL is two times the sum of: (i) the firm’s Pillar 1 requirement; (ii) its Pillar 2 requirement; and
(iii) its combined buffer requirement, minus 125 basis points. The SRB’s policy does not envisage the application of any scalar in respect of the
internal MREL requirement.
In the US, the FRB’s TLAC rule includes provisions that require BUSL 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 eligible long - term debt); and (iii) a
specified common equity buffer. In addition, the FRB’s TLAC rule prohibits BUSL, for so long as the Barclays Group’s overall resolution plan treats
BUSL as a no n - resolution entity, from issuing TLAC to entities other than those within the Barclays Group.
Bank Levy and FSCS
The BRRD requires EU member states to establish a pre - funded resolution financing arrangement with funding equal to 1% of covered deposits by
31 December 2024 to cover the costs of bank resolutions. The UK has implemented this requirement by way of a tax o n the balance sheets of
banks known as the ‘Bank Levy’.
In addition, the UK has a statutory compensation fund called the Financial Services Compensation Scheme (FSCS), which is funded by way of
annual levies on most financial services firms authorised und er FSMA.
(c) Structural reform
In the UK, the Financial Services (Banking Reform) Act 2013 put in place a framework for ring - fencing certain operations of large banks and
secondary legislation passed in 2014 elaborated on the operation and application of the ring - fence. Ring - fencing requires, among other things, the
separation of the retail and smaller deposit - taking business activities of UK banks into a legally distinct, operationally separate and economically
independent entity, which is not permitte d to undertake a range of activities.
US regulation places further substantive limits on the activities that may be conducted by banks and holding companies, including foreign banking
organisations such as the Barclays Group. The ‘Volcker Rule’, which was part of the DFA and which came into effect in the US in 2015, prohibits
banking entities from undertaking certain proprietary trading activities and limits such entities’ ability to sponsor or invest in certain private equity
funds and hedge funds (in each case broadly defined). As required by the rule, the Barclays Group has developed and implemented an extensive
compliance and monitoring programme addressing proprietary trading and covered fund activities (both inside and outside of the US). In August
20 19 the Volcker regulatory agencies finalised amendments to the Volcker Rule’s proprietary trading provisions, which became effective on 1
January 2020 (with a mandatory compliance date of 1 January 2021). The amendments generally provide greater flexibility for banking entities, and
in particular for business units that operate solely outside the US. The Volcker Rule agencies have indicated that further changes are likely to be
proposed in 2020 with regard to the Volcker covered funds provisions.
Risk review
Supervision and regulation
Barclays Bank PLC 2019 Annual Report on Form 20-F 92
(d) Market infrastructure regulation
In recent years, regulators as well as global - standard setting bodies such as the International Organisation of Securities Commissions (IOSCO) have
focused on improving transparency and reducing risk in markets, particularly ri sks related to over - the- counter (OTC) transactions. This focus has
resulted in a variety of new regulations across the G20 countries and beyond that require or encourage on - venue trading, clearing, posting of
margin and disclosure of pre - trade and post- tra de information. Some of the most significant developments are described below.
The European Market Infrastructure Regulation, as amended, (EMIR) has introduced requirements designed to improve transparency and reduce
the risks associated with the derivati ves market, some of which are still to be fully implemented. EMIR has potential operational and financial
impacts on the Barclays Group, including by imposing new collateral require ments. Over the coming months, European regulators will undergo a
review of the exchange of collateral rules, raising the possibility of some alterations to the existing rules. European regulators are also currently
consulting on details of the recent amendments to EMIR, which could potentially have a significant impact on our clearing business.
CRD IV complements EMIR by applying higher capital requirements for bilateral, uncleared OTC derivative trades. Lower capital requirements for
cleared derivative trades are only available if the central counterparty (CCP) through which the trade is cleared is recognised as a ‘qualifying central
counterparty’ (QCCP) which has been authorised or recognised under EMIR.
The Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation (collectively referred to as M iFID II) have largely
been applicable since 3 January 2018. MiFID II affects many of the investment markets in which the Barclays Group operates, the instruments in
which it trades and the way it transacts with market counterparties and other customers. MiFID II is currently undergoing a review process in order
to determine those areas of the regulation that require further amendment. These amendments are being considered particularly in light of the EU’s
ongoing focus on the development of a stronger Capital Markets Union.
As part of the EU’s sustainable finance action plan, new regulatory requirements are being introduced to provide greater transparency on the
environmental and social impact of financial investments. These include (i) the Regulation on Sustainability-Related Disclosures, which introduces
disclosure obligations regarding the way in which financial institutions integrate environmental, social and governance factors in their investment
decisions, and (ii) the Taxonomy Regulation, which provid es for a general framework for the development of an EU - wide classification system for
environmentally sustainable economic activities. These new requirements will have an impact on the Barclays Bank Group as an intermediary
performing investment services for customers and investors.
The EU Benchmarks Regulation applies to the administration, contribution of data to and use of benchmarks within the EU. Financial institutions
within the EU are prohibited from using benchmarks unless their administrators are authorised, registered or otherwise recognised in the EU,
subject to transitional provisions expiring on 1 January 2022. For example, EURIBOR is no longer compliant with the Benchmarks Regulation, and
the FCA has stated that it does not intend to support LIBOR after the end of 2021. International initiatives are therefore underway to develop
alternative benchmarks and backstop arrangements.
US regulators have imposed similar rules as the EU with respect to the mandatory on - venue trading and clearing of certain derivatives, and post-
trade transparency, as well as in relation to the margining of OTC derivatives.
US regulators are continuing to review and consider their rules with respect to their application on a cross - border basis, including with respect to
their registration requirements in relation to non - US swap dealers and security- based swap dealers. The regulators may adopt further rules, or
provide further guidance, regarding cross-border applicability. In December 2017, the CFTC and the European Commission recognised the trading
venues of each other’s jurisdiction to allow market participants to comply with mandatory on - venue trading requirements while trading on certain
venues recognised by the other jurisdiction. In April 2019, the CFTC issued temporary relief that would permit trading venues and market
participants located in the UK to continue to rely on this mutual recognition framework following a withdrawal of the UK from the EU.
Certain participants in US swap 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 subject to CFTC, an d will be subject to SEC, regulation and oversight. Entities required to register as swap dealers are subject to business
conduct, recordkeeping and reporting requirements under CFTC rules. Barclays Bank PLC is subject to regulation by the FRB, and has pro visionally
registered with the CFTC as a swap dealer. Accordingly, Barclays Bank PLC is subject to CFTC rules on business conduct, record - keeping and
reporting and to FRB rules on capital and margin.
The CFTC has approved certain comparability determinati ons that permit substituted compliance with non - US regulatory regimes for certain swap
regulations. Substituted compliance is permitted for certain transaction - level requirements, where applicable, only with respect to transactions
between a non - US swap de aler and a non - US counterparty, whereas entity-level determinations generally apply on an entity-wide basis regardless
of counterparty status. In April 2019, the CFTC issued temporary relief that would permit swap dealers located in the UK to continue to r ely on
existing CFTC substituted compliance determinations with respect to EU requirements in the event of a withdrawal of the UK from the EU. In
addition, the CFTC has issued guidance that would require a non - US swap dealer to comply with certain CFTC rul es in connection with transactions
that are “arranged, negotiated or executed” from the US. The CFTC has provided temporary no - action relief from application of the guidance. In
December 2019 the CFTC proposed rules that would, for certain CFTC requirement s, codify on a permanent basis, the temporary no - action relief
for transactions that are arranged, negotiated or executed in the US. The proposed rules would also codify certain aspects of the CFTC's current
cross - border framework with respect to internal and external business conduct requirements, and it is expected that the CFTC will introduce
additional proposed rules addressing mandatory clearing, trading and reporting requirements . In October 2017, the CFTC issued an order
permitting substituted compliance with EU margin rules for certain uncleared derivatives. However, as the Barclays Bank Group is subject to the
margin rules of the FRB, it will not benefit from the CFTC’s action unless the FRB takes a similar approach.
The SEC finalised the rul es 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 . In December of 2019 the SEC adopted a final cross - border rule that, upon publication
in the federal register, will trigger the timeline for security- based swap dealer registration, which will be required 18 months following the effective
date of those rules, currently expected in September 2021.
When security- based swap d ealer registration is required, it is anticipated that Barclays Bank PLC and/or one or more of its affiliates will be required
to register in that capacity and thus will be required to comply with the SEC’s rules for security- based swap dealers. These rule s may impose costs
and other requirements or restrictions that could impact our business. As with similar CFTC rules, substituted compliance will be available for
certain security- based swap dealer requirements; however, the SEC has not yet issued any comp arability determinations, and the ultimate scope
and applicability of such determinations remains unclear.
Risk review
Supervision and regulation
Barclays Bank PLC 2019 Annual Report on Form 20-F 93
(e) Conduct, culture and other regulation
Conduct and culture
The PRA and FCA measures to increase the individual accountability of senior managers and other covered individuals in the banking sector
include: 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 monitor the fitness and propriety of a wider range of employees who could pose a risk of
significant harm to the firm or its customers; and conduct rules that individuals subject to either regime must comply with. From March 2017, the
conduct rules have applied more widely to other staff of firms within the scope of the regime, including the Barclays Group. Our regulators have
also enhanced their focus on the promotion of cultural values as a key area for banks, although they generally view the resp onsibility for reforming
culture as primarily sitting with the industry.
Data protection and PSD2
Most countries in which the Barclays Bank Group operates have comprehensive laws governing the collection and use of personal information.
Prominent media reporting of recent cyber - security breaches or data losses and the significant penalties being handed down by European privacy
regulators have heightened interest in data privacy worldwide. The introduction of the EU’s General Data Protection Regulation (G DPR) does not
significantly alter the core principles established under the earlier Data Protection Directive, but it creates a harmonised privacy regime across
European member states with penalties up to the higher of 4% of global turnover or €20 million. The GDPR also institutes new mandatory breach
notification requirements, enhances the rights of individual data subjects and introduces an accountability principle concerned with openly
demonstrating compliance. The international nature of our business and IT infrastructure means personal information may be available in
countries other than from where it originated. The GDPR has extra - territorial effect where a business established outside the EU is processing
personal data of persons located in the EU ( e.g. European based customers or clients) and such processing relates to the offering of goods or
services to such persons, or the monitoring of their behaviour in the EU.
In the United States, the California Consumer Privacy Protection Act (CCPA), effec tive 1 January 2020 requires companies that process information
regarding California residents to make new disclosures to consumers about their data collection, use and sharing practices, allows consumers to
opt out of certain data sharing with third parti es and provides a new cause of action for data breaches. It remains unclear what modifications will
be made, if any, to the CCPA and its regulations and how these will be interpreted. The introduction of the CCPA has prompted several other US
states to con sider similar legislation. Elsewhere non - EU countries such as Bermuda, Brazil, India, Cayman Islands, China, Guernsey, Jersey, Isle of
Man, and Switzerland have introduced or updated existing legislation, or are considering new laws, with provisions that are either inspired by the
GDPR or that otherwise provide enhanced rights to data subjects.
The revised Payment Services Directive (PSD2) introduces additional security requirements when customers and clients are accessing accounts or
making payments onlin e. In August 2019, the FCA agreed an 18 - month plan for firms to implement these requirements, referred to as Strong
Customer Authentication (SCA).
Cyber security and operational resilience
Regulators in Europe and the US continue to focus on cyber security risk management and organisational operational resilience and overall
soundness across all financial services firms, with customer and market expectations of continuous access to financial services at an all-time high.
This has a led to a number of proposed laws and changes to regulatory frameworks being published, such as the UK regulators’ proposals for a new
operational resilience regime, that necessitate the implementation of a variety of increased controls and enhancement activities for regulate d
Barclays Bank Group entities. To comply with these new requirements, firms such as the Barclays Bank Group have adopted or will adopt a variety
of increased controls and processes, including, among others, the amendment of cyber security policies and pro cedures to include specified
criteria, additional security measures for enhanced reporting and public disclosures, compliance certification requirements, operational resilience
and more advanced recovery solutions, as well as other cyber and information ri sk governance measures. These increased controls will enhance
industry standardisation, expand and enhance our resilience capabilities as well as increase our ability to protect and maintain customer service
during potential disruptions. Such measures are likely to result in increased technology and compliance costs for the Barclays Bank Group.
Sanctions and financial crime
The UK Bribery Act 2010 introduced a new form of corporate criminal liability focused broadly on a company’s failure to prevent bri bery on its
behalf. The Criminal Finances Act 2017 introduced new corporate criminal offences of failing to prevent the facilitation of UK and overseas tax
evasion. Both pieces of legislation have broad application and in certain circumstances may have extra - territorial impact on entities, persons or
activities located outside the UK, including Barclays PLC and its subsidiaries. The UK Bribery Act requires the Barclays Bank Group to have adequate
procedures to prevent bribery which, due to the extra - territo rial nature of the Act, makes this both complex and costly. Additionally, the Criminal
Finances Act requires the Barclays Group to have reasonable prevention procedures in place to prevent the criminal facilitation of tax evasion by
persons acting for, or on behalf of, the Barclays Group.
In May 2018, the Sanctions and Anti- Money Laundering Act became law in the UK. The Act allows for the adoption of an autonomous UK
Sanctions regime, as well as a more flexible licensing regime post- Brexit.
In July 2018, the 5th EU Anti- Money Laundering Directive entered into force. Amongst other things, the Directive introduces changes to the
Enhanced Due Diligence measures that are required in respect of customer relationships or transactions involving high risk non - EU countries. EU
Member States are required to implement the requirements of the Directive by January 2020. The UK Government has confirmed that it will
implement the requirements of the Directive, regardless of the outcome of Brexit.
In the US, the Ban k Secrecy Act, the USA PATRIOT Act 2001 and regulations thereunder contain numerous anti-money laundering and anti-
terrorist financing requirements for financial institutions. In addition, the Barclays Bank Group is subject to the US Foreign Corrupt Practi ces 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 government, including the US Office of Foreign Assets Control and the US Department of State, which restrict certain
business activities with certain individuals, entities, groups, countries and territories.
In some cases, US state and federal regulations addressing sanctions, money laundering and other financial crimes 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
Risk review
Supervision and regulation
Barclays Bank PLC 2019 Annual Report on Form 20-F 94
state and federal 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.
Financial statements
Contents
Credit risk management
Barclays Bank PLC 2019 Annual Report on Form 20-F 95
Detailed analysis of our consolidated financial statements , independently audited and providing
in- depth disclosure on the financial performance of Barclays Bank Group.
Consolidated financial statements
Page
Note
◾
Report of independent registered public accounting firm
96
n/a
◾
Consolidated income statement
97
n/a
◾
Consolidated statement of comprehensive income
98
n/a
◾
Consolidated balance sheet
99
n/a
◾
Consolidated statement of changes in equity
100
n/a
◾
Consolidated cash flow statement
103
n/a
Notes to the financial statements
◾
Significant accounting policies
105
1
Performance/return
◾
Segmental reporting
110
2
◾
Net interest income
111
3
◾
Net fee and commission income
112
4
◾
Net trading income
114
5
◾
Net investment income
115
6
◾
Credit impairment charges
115
7
◾
Operating expenses
120
8
◾
Tax
120
9
◾
Dividends on ordinary shares
125
10
Assets and liabilities held at fair value
◾
Trading portfolio
126
11
◾
Financial assets at fair value through the income statement
126
12
◾
Derivative financial instruments
127
13
◾
Financial assets at fair value through other comprehensive income
136
14
◾
Financial liabilities designated at fair value
137
15
◾
Fair value of financial instruments
138
16
◾
Offsetting financial assets and financial liabilities
150
17
Assets at amortised cost and other
◾
Loans and advances and deposits at amortised cost
152
18
i nvestments
◾
Property, plant and equipment
152
19
◾
Leases
154
20
◾
Goodwill and intangible assets
156
21
Accruals, provisions, contingent
◾
Other liabilities
159
22
liabilities and legal proceedings
◾
Provisions
159
23
◾
Contingent liabilities and commitments
161
24
◾
Legal, competition and regulatory matters
161
25
Capital instruments, equity and
◾
Subordinated liabilities
166
26
reserves
◾
Ordinary shares, share premium and other equity
169
27
◾
R
eserves
171
28
◾
Non - controlling interests
172
29
Employee benefits
◾
Staff costs
173
30
◾
Share - based payments
173
31
◾
Pensions and post- retirement benefits
176
32
Scope of consolidation
◾
Principal subsidiaries
182
33
◾
Structured entities
183
34
◾
Investments in associates and joint ventures
187
35
◾
S
ecuritisations
188
36
◾
Assets pledged , collateral received and assets transferred
189
37
Other disclosure matters
◾
Related party transactions and Directors’ remuneration
191
38
◾
Disposal of businesses and d iscontinued operations
194
39
◾
Auditor ’s remuneration
196
40
Report of Independent Registered Public Accounting Firm
Barclays Bank PLC 2019 Annual Report on Form 20-F 96
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Barclays Bank PLC:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Barclays Bank PLC and subsidiaries (the Group) as of December 31, 2019 and
2018, the related consolidated income statements, statements of comprehensive income, statements of changes in equity, and cash flow
statements for each of the years in the three - year period ended December 31, 2019, and the related notes and specific disclosures described in
Note 1 of the consolidated financial statements as being part of the consolidated financial statements (collectively, the consolidated financial
statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of
December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the three - year period ended December 31,
2019, in conformity with International Financial Reporting Standards, as issued by the International Accounting Standards Board.
Change in Accounting Principle
The Group changed its meth od of accounting for financial instruments in 2018 due to the adoption of International Financial Reporting Standard 9
Financial Instruments.
Basis for Opinion
These consolidated financial statements are the responsibility of the Group’s management. Our re sponsibility is to express an opinion on these
consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent w ith respect to the Group in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The
Group is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles u sed and
significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that
our audits provide a reasonable basis for our opinion.
We have served as the Group’s auditor since 2017.
/s/ KPMG LLP
London, United Kingdom
February 12, 2020
Consolidated financial statements
Consolidated income statement
Barclays Bank PLC 2019 Annual Report on Form 20-F 97
2019
2018
a
2017
a,b
For the year ended 31 December
Notes
£m
£m
£m
Continuing operations
Interest income
3
8,085
7,459
6,917
Interest expense
3
(4,178)
(4,329)
(3,041)
Net interest income
3,907
3,130
3,876
Fee and commission income
4
7,664
7,392
7,424
Fee and commission expense
4
(1,992)
(1,785)
(1,726)
Net fee and commission income
5,672
5,607
5,698
Net trading income
5
4,073
4,364
3,396
Net investment income
6
420
394
699
Other income
79
105
61
Total income
14,151
13,600
13,730
Credit impairment charges
7
(1,202)
(643)
(1,553)
Net operating income
12,949
12,957
12,177
Staff costs
30
(4,565)
(4,874)
(4,393)
Infrastructure costs
8
(835)
(935)
(1,696)
Administration and general expenses
8
(4,318)
(4,224)
(4,141)
Provision for litigation and conduct
8
(264)
(1,706)
(448)
Operating expenses
8
(9,982)
(11,739)
(10,678)
Share of post- tax results of associates and joint ventures
57
68
75
Profit on disposal of subsidiaries, associates and joint ventures
88
-
184
Profit before tax
3,112
1,286
1,758
Taxation
9
(332)
(229)
(1,352)
Profit after tax in respect of continuing operations
2,780
1,057
406
(Loss)/profit after tax in respect of discontinued operations
39
-
(47)
(1,386)
Profit/(loss) after tax
2,780
1,010
(980)
Attributable to:
Equity holders of the parent
2,120
363
(1,763)
Other equity instrument holders
660
647
639
Total equity holders of the parent
2,780
1,010
(1,124)
Non - controlling interests in respect of continuing operations
29
-
-
4
Non - controlling interests in respect of discontinued operations
29
-
-
140
Profit/(loss) after tax
2,780
1,010
(980)
Note
a From 2019, due to an IAS 12 update, the tax relief on payments in relation to equity instruments has been recognised in the tax charge of the income statement, whereas it was
previously recorded in retained earnings. Comparatives have been restated, reducing the tax charge for 2018 by £ 175m and 2017 by £174m. This change does not impact
earnings per share or return on average tangible shareholders’ equity. Further detail can be found in Note 1.
b Following the sale of the UK banking business on 1 April 2018 by the Group, the continuing operations for 2017 have been restated to disclose the UK banking business as a
discontinued operation. Further detail on the discontinued operations can be found in Note 39.
Consolidated financial statements
Consolidated statement of comprehensive income
Barclays Bank PLC 2019 Annual Report on Form 20-F 98
2019
2018
2017
a
For the year ended 31 December
£m
£m
£m
Profit/(loss) after tax
2,780
1,010
(980)
Profit after tax in respect of continuing operations
2,780
1,057
406
Loss after tax in respect of discontinuing operations
-
(47)
(1,386)
Other comprehensive income/(loss) that may be recycled to profit or loss from continuing
operations:
Currency translation reserve
Currency translation differences
b
(544)
844
(1,310)
Fair value through other comprehensive income reserve movement relating to debt securities
c
Net gains/(losses) from changes in fair value
2,465
(475)
-
Net (gains)/losses transferred to net profit on disposal
(454)
74
-
Net losses transferred to net profit due to impairment
1
4
-
Net (losses)/gains due to fair value hedging
(1,782)
165
-
Other movements
(8)
(25)
-
Tax
(63)
53
-
Cash flow hedging reserve
Net gains/(losses) from changes in fair value
823
(197)
(428)
Net gains transferred to net profit
(141)
(213)
(602)
Tax
(171)
103
256
Available for sale reserve
c
-
-
429
Other
16
27
(7)
Other comprehensive income/(loss) that may be recycled to profit or loss from continuing
operations
142
360
(1,662)
Other comprehensive (loss)/income not recycled to profit or loss from continuing operations:
Retirement benefit remeasurements
(280)
412
115
Fair value through other comprehensive income reserve movements relating to equity instruments
c
-
(141)
-
Own credit
(316)
77
(7)
Tax
150
(118)
(66)
Other comprehensive (loss)/income not recycled to profit or loss from continuing operations
(446)
230
42
Other comprehensive (loss)/income for the year from continuing operations
(304)
590
(1,620)
Other comprehensive (loss)/gains for the year from discontinued operation
-
(3)
1,301
Total comprehensive income/(loss) for the year
Total comprehensive income/(loss) for the year, net of tax from continuing operations
2,476
1,647
(1,214)
Total comprehensive loss for the year, net of tax from discontinued operation
-
(50)
(85)
Total comprehensive income/(loss) for the year
2,476
1,597
(1,299)
Attributable to:
Equity holders of the parent
2,476
1,597
(1,411)
Non-controlling interests
-
-
112
Total comprehensive income/(loss) for the year
2,476
1,597
(1,299)
Note
a Following the sale of the UK banking business on 1 April 2018 by the Group, the continuing operations for 2017 have been restated to disclose the UK banking business as a
discontinued operation. Further detail on the discontinued operations can be found i n Note 39.
b Includes £15 m profit (2018: £41m loss; 2017:£189m loss) on recycling of currency translation differences.
c Following the adoption of IFRS 9, Financial Instruments on 1 January 2018, the fair value through other comprehensive income reserve was introduced replacing the available for
sale reserve.
Consolidated financial statements
Consolidated balance sheet
Barclays Bank PLC 2019 Annual Report on Form 20-F 99
2019
2018
As at 31 December
Notes
£m
£m
Assets
Cash and balances at central banks
125,940
136,359
Cash collateral and settlement balances
79,486
74,352
Loans and advances at amortised cost
18
141,636
136,959
Reverse repurchase agreements and other similar secured lending
1,731
1,613
Trading portfolio assets
11
113,337
104,038
Financial assets at fair value through the income statement
12
129,470
145,250
Derivative financial instruments
13
229,641
222,683
Financial assets at fair value through other comprehensive income
14
45,406
44,994
Investments in associates and joint ventures
35
295
762
Goodwill and intangible assets
21
1,212
1,327
Property, plant and equipment
19
1,631
947
Current tax assets
9
898
1,713
Deferred tax assets
9
2,460
2,970
Retirement benefit assets
32
2,108
1,768
Other assets
1,421
1,965
Total assets
876,672
877,700
Liabilities
Deposits at amortised cost
18
213,881
199,337
Cash collateral and settlement balances
67,682
67,736
Repurchase agreements and other similar secured borrowing
2,032
7,378
Debt securities in issue
33,536
39,063
Subordinated liabilities
26
33,425
35,327
Trading portfolio liabilities
11
35,212
36,614
Financial liabilities designated at fair value
15
204,446
217,741
Derivative financial instruments
13
228,940
219,592
Current tax liabilities
9
320
621
Deferred tax liabilities
9
80
-
Retirement benefit liabilities
32
313
283
Other liabilities
22
5,239
5,170
Provisions
23
951
1,127
Total liabilities
826,057
829,989
Equity
Called up share capital and share premium
27
2,348
2,348
Other equity instruments
27
8,323
7,595
Other reserves
28
3,235
3,361
Retained earnings
36,709
34,405
Total equity excluding non - controlling interests
50,615
47,709
Non - controlling interests
29
-
2
Total equity
50,615
47,711
Total liabilities and equity
876,672
877,700
The Board of Directors approved the financial statements on pages
97 to 196
on
12
February 2020.
James E Staley
Barclays Bank Group – Chief Executive Officer
Steven Ewart
Barclays Bank Group – Chief Financial Officer
Consolidated financial statements
Consolidated statement of changes in equity
Barclays Bank PLC 2019 Annual Report on Form 20-F 100
Called up
share
capital
and share
premium
a
Other
equity
instruments
a
Other reserves
b
Retained
earnings
Total equity
excluding non-
controlling
interests
Non -
controlling
interests
Total
equity
£m
£m
£m
£m
£m
£m
£m
Balance as at 1 January 2019
2,348
7,595
3,361
34,405
47,709
2
47,711
Profit after tax
-
660
-
2,120
2,780
-
2,780
Currency translation movements
-
-
(544)
-
(544)
-
(544)
Fair value through other comprehensive
income reserve
-
-
159
-
159
-
159
Cash flow hedges
-
-
511
-
511
-
511
Retirement benefit remeasurement
-
-
-
(194)
(194)
-
(194)
Own credit reserve
-
-
(252)
-
(252)
-
(252)
Other
-
-
-
16
16
-
16
Total comprehensive income for the
year
-
660
(126)
1,942
2,476
-
2,476
Issue and exchange of other equity
instruments
-
728
-
(406)
322
-
322
Other equity instruments coupons paid
-
(660)
-
-
(660)
-
(660)
Equity settled share schemes
-
-
-
392
392
-
392
Vesting of Barclays PLC shares under
share - based payment schemes
-
-
-
(349)
(349)
-
(349)
Dividends on ordinary shares
-
-
-
(233)
(233)
-
(233)
Dividends on preference shares and
other shareholders equity
-
-
-
(41)
(41)
-
(41)
Capital contribution from Barclays Plc
-
-
-
995
995
-
995
Other reserve movements
-
-
-
4
4
(2)
2
Balance as at 31 December 2019
2,348
8,323
3,235
36,709
50,615
-
50,615
Notes
a
For further details refer to Note 27.
b
For further details refer to Note 28.
Consolidated financial statements
Consolidated statement of changes in equity
Barclays Bank PLC 2019 Annual Report on Form 20-F 101
Called up
share
capital
and share
premium
a
Other
equity
instruments
a
Other reserves
b
Retained
earnings
c
Total equity
excluding non-
controlling
interests
Non -
controlling
interests
Total
equity
£m
£m
£m
£m
£m
£m
£m
Balance as at 31 December 2017
14,453
8,982
3,808
38,490
65,733
1
65,734
Effects of changes in accounting policies
d
-
-
(136)
(2,014)
(2,150)
-
(2,150)
Balance as at 1 January 2018
14,453
8,982
3,672
36,476
63,583
1
63,584
Profit after tax
-
647
-
410
1,057
-
1,057
Currency translation movements
-
-
844
-
844
-
844
Fair value through other comprehensive
income reserve
-
-
(345)
-
(345)
-
(345)
Cash flow hedges
-
-
(307)
-
(307)
-
(307)
Retirement benefit remeasurement
-
-
-
313
313
-
313
Own credit reserve
-
-
58
-
58
-
58
Other
-
-
-
27
27
-
27
Total comprehensive income net of tax
from continuing operations
-
647
250
750
1,647
-
1,647
Total comprehensive income net of tax
from discontinued operations
-
-
(3)
(47)
(50)
-
(50)
Total comprehensive income for the
year
-
647
247
703
1,597
-
1,597
Issue and exchange of other equity
instruments
-
683
-
(312)
371
-
371
Capital reorganisation
(12,092)
-
-
12,092
-
-
-
Other equity instruments coupons paid
-
(647)
-
-
(647)
-
(647)
Redemption of preference shares
(13)
-
21
(2,048)
(2,040)
-
(2,040)
Equity to debt reclassification
e
-
-
(272)
-
(272)
-
(272)
Equity settled share schemes
-
-
-
373
373
-
373
Vesting of Barclays PLC shares under
share - based payment schemes
-
-
-
(418)
(418)
-
(418)
Dividends on ordinary shares
-
-
-
(14,585)
(14,585)
-
(14,585)
Dividends on preference shares and other
shareholders equity
-
-
-
(204)
(204)
-
(204)
Capital contribution from Barclays Plc
-
-
-
3,000
3,000
-
3,000
Net equity impact of intra - group transfers
-
(2,070)
(307)
(638)
(3,015)
-
(3,015)
Other reserve movements
-
-
-
(34)
(34)
1
(33)
Balance as at 31 December 2018
2,348
7,595
3,361
34,405
47,709
2
47,711
Notes
a
For further details refer to Note 27.
b
For further details refer to Note 28.
c
From 2019, due to an IAS 12 update, the tax relief on payments in relation to AT1 instruments has been recognised in the tax charge of the income statement, whereas it was
previously recorded in retained earnings. This change does not impact earnings per share or return on average tangible shareholders’ equity. Comparatives have been restated,
reducin g the tax charge for 2018 by £175 m. Further detai l can be found in Note 1.
d
Effects of changes in accounting policies relate to the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers on 1 January 2018. The
impact of IFRS 15 Revenue from Contracts with Customers was an increase to retained earnings of £67m with the remainder due to the impact of IFRS 9 Financial Instruments .
e
Following a review of certain equity instruments, certain instruments have been deemed to have characteristics that would qualify them as debt and have subsequently been
reclassified.
Consolidated financial statements
Consolidated statement of changes in equity
Barclays Bank PLC 2019 Annual Report on Form 20-F 102
Called up
share
capital
and share
premium
a
Other
equity
instruments
a
Other reserves
b
Retained
earnings
Total equity
excluding non-
controlling
interests
Non -
controlling
interests
Total
equity
£m
£m
£m
£m
£m
£m
£m
Balance as at 31 December 2016
14,462
6,486
4,295
42,190
67,433
3,522
70,955
Effects of changes in accounting
policies
c
-
-
(175)
175
-
-
-
Balance as at 1 January 2017
14,462
6,486
4,120
42,365
67,433
3,522
70,955
Profit after tax
-
639
(411)
228
4
232
Currency translation movements
-
-
(1,309)
-
(1,309)
(1)
(1,310)
Fair value through other comprehensive
income reserve
-
-
429
-
429
-
429
Cash flow hedges
-
-
(774)
-
(774)
-
(774)
Retirement benefit remeasurement
-
-
53
53
-
53
Own credit reserve
-
-
(11)
-
(11)
-
(11)
Other
-
-
-
(7)
(7)
-
(7)
Total comprehensive income net of tax
from continuing operation
-
639
(1,665)
(365)
(1,391)
3
(1,388)
Total comprehensive income net of tax
from discontinued operation
-
-
1,332
(1,526)
(194)
109
(85)
Total comprehensive income for the
year
-
639
(333)
(1,891)
(1,585)
112
(1,473)
Issue and exchange of other equity
instruments
-
2,496
-
-
2,496
-
2,496
Other equity instruments coupons paid
-
(639)
-
174
(465)
-
(465)
Redemption of preference shares
(9)
-
14
(1,343)
(1,338)
-
(1,338)
Equity settled share schemes
-
-
-
550
550
-
550
Vesting of Barclays PLC shares under
share - based payment schemes
-
-
-
(78)
(78)
-
(78)
Dividends on ordinary shares
-
-
-
(674)
(674)
(173)
(847)
Dividends on preference shares and
other shareholders equity
-
-
-
(242)
(242)
-
(242)
Capital contribution from Barclays Plc
-
-
-
-
-
-
-
Net equity impact of intra -group
transfers
-
-
-
(359)
(359)
(3,462)
Other reserve movements
-
-
7
(12)
(5)
2
(3)
Balance as at 31 December 2017
14,453
8,982
3,808
38,490
65,733
1
65,734
Note
a For further details refer to Note 27.
b For further details refer to Note 28.
c As a result of the early adoption of the own credit provisions of IFRS 9 on 1 January 2017, own credit which was previously recorded in the income statement is now recognised
within other comprehensive income. The cumulative unrealised own credit net loss of £175m was therefore reclassified from retained earnings to a separate own credit reserve,
within other reserves. During 2017, a £ 3m loss (net of tax) on own credit was booked in the reserve.
Consolidated financial statements
Consolidated cash flow statement
Barclays Bank PLC 2019 Annual Report on Form 20-F 103
2019
2018
2017
a
For the year ended 31 December
Notes
£m
£m
£m
Continuing operations
Reconciliation of profit before tax to net cash flows from operating activities:
Profit before tax
3,112
1,286
1,758
Adjustment for non-cash items:
Credit impairment charges
1,202
643
1,553
Depreciation, amortisation and impairment of property, plant, equipment and intangibles
459
397
663
Other provisions, including pensions
417
2,274
770
Net profit on disposal of investments and property, plant and equipment
(84)
-
(314)
Other non-cash movements including exchange rate movements
1,060
(3,877)
1,565
Changes in operating assets and liabilities
Net increase in cash collateral and settlement balances
(6,427)
(5,606)
(3,912)
Net (increase)/decrease in loans and advances at amortised cost
(5,125)
(3,890)
26,062
Net increase in reverse repurchase agreements and other similar secured lending
(118)
(434)
(1,827)
Net increase in deposits and debt securities in issue
8,782
16,330
938
Net (decrease)/increase in repurchase agreements and other similar secured borrowing
(5,346)
2
16,978
Net decrease/(increase) in derivative financial instruments
2,390
(6,419)
6,770
Net (increase)/decrease in trading assets
(9,299)
10,102
(33,179)
Net (decrease)/increase in trading liabilities
(1,402)
1,688
2,665
Net decrease/(increase) in financial assets and liabilities designated at fair value
2,485
(6,284)
39,507
Net (increase)/decrease in other assets
(44)
949
(721)
Net decrease in other liabilities
(991)
(6,099)
(2,014)
Corporate income tax received/(paid)
9
894
(409)
59
Net cash from operating activities
(8,035)
653
57,321
Purchase of financial assets at fair value through other comprehensive income
(67,056)
(106,330)
-
Purchase of available for sale investments
-
-
(83,233)
Proceeds from sale or redemption of financial assets at fair value through other comprehensive income
67,743
108,038
-
Proceeds from sale or redemption of available for sale investments
-
-
88,298
Purchase of property, plant and equipment and intangibles
(610)
(422)
(714)
Proceeds from sale of property, plant and equipment and intangibles
-
35
2,150
Disposal of discontinued operation, net of cash disposed
-
(39,703)
(1,060)
Disposal of subsidiaries and associates, net of cash disposed
617
-
358
Other cash flows associated with investing activities
95
1,191
693
Net cash from investing activities
789
(37,191)
6,492
Dividends paid and coupon payments on other equity instruments
(934)
(1,142)
(1,427)
Issuance of subordinated debt
26
6,785
221
3,041
Redemption of subordinated debt
26
(6,574)
(3,246)
(1,378)
Issue of shares and other equity instruments
2,292
1,925
2,495
Redemption of shares and other equity instruments
(1,970)
(3,588)
(1,339)
Capital contribution from Barclays PLC
-
2,000
-
Vesting of shares under employee share schemes
(349)
(418)
-
Net cash from financing activities
(750)
(4,248)
1,392
Effect of exchange rates on cash and cash equivalents
(3,345)
4,159
(4,773)
Net (decrease)/increase in cash and cash equivalents from continuing operations
(11,341)
(36,627)
60,432
Net cash from discontinued operation
40
-
(468)
88
Net (decrease)/increase in cash and cash equivalents
(11,341)
(37,095)
60,520
Cash and cash equivalents at beginning of year
167,357
204,452
143,932
Cash and cash equivalents at end of year
156,016
167,357
204,452
Cash and cash equivalents comprise:
Cash and balances at central banks
125,940
136,359
171,036
Loans and advances to banks with original maturity less than three months
8,158
7,404
8,050
Cash collateral and settlement balances with banks with original maturity less than three months
21,438
22,677
24,656
Treasury and other eligible bills with original maturity less than three months
480
917
682
Trading portfolio assets with original maturity less than three months
-
-
28
156,016
167,357
204,452
Consolidated financial statements
Consolidated cash flow statement
Barclays Bank PLC 2019 Annual Report on Form 20-F 104
Note
a Following the sale of the UK banking business on 1 April 2018 by the Group, the continuing operations for 2017 have been restated to disclose the UK banking business as a
discontinued operation. Further detail on the discontinued operations can be found in Note 39.
Interest received by Barclays Bank Group was £ 26, 637m (2018: £ 1 8,990m) and interest paid by Barclays Bank Group was £ 21,314 m (2018:
£1 4,800 m).
Barclays Bank Group is required to maintain balances with central banks and other regulatory authorit ies and these amounted to £4,505 m ( 2018 :
£4 ,716 m).
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.
Notes to the financial statements
For the year ended 31 December 2019
Barclays Bank PLC 2019 Annual Report on Form 20-F 105
This section describes Barclays Bank Group’s significant 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 particular note, the account ing policy and/or critical accounting
estimate is contained with the relevant note.
1 Significant accounting policies
1. Reporting entity
Barclays Bank PLC is a public limited company, registered in England under company number 1026167.
These financial statements are prepared for Barclays Bank PLC and its subsidiaries (the Barclays Bank Group) under Section 399 of the Companies
Act 2006. The Barclays Bank Group is a major global financial services provider engaged in credit cards, wholesale banking, inve stment banking,
wealth management and investment management services. In addition, separate financial statements have been presented for the holding
company.
2. Compliance with International Financial Reporting Standards
The consolidated financial statements of the Barclays Bank Group 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
Boar d (IASB). They are also in accordance with IFRS and IFRIC interpretations endorsed by the European Union. The principal accounting policies
applied in the preparation o f the consolidated and separate financial statements are set out below, and in the relev ant notes to the financial
statements. These policies have been consistently applied with the exception of the adoption of IFRS 16
Leases,
Uncertainty
over Income Tax Treatments,
Income Taxes,
Employee Benefits,
IFRS 9, IAS 39 and IFRS 7
which were applied from 1 January 2019.
3. Basis of preparation
The consolidated 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 acc ounting policies. They are
stated in millions of pounds Sterling (£m), the functional currency of Barclays Bank PLC.
The financial statements have been prepared on a going concern basis, in accordance with the Companies Act 2006 as applicable to companies
using IFRS.
4. Accounting policies
The Barclays Bank Group prepares financial statements in accordance with IFRS. The Barclays Bank 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 Bank Group applies IFRS 10
Consolidated financial statements
.
The consolidated financial statements combine the financial statements of Barclays Bank PLC and all its subsidiaries. Subsidiaries are entities over
which Barclays Bank PLC has control. The Barclays Bank Group has contro l over another entity when the Barclays Bank Group has all of the
following:
1) power over the relevant activities of the investee, for example through voting or other rights
2) exposure to, or rights to, variable returns from its involvement with the 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 Barclays Bank 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. Consistent accounting policies are used throughout the Barclays Bank
Group for the purpos es 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 inc lude partnerships where the Barclays Bank 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 33 ,.
(ii) Foreign currency translation
The Barclays Bank Group applies IAS 21
The Effects of Changes in Foreign Exchange Rates
. Transactions in foreign currencies are translated into
Sterling at the rate ruling on the date of the transaction. Foreign currency monetary balances are translated into Sterling at the period end
exchange rates. Exchange gains and losses on such balances are taken to the income statement. Non - monetary foreign currenc y balances are
carried at historical transaction date exchange rates.
The Barclays Bank 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.
Notes to the financial statements
For the year ended 31 December 2019
Barclays Bank PLC 2019 Annual Report on Form 20-F 106
1 Significant accounting policies
Prior to consolidation (or equity accounting) the assets and liabilities of non - Sterling operations are translated at the period end exchange rate and
items of income, expense and other comprehensive income are translated into Sterling at the rate on the date of the transactions. Exchange
differences arising on the translation of foreign operations are inclu ded in currency translation reserves within equity. These are transferred to the
income statement when the Barclays Bank Group disposes of the entire interest in a foreign operation, when partial disposal results in the loss of
control of an interest in a subsidiary, when an investment previously accounted for using the equity method is accounted for as a financial asset, or
on the disposal of an autonomous foreign operation within a branch.
The Barclays Bank Group applies IFRS 9
Financial Instruments
assets and financial liabilities and the impairment of financial assets. The Barclays Bank Group applies the req uirements of IAS 39
Financial
Instruments: Recognition and Measurement
Recognition
The Barclays Bank Group recognises financial assets and liabilities when it becomes a party to the terms of the contract. Trade date or settlement
date accounting is applied depending on the classification of the financial asset.
Classification and measurement
Financial assets are classified on the basis of two criteria:
i) the business model within which financial assets are managed; and
ii) their contractual cash flow characteristics (whether the cash flows represent ‘solely payments of principal and interest’ (SPPI)).
The Barclays Bank Group assesses the business model criteria at a portfolio level. In formation that is considered in determining the applicable
business model includes (i) policies and objectives for the relevant portfolio, (ii) how the performance and risks of the portfolio are managed,
evaluated and reported to management, and (iii) the frequency, volume and timing of sales in prior periods, sales expectation for future periods,
and the reasons for such sales.
The contractual cash flow characteristics of financial assets are assessed with reference to whether the cash flows represent SPP I. In assessing
whether contractual cash flows are SPPI compliant, interest is defined as consideration primarily for the time value of money and the credit risk of
the principal outstanding. The time value of money is defined as the element of interest that provides consideration only for the passage of time
and not consideration for other risks or costs associated with holding the financial asset. Terms that could change the contractual cash flows so
that it would not meet the condition for SPPI are consi dered, including: (i) contingent and leverage features, (ii) non - recourse arrangements and
(iii) features that could modify the time value of money.
Financial assets ar e 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 SPPI .
Financial assets ar e 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 SPPI .
Other financial assets are measured at fair value through profit and loss. There is an option to make an irrevocable election on initial recognition for
non 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 the impairment requirements of IFRS 9 do not apply .
The accounting policy for each type of financial asset or liability is included within the relevant note for the item. The Barclays Bank Group’s policies
for determining the fair values of the assets and liabilities are set out in Note 16.
Derecognition
The Barclays Bank 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 rewa rds, along with the unconditional ability to sell or pledge the asset.
Financial liabilities are de - recognised 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% or more 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 re cognition of a
new financial liability.
Transactions in which the Barclays Bank 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 Barclays Bank Group’s exposure to variability in asset cash flows before the transfer with its
retained exposure after the transfe r.
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.
Notes to the financial statements
For the year ended 31 December 2019
Barclays Bank PLC 2019 Annual Report on Form 20-F 107
1 Significant accounting policies
Accounting for reverse repurchase and repurchase agreements including other similar lending and borrowing
Reverse repurchase agreements (and stock borrowing or similar transaction) are a form of secured lending whereby the Barclays Bank Group
provides a lo an 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 Barclays Bank Group obtains such loans or cash
collateral, in exchange for the transfer of collateral.
The Barclays Bank 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 Barclays Bank 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 or mandatorily at fair value through profit and
loss.
The Barclays Bank 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 Barclays Bank 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.
The Barclays Bank Group applies IAS 32,
Financial 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 Barclays Bank Group
having an 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 fro m 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.
5. New and amended standards and interpretations
The accounting policies adopted are consistent with those of the previous financial year, with the exception of the adoption of IFRS 16
Leases
,
IFRIC Interpretation 23
Uncertainty over Income Tax Treatment
, the amendments to IAS 12
Income Taxes
, the amendments to IAS 19
Employee
Benefits
, and the amendments to IFRS 9, IAS 39 and IFRS 7 which were applied from 1 January 2019.
IFRS 16 – Leases
IFRS 16
Leases
, which replaced IAS 17
Leases
, was applied effective from 1 January 2019. IFRS 16 does not result in a significant change to lessor
accounting; however, for lessee accounting there is no longer a distinction between operating and finance leases. Instead, the lessee is required to
recognis e both a r ight of use (ROU) Asset and lease liability on - balance sheet. There is a recognition exemption permitted for leases with a term of
12 months or less.
The Barclays Bank Group applied IFRS 16 on a modified retrospective basis and took advantage of the optio n not to restate comparative periods.
The Barclays Bank Group applied the following transition options available under the modified retrospective approach:
●
To calculate the right of use asset equal to the lease liability, adjusted for prepaid or accrued payments.
●
To rely on the previous assessment of whether leases are onerous in accordance with IAS 37 immediately before the date of initial application
as an alternative to performing an impairment review. The Barclays Bank Group adjusted the carrying amou nt of the ROU asset at the date of
initial application by the previous carrying amount of its onerous lease provision.
●
To apply the recognition exception for leases with a term not exceeding 12 months.
●
To use hindsight in determining the lease term if the contract contains options to extend or terminate the lease.
Upon adoption of IFRS 16, the Barclays Bank Group applied the transition option which permitted the ROU asset to equal the lease liability, adjusted
for prepaid or accrued prepayments. This approach resulted in a lease liability of £569m and an ROU asset o f £509m being recognised as at 1
January 2019. Th e difference in the lease liability and the ROU asset was a result of the following adjustments:
●
An increase in the ROU asset as a result of rental prepayments o f £ 1 4m and,
●
A decrease in the ROU asset as a result of onerous lease provisions previously reco gnised of £46m, £ 25 m of rent free adjustments and £3m of
finance sublease arrangements .
The ROU asset was recorded in property, plant and equipment and the lease liability within other liabilitites.
When measuring lease liabilities, the Barclays Bank Group discounted lease payments using the incremental borrowing rate at 1 January 2019. The
weighted average applied was 4.59%.
Notes to the financial statements
For the year ended 31 December 2019
Barclays Bank PLC 2019 Annual Report on Form 20-F 108
The following shows a reconciliation between the operating lease commitments as at 31 December 2018 and the lease liability recorded as at 1
January 2019.
£m
Operating lease commitment as at 31 December 2018 as disclosed in the Barclays Bank Group consolidated financial
statements
1,071
Impact of discounting using the Barclays Bank Group's incremental borrowing rate
(488)
Recognition exemption for short term leases
(3)
Extension and termination options reasonably certain to be exercised
(11)
Lease liability recognised as at 1 January 2019
569
IFRIC Interpretation 23 – Uncertainty over Income Tax Treatment
IFRIC 23 clarifies the application of IAS 12 to accounting for income tax treatments that have yet to be accepted by tax authorities, in scenarios
where it may be unclear how tax law applies to a particular transaction or circumstance, or whether a taxation authority will accept an entity’s tax
treatment. There was no significant effect from the adoption of IFRIC 23 in relation to accounti ng for uncertain tax positions.
IAS 12 – Income Taxes – Amendments to IAS 12
The IASB amended IAS 12 in order to clarify the accounting treatment of the income tax consequences of dividends. As a result of the amendment,
the tax consequences of all paymen ts on financial instruments that are classified as equity for accounting purposes, where those payments are
considered to be a distribution of profit, will be included in, and will reduce, the income statement tax charge. The amendments of IAS 12 were
appl ied to the income tax consequences of dividends recognised on or after the beginning of the earliest comparative period. This resulted in
reducing the tax charge and increasing profit after tax for 2019 by £171m, 2018 by £175 m and 2017 by £174m. This chang e does not impact
retained earnings.
IAS 19 – Employee Benefits – Amendments to IAS 19
The IASB issued amendments to the guidance in IAS 19, Employee Benefits, in connection with accounting for plan amendments, curtailments and
settlements. There was no significant effect from the adoption of the amendments of IAS 19.
IFRS 9, IAS 39 and IFRS 7 Amendments relating to Interest Rate Benchmark Reform
IFRS 9, IAS 39 and IFRS 7 were amended in September 2019. The amendments are effective for periods beginning on or after 1 January 2020 with
earlier application permitted. The Barclays Bank Group elected to early adopt the amendments with effect from 1 January 2019. The amendments
have been endorsed by the EU.
IFRS 9 allows companies when they first apply IFRS 9 , to choose as an accounting policy to continue to apply the hedge accounting requirements
of IAS 39. The Barclays Bank Group made the election to continue to apply the IAS 39 hedge accounting requirements , and consequently, the
amendments to IAS 39 have b een adopted by the Barclays Bank Group.
The objective of the amendments are to provide temporary exceptions from applying specific hedge accounting requirements during the period of
uncertainty resulting from interest rate benchmark reform. Each of the ex ceptions adopted by the Barclays Bank Group are described below.
◾
Highly probable requirement
When determining whether a forecast transaction or cash flow is highly probable, the Barclays Bank Group assumes that the interest rate
benchmark on which the hed ged cash flows are based is not altered as a result of the reform. This amendment has also been applied when cash
flows are still expected to occur in respect of amounts remaining in the cash flow hedge reserve.
◾
Prospective assessments
When performing pro spective assessments, the Barclays Bank Group assumes that the interest rate benchmark on which the hedged risk and/or
hedging instrument are based is not altered as a result of the interest rate benchmark reform.
◾
Retrospective assessments
The Barclays Bank Group will not discontinue hedge accounting during the period of IBOR - related uncertainty solely because the retrospective
effectiveness falls outside the required 80 - 125% range.
◾
Hedge of a non - contractually specified benchmark portion of an interest rate
The Barclays Bank Group only considers at inception of such a hedging relationship whether the separately identifiable requirement is met.
The amendments to IFRS 7 require certain disclosures to be made in the first period that the amendments to IFRS 9 or IAS 39 are adopted. Refer to
Note 13 where these disclosures have been included.
Future accounting developments
The following accounting standards have been issued by the IASB but are not yet effective:
IFRS 17 – Insurance contracts
In May 2017, the IASB issued IFRS 17
Insurance Contracts
, a comprehensive new accounting standard for insurance contracts covering recognition
and measurement, presentation and disclosure. Once effective, IFRS 17 will replace IFRS 4
Insurance Contracts
Notes to the financial statements
For the year ended 31 December 2019
Barclays Bank PLC 2019 Annual Report on Form 20-F 109
IFRS 17 applies to all types of insurance contracts (i.e. life, non - life, direct insurance and re - insurance), regardless of the type of entities that issue
them, as well as to certain guarantees and financial instruments with discretionary participation features. A few scope exceptions will apply.
In June 2019, the IASB published an exposure draft with proposed amendments to IFRS 17. The proposed amendments that are expected to be
relevant to the Barclays Bank Group are changes to the scoping of IFRS 17, changes in the effective date of IFRS 17 and changes to IFRS 9 which
were consequential amendments as a result of IFRS 17.
The standard is currently effective from 1 January 2021, although the amendments would change the effective date to 1 January 2022, and the
standard has not yet been endorsed by the EU. The Barclays Bank Group is currently assessing the expected impact of adopting this standard.
6. 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:
◾
Cre dit impairment charges on page 115 to 119
◾
Tax on page 120 to 124
◾
Fair value of financial instruments on page 138 to 149
◾
Pensions and post- retirement benefits – obligations on page 176 to 181
◾
Provisions including conduct and legal, competition and regulatory matters on page 159 to 160 .
7. Other disclosures
To improve transparency and ease of reference, by concentrating rela ted information in one place, certain disclosures required under IFRS have
been included within the Risk review section as follows:
◾
Credit risk on page 38 to 39 and on pages 45 to 67
◾
Market risk on page 39 and on pages 68 to 70
◾
Treasury and capital risk – capital on page 40 to 41 and on page 77
◾
Treasury and c apital risk – liquidity on page 40 and on pages 72 to 76 .
These disclosures are covered by the A udit opinion (included on page 96) where referenced as audited.
Notes to the financial statements
Performance/return
Barclays Bank PLC 2019 Annual Report on Form 20-F 110
The notes included in this section focus on the results and performance of the Barclays Bank Group . Information on the segmental performance,
income generated, expenditure incurred, tax, and dividends are included here.
2 Segment al reporting
Presentation of segmental reporting
The Barclays Bank Group’s segmental reporting is in accordance with IFRS 8
Operating Segments
. Operating segments are reported in a manner
consistent with the internal reporting provided to the Executive Committee, which is responsible for allocating resou rces 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- length basis, with intra - segment revenue and costs being eliminated in Head Office. Income and expenses
directly associated with each segment are included in determining business segment performance.
T he Barclays Bank Group divisions have been for segmental reporting purposes defined as Corporate and Investment Bank and Consumer, Cards
and Payments.
◾
Corporate and Investment Bank
◾
Consumer, Cards and Payments
Commercial Payments, Barclaycard Payment Solutions and the international Wealth business.
The below table also includes Head Office which
comprises head office and central support functions.
Analysis of results by business
Corporate and
Consumer, Cards
and Payments
Head
Barclays Bank
Group
£m
£m
£m
£m
For the year ended 31 December 2019
Total income
10,009
4,462
(320)
14,151
Credit impairment charges
(157)
(1,016)
(29)
(1,202)
Net operating income/(expenses)
9,852
3,446
(349)
12,949
Operating expenses
(7,267)
(2,359)
(92)
(9,718)
Litigation and conduct
(108)
(7)
(149)
(264)
Total operating expenses
(7,375)
(2,366)
(241)
(9,982)
Other net income/(expenses)
a
113
40
(8)
145
Profit/(loss) before tax
2,590
1,120
(598)
3,112
Total assets
799.6
65.7
11.4
876.7
Number of employees (full time equivalent)
8,100
3,100
9,300
20,500
Average number of employees (full time equivalent)
21,700
Corporate and
Investment Bank
Consumer, Cards
Head
Barclays Bank
Group
£m
£m
£m
£m
For the year ended 31 December 2018
Total income
b
9,741
4,267
(408)
13,600
Credit impairment releases/(charges)
152
(808)
13
(643)
Net operating income/(expenses)
9,893
3,459
(395)
12,957
Operating expenses
(7,459)
(2,304)
(130)
(9,893)
GMP charge
-
-
(140)
(140)
Litigation and conduct
(68)
(59)
(1,579)
(1,706)
Total operating expenses
(7,527)
(2,363)
(1,849)
(11,739)
Other net income/(expenses)
a
28
41
(1)
68
Profit/(loss) before tax
2,394
1,137
(2,245)
1,286
Total assets
792.5
71.6
13.6
877.7
Number of employees (full time equivalent)
9,100
3,300
10,000
22,400
Notes
a Other net income/(expenses) 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 £ 351m of certain capital instrument funding costs are now charged to Head Office, the impact of which would have been materially the same if the charges had been included in
full year 2017.
Notes to the financial statements
Performance/return
Barclays Bank PLC 2019 Annual Report on Form 20-F 111
Corporate and
Investment Bank
Consumer, Cards
and Payments
Head
Barclays
Non -Core
a
Barclays Bank
Group
£m
£m
£m
£m
£m
For the year ended 31 December 2017
Total income
9,901
4,504
(148)
(527)
13,730
Credit impairment charges
(213)
(1,293)
(17)
(30)
(1,553)
Net operating income/(expenses)
9,688
3,211
(165)
(557)
12,177
Operating expenses
(7,610)
(2,167)
(202)
(251)
(10,230)
Litigation and conduct
(267)
(2)
(151)
(28)
(448)
Total operating expenses
(7,877)
(2,169)
(353)
(279)
(10,678)
Other net income
b
133
121
(192)
197
259
Profit before tax from continuing operations
1,944
1,163
(710)
(639)
1,758
Total assets
c
788.7
67.4
35.8
-
1,129.3
Number of employees (full time equivalent)
8,800
2,700
10,300
-
21,800
Notes
a Barclays Non-Core segment was closed on 1 July 2017, with financial performance subsequently reported in Corporate and Investment Bank, Head Office and UK banking business.
b Other net income/(expenses) 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 acqui sitio ns.
c Total assets for UK banking business are included within Barclays Bank Group for 2017.
Income by geographic region
a
2019
2018
2017
For the year ended 31 December
£m
£m
£m
Continuing operations
United Kingdom
4,084
4,007
3,582
Europe
1,752
1,615
1,985
Americas
7,251
7,048
7,194
Africa and Middle East
62
44
137
Asia
1,002
886
832
Total
14,151
13,600
13,730
Income from individual countries which represent more than 5% of total income
a
2019
2018
2017
For the year ended 31 December
£m
£m
£m
Continuing operations
United Kingdom
4,084
4,007
3,582
United States
7,121
6,916
7,049
Note
a The geographical analysis is now based on the location of office where the transactions are recorded, whereas it was previously based on counterparty location. The new approach
is better aligned to the geographical view of the business following the implementation of structural reform. Prior year comparatives have been restated.
3 Net interest income
Accounting for interest income and expenses
Interest income on loans and advances at amortised cost, and interest expense on financial liabilities held at amortised cost, are calculated using
the effective interest method which allocates interest, and direct and increme ntal fees and costs, over the expected lives of the assets and liabilities.
The effective interest method requires the Barclays Bank Group to estimate future cash flows, in some cases based on its experience of customers’
behaviour, considering all contra ctual terms of the financial instrument, as well as the expected lives of the assets and liabilities.
Barclays Bank Group incurs certain costs to originate credit card balances with the most significant being co - brand partner fees. To the extent
these costs are attributed to customers that continuously carry an outstanding balance (revolvers), they are cap italised and subsequently included
within the calculation of the effective interest rate. They are amortised to interest income over the period of expected repayment of the originated
balance. Costs attributed to customers that settle their outstanding bal ances each period (transactors) are deferred on the balance sheet as a cost
of obtaining a contract and amortised to fee and commission expense over the life of the customer relationship (refer to Note 4 ) . There are no
other individual estimates involved in the calculation of effective interest rates that are material to the results or financial position.
Notes to the financial statements
Performance/return
Barclays Bank PLC 2019 Annual Report on Form 20-F 112
2019
2018
2017
£m
£m
£m
Cash and balances at central banks
919
919
214
Loans and advances at amortised cost
5,514
5,554
5,951
Financial investments
-
-
385
Fair value through other comprehensive income
831
662
-
Other
821
324
367
Interest income
8,085
7,459
6,917
Deposits at amortised cost
(1,778)
(1,591)
(936)
Debt securities in issue
(873)
(493)
(461)
Subordinated liabilities
(1,096)
(1,397)
(1,225)
Other
(431)
(848)
(419)
Interest expense
(4,178)
(4,329)
(3,041)
Net interest income
3,907
3,130
3,876
Interest income presented above represents interest revenue calculated using the effective interest method. Costs to originate credit card balances
o f £ 684m (2018: £585m; 2017: £486 m) have been amortised to interest income during the period. Intere st income includes £9 m (2018: £ 9 m;
201 7 : £16m) accrued on impaired loans . Other interest expense includes £25m relating to IFRS 16 lease interest expenses.
4 Net fee and commission income
Accounting for net fee and commission income under IFRS 15 effective from 1 January 2018
The Barclays Bank Group applies IFRS 15 Revenue from Contracts with Customers. The standard establishes a five- step model governing revenue
recognition. The five- step model requires the Barclays Bank Group to (i) identify the contract with the customer, (ii) identify each of the
performance obligations included in the contract, (iii) determine the amount of consideration in the contract, (iv) allocate the consideration to each
of the identified performance obligations and (v) recognise revenue as each performance obligation is satisfied.
The Barclays Bank Group recognises fee and com mission income charged for services provided by the Barclays Bank Group as the services are
provided, for example on completion of the underlying transaction.
Accounting for net fee and commission incom e under IAS 18 for 2017
The Barclays Bank Group appl ies IAS 18 Revenue. Fees and commissions charged for services provided or received by the Barclays Bank Group are
recognised as the services are provided, for example on completion of the underlying transaction.
Fee and commission income is disaggregated below by fee types that reflect the nature of the services offered across the Barclays Bank Group and
operating segments, in accordance with IFRS 15. It includes a total for fees in scope of IFRS 15. Refer to Note 2 for more detailed information about
ope rating segments.
2019
Corporate and
Investment Bank
Consumer,
Cards and
Payments
Head Office
Total
£m
£m
£m
£m
Fee type
Transactional
391
2,418
-
2,809
Advisory
821
83
-
904
Brokerage and execution
1,082
49
-
1,131
Underwriting and syndication
2,358
-
-
2,358
Other
90
227
30
347
Total revenue from contracts with customers
4,742
2,777
30
7,549
Other non - contract fee income
110
5
-
115
Fee and commission income
4,852
2,782
30
7,664
Fee and commission expense
(743)
(1,249)
-
(1,992)
Net fee and commission income
4,109
1,533
30
5,672
Notes to the financial statements
Performance/return
Barclays Bank PLC 2019 Annual Report on Form 20-F 113
2018
Corporate and
Investment Bank
Consumer,
Cards and
Payments
Head Office
Total
£m
£m
£m
£m
Fee type
Transactional
366
2,248
-
2,614
Advisory
772
78
-
850
Brokerage and execution
1,002
71
-
1,073
Underwriting and syndication
2,462
-
-
2,462
Other
24
222
29
275
Total revenue from contracts with customers
4,626
2,619
29
7,274
Other non - contract fee income
114
4
-
118
Fee and commission income
4,740
2,623
29
7,392
Fee and commission expense
(657)
(1,128)
-
(1,785)
Net fee and commission income
4,083
1,495
29
5,607
2017
£m
Fee and commission income
Banking, investment management and credit related fees and commissions
7,352
Foreign exchange commission
72
Fee and commission income
7,424
Fee and commission expense
(1,726)
Net fee and commission income
5,698
Note
a The Barclays Group elected the cumulative effect transition method on adoption of IFRS 15 for 1 January 2018, and recognised in retained earnings without restating comparative
periods. The comparative figures are reported under IAS 18.
Fee types
Transactional
Transactional fees are service charges on deposit accounts, cash management services and transactional processing fees including interchange
and merchant fee income generated from credit and bank card usage. Transaction and processing fees are recognised at the point in time the
transaction occurs or service is performed. They include banking services such as Automated Teller Machine (ATM) fees, wire transfer fees,
balance transfer fees, overdraft or late fees and foreign exchange fees, among others. Interchange and merchant fees are recognised upon
settlement of the card transaction payment.
Barclays incurs certain card related costs including those related to cardholder reward programmes and various payments made to co - brand
partners. To the extent cardholder reward programmes costs are attributed to customers that settle their outstanding balance each period
(transactors) they are expensed wh en incurred and presented in fee and commission expense while costs related to customers who continuously
carry an outstanding balance (revolvers) are included in the effective interest rate of the receivable (refer to Note 3). Payments to partners for new
cardholder account originations for transactor accounts are deferred as costs to obtain a contract under IFRS 15 while those costs related to
revolver accounts are included in the effective interest rate of the receivable (refer to Note 3). Those costs de ferred under IFRS 15 are capitalised
and amortised over the estimated cardholder relationship. Payments to co - brand partners based on revenue sharing are presented as a reduction
of fee and commission income while payments based on profitability are presen ted in fee and commission expense.
Advisory
Advisory fees are generated from wealth management services and investment banking advisory services related to mergers, acquisitions and
financial restructurings. Wealth management advisory fees primarily consi sts of asset-based fees for advisory accounts of wealth management
clients and are based on the market value of client assets. They are earned over the period the services are provided and are generally recognised
quarterly when the market value of client assets is determined. Investment banking advisory fees are recognised at the point in time when the
services related to the transaction have been completed under the terms of the engagement. Investment banking advisory costs are recognised as
incurred in fee and commission expense if direct and incremental to the advisory services or otherwise recognised in operating expenses.
Brokerage and execution
Brokerage and execution fees are earned for executing client transactions with various exchanges and over - the - counter markets and assisting
clients in clearing transactions. Brokerage and execution fees are recognised at the point in time the associated service has been completed which
is generally the trade date of the transaction.
Notes to the financial statements
Performance/return
Barclays Bank PLC 2019 Annual Report on Form 20-F 114
Underwriting and syndication
Underwriting and syndication fees are earned for the distribution of client equity or debt securities and the arrangement and administration of a
loan syndication. This includes commitment fees to provide loan financing. Underwriting fees are generally r ecognised on trade date if there is no
remaining contingency, such as the transaction being conditional on the closing of an acquisition or another transaction. Underwriting costs are
deferred and recognised in fee and commission expense when the associated underwriting fees are recorded. Syndication fees are earned for
arranging and administering a loan syndication; however, the associated fee may be subject to variability until the loan has been syndicated to
other syndicate members or until other conting encies (such as a successful M&A closing) have been resolved and therefore the fee revenue is
deferred until the uncertainty is resolved.
Included in underwriting and syndication, are commitment fees to provide loan financing which are not presented as pa rt of the carrying value of
the loan in accordance with IFRS 9, for example as part of the effective interest rate. Loan commitment fees included as IFRS 15 revenues are fees
for loan commitments that are not expected to fund, fees received as compensation for unfunded commitments and the applicable portion of fees
received for a revolving loan facility, which for that period, are undrawn. Such commitment fees are recognised over time through to the
contractual maturity of the commitment.
Contract assets and contract liabilities
The Barclays Bank Group had no material contract assets or contract liabilities as at 31 December 2019 (2018: nil).
Impairment on fee receivables and contract assets
During 201 9 , there have been no material impairments recognised in relation to fees receivable and contract assets (2018: nil). Fees in relation to
transactional business can be added to outstanding customer balances. These amounts may be subsequently impaired as par t of the overall loans
and advances balance.
Remaining performance obligations
The Barclays Bank Group applies the practical expedient of IFRS 15 and does not disclose information about remaining performance obligations
that have original expected durations of one year or less or because the Barclays Bank Group has a right to consideration that corresponds directly
with the value of the service provided to the client or customer.
Costs incurred in obtaining or fulfilling a contract
The Barclays Bank Group expects that incremental costs of obtaining a contract such as success fee and commission fees paid are recoverable and
therefore capitalised such con tract costs in the amount of £153 m at 31 December 2019 (2018: £125m).
Capitalised contract costs are amortised based on the transfer of services to which the asset relates which typically ranges over the expected life of
the relationship. In 2019, the amount of amortisation was £ 29 m (2018: £30m) and there was no impairment loss recognised in connection with
the capitalised contract costs (2018: nil).
5 Net trading income
Accounting for net trading income
In accordance with IFRS 9, 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 making and customer business
and from changes in fair value caused by movements in interest and exchange rates, equity prices and othe r market variables.
Gains or losses on non - trading financial instruments designated or mandatorily at fair value with changes in fair value recognised in the income
statement are included in net trading income where the business model is to manage assets and liabilities on a fair value basis which includes use
of derivatives or where an instrument is designated at fair value to eliminate an accounting mismatch and the related instrument's gain and losses
are reported in trading income.
2019
2018
2017
£m
£m
£m
Net gains from financial instruments held for trading
2,795
3,101
2,280
Net gains from financial instruments designated at fair value
240
259
1,116
Net gains from financial instruments mandatorily at fair value
1,038
1,004
-
Net trading income
4,073
4,364
3,396
Notes to the financial statements
Performance/return
Barclays Bank PLC 2019 Annual Report on Form 20-F 115
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 12 and Note 14.
2019
2018
2017
£m
£m
£m
Net gains from financial assets mandatorily at fair value
218
172
-
Net gains from disposal of debt instruments at fair value through other comprehensive
income
454
131
-
Net gains/(losses) from disposal of financial assets and liabilities measured at amortised cost
(38)
(20)
86
Dividend income
-
55
48
Net (losses)/gains on other investments
(214)
56
(14)
Net gains from financial instruments designated at fair value
a
-
-
281
Net gains from disposal of available for sale investments
b
-
-
298
Net investment income
420
394
699
Notes
a Following the adoption of IFRS 9 in 2018, gains or losses on financial assets designated at fair value to eliminate or reduce an accounting mismatch are recognised in net trading
income lines.
b Following the adoption of IFRS 9 in 2018, available for sale classification is no longer applicable.
7 Credit impairment charges
Accounting for the impairment of financial assets under IFRS 9 effective from 1 January 2018
Impairment
The Barclays Bank Group is required to recognise expected credit losses (ECLs) based on unbiased forward - looking information for all financial
assets at amortised cost, lease receivables, debt financial assets at fair value through other comprehensive income, loan commitments and financial
guarantee con tracts. Intercompany exposures in the individual financial statements, including loan commitments and financial guarantee
contracts, are also in scope of IFRS 9 for ECL purposes.
At the reporting date, an allowance (or provision for loan commitments and financial guarantees) is required for the 12 month (Stage 1) ECLs. If the
credit risk has significantly increased since initial recognition (Stage 2), or if the financial instrument is credit impaired (Stage 3), an allowance (or
provision) should be recogni sed for the lifetime ECLs.
The measurement of ECL is calculated using three main components: (i) probability of default (PD) (ii) loss given default (LGD) and (iii) the
exposure at default (EAD).
The 12 month and lifetime ECLs are calculated by multiplying the respective PD, LGD and the EAD. The 12 month and lifetime PDs represent the PD
occurring over the next 12 months and the remaining maturity of the instrument respectively. The EAD represents the expected balance at default,
taking into account the repayment of principal and interest from the balance sheet date to the default event together with any expected
drawdowns of committed facilities. The LGD represents expected losses on the EAD given the event of default, taking into account, among other
attributes, the mitigating effect of collateral value at the time it is expected to be realised and the time value of money.
Determining a significant increase in credit risk since initial recognition:
The Barclays Bank Group assesses when a significant increase in credit risk has occurred based on quantitative and qualitative assessments. The
credit risk of an exposure is considered to have significantly increased when :
i)
Quantitative test
The annualised lifetime PD has increased by more than an agreed threshold relative to the equivalent at origination.
PD deterioration thresholds are defined as percentage increases, and are set at an origination score band and segment level to ensure the test
appropriately captures significant increases in credit risk at all risk levels. Generally, thresholds are inversely correlated to the origination PD, i.e. as
the origination PD increases, the threshold value reduces.
The assessment of the point at which a PD increase is deemed ‘significant’, is based upon analysis of the portfolios’ risk profile against a common
set of principles and performance metrics (consistent across both retail and wholesale businesses), incorporating expert credit judgement where
appropriate. Application of quantitative PD floors does not r epresent the use of the low credit risk exemption as exposures can separately move
into stage 2 via the qualitative route described below.
Notes to the financial statements
Performance/return
Barclays Bank PLC 2019 Annual Report on Form 20-F 116
Wholesale assets apply a 100% increase in PD an d 0.2% PD floor to determine a significant increase in credit risk.
Retail assets apply bespoke relative increase and absolute PD thresholds based on product type and origination PD. Thresholds are subject to
maximums defined by Barclays Bank Group policy and typically apply minimum relative thresholds of 50 - 100% and a max imum relative threshold
of 400%.
For existing/historical exposures where origination point scores or data are no longer available or do not represent a comparable estimate of
lifetime PD, a proxy origination score is defined, based upon:
◾
Back - population of the approved lifetime PD score either to origination date or, where this is not feasible, as far back as possible, (subject to a
data start point no later than 1 January 2015); or
◾
Use of available historical account performance data and other customer information, to derive a comparable ‘proxy’ estimation of origination
PD.
ii)
Qualitative test
This is relevant for accounts that meet the portfolio’s ‘high risk’ criteria and are subject to closer credit monitoring.
High risk customers may not be in arrears but either through an event or an observed behaviour exhibit credit distress. The definition and
assessment of high risk includes as wide a range of information as reasonably available, such as industry and Group - wide customer level data,
including but not limited to bureau scores and high consumer indebtedness index, wherever possible or relevant.
Whilst the high risk populations applied for IFRS 9 impairment purposes are aligned with risk management processes, they are also regularly
reviewed and validated to ensure that they capture any incremental segments where there is evidence of credit deterioration.
iii)
Backstop criteria
This is relevant for accounts that are more than 30 calendar days past due. The 30 days past due cr iteria is a backstop rather than a primary driver
of moving exposures into Stage 2.
The criteria for determining a significant increase in credit risk for assets with bullet repayments follows the same principle as all other assets, i.e.
quantitative, qualitative and backstop tests are all applied.
Exposures will move back to Stage 1 once they no longer meet the criteria for a significant increase in credit risk. This means that, at a minimum all
payments must be up - to- date, the PD deterioration test is no longer met, the account is no longer classified as high risk, and the customer has
evidenced an ability to maintain future payments.
Exposures are only removed from Stage 3 and re - assigned to Stage 2 once the original default trigger event no longer applies. Exposures b eing
removed from Stage 3 must no longer qualify as credit impaired, and:
a) the obligor will also have demonstrated consistently good payment behaviour over a 12 - month period, by making all consecutive contractual
payments due and, fo r forborne exposures, the relevant EBA defined probationary period has also been successfully completed or;
b) (for non - forborne exposures) the performance conditions are defined and approved within an appropriately sanctioned restructure plan,
including 12 months’ payment history have been met.
Management overlays and other exceptions to model outputs are applied only if consistent with the objective of identifying significant increases in
credit risk.
Forward - looking information
The measurement of ECL involves complexity and judgement, including estimation of PD, LGD, a range of unbiased future economic scenarios,
estimation of expected lives (where contractual life is not appropriate), and estimation of EAD and assessing significant increases in credit risk.
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 (EIR). ECLs are the unbiased probability - wei ghted credit losses determined by evaluating a range of possible
outcomes and considering future economic conditions.
The Barclays Bank Group uses a five- scenario model to calculate ECL. An external consensus forecast is assembled from key sources, including HM
Treasury (short and medium term forecasts), Bloomberg (based on median of economic forecasters) and the Urban Land Institute (for US House
Prices), which forms the b aseline scenario. In addition, two adverse scenarios (Downside 1 and Downside 2) and two favourable scenarios (Upside
1 and Upside 2) are derived, with associated probability weightings. The adverse scenarios are calibrated to a similar severity to internal stress tests,
whilst also considering IFRS 9 specific sensitivities and non - linearity. Downside 2 is benchmarked to the Bank of England’s annual cyclical scenarios
and to the most severe scenario from Moody’s inventory, but is not designed to be the same. The favourable scenarios are calibrated to be
symmetric to the adverse scenarios, subject to a ceiling calibrated to relevant recent favourable benchmark scenarios. The scenarios include eight
economic variables, (GDP, unemployment, House Price Index (HPI) and base rates in both the UK and US markets), and expanded variables using
statistical models based on historical correlations. The upside and downside shocks are designed to evolve over a five- year stress horizon, with all
five scenarios converging to a steady state after approximately eight years.
The methodology for estimating probability weights for each of the scenarios involves a comparison of the distribution of key historical UK and US
macroeconomic variables against the forecast paths of the five scenarios. The m ethodology works such that the b aseline (reflecting curren t
Notes to the financial statements
Performance/return
Barclays Bank PLC 2019 Annual Report on Form 20-F 117
consensus outlook) has the highest weight and the weights of adverse and favourable scenarios depend o n the deviation from the b aseline; the
further from the b aseline, the smaller the weight. A single set of five scenarios is used across all portfolios and all five weights are normalised to
equate to 100%. The same scenarios and weights that are used in the estimation of expected credit losses are also used for the Barclays Group
internal planning purposes. The impacts across the portfolios are different because of the sensitivities of each of the portfolios to specific
macroeconomic variables, for example, mortgages are highly sensitive to house prices and base rates, credit cards and unsecured consumer loans
are highly sensitive to unemployment.
Definition of default, credit impaired assets, write - offs, and interest income recognition
The definition of default for the purpose of determining ECLs, and for internal credit risk management purposes, has been aligned to the Regulatory
Capital CRR Article 178 definition of default, to maintain a consistent approach with IFRS 9 and associated regulatory guidance. The Regulatory
Capital CRR Article 178 definition of default 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 cr edit
impaired or purchased or originated as such interest income is calculated on the carrying value net of the impairment allowance.
An asset is considered credit impaired when one or more events occur that have a detrimental impact on the estimated futu re cash flows of the
financial asset. This comprises assets defined as defaulted and other individually assessed exposures where imminent default or actual loss is
identified.
Uncollectible loans are written off against the related allowance for loan impa irment on completion of the Barclays Bank Group’s internal processes
and when all reasonably expected recoverable amounts have been collected. Subsequent recoveries of amounts previously written off are credited
to the income statement. The timing and extent of write- offs may involve some element of subjective judgement. Nevertheless, a write- off will
often be prompted by a specific event, such as the inception of insolvency proceedings or other formal recovery action, which makes it possible to
establish that some or the entire advance is beyond realistic prospect of recovery .
Loan modifications and renegotiations that are not credit - impaired
When modification of a loan agreement occurs as a result of commercial restructuring activity rather than due to the credit risk of the borrower, an
assessment must be performed to determine whether the terms of the new agreement are substantially different from the terms of the existing
agreement. This assessment considers both the change in cash flows arising from the modified terms as well as the change in overall instrument
risk profile.
Where terms are substantially different, the existing loan will be derecognised and a new loan will be recognised at fair value, with any difference in
valuation recognised immediately within the income statement, subject to observability criteria.
Where terms are not substantially different, the loan carrying value will be adjusted to reflect the present value of modified cash flows discounted at
the original EIR, with any resulting gain or loss recognised immediately within the income statement as a modification gain or loss.
Expected life
Lifetime ECLs must be measure d over the expected life. This is restricted to the maximum contractual life and takes into account expected
prepayment, extension, call and similar options. The exceptions are certain revolver financial instruments, such as credit cards and bank overdraft s,
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. For revolvi ng facilities, expected life is analytically
derived to reflect behavioural life of the asset, i.e. the full period over which the business expects to be exposed to credit risk. Behavioural life is
typically based upon historical analysis of the average time to defa ult, closure or withdrawal of facility. Where data is insufficient or analysis
inconclusive, an additional ‘maturity factor’ may be incorporated to reflect the full estimated life of the exposures, based upon experienced
judgement and/or peer analysis. Pot ential future modifications of contracts are not taken into account when determining the expected life or EAD
until they occur.
Discounting
ECLs are discounted at the EIR at initial recognition or an approximation thereof and consistent with income recogn ition. For loan commitments the
EIR is the rate that is expected to apply when the loan is drawn down and a financial asset is recognised. Issued financial guarantee contracts are
discounted at the risk free rate. Lease receivables are discounted at the ra te implicit in the lease. For variable/floating rate financial assets, the spot
rate at the reporting date is used and projections of changes in the variable rate over the expected life are not made to estimate future interest cash
flows or for discounting .
Modelling techniques
ECLs are calculated by multiplying three main components, being the PD, LGD and the EAD, discounted at the original EIR. The regulatory Basel
Committee of Banking Supervisors (BCBS) ECL calculations are leveraged for IFRS 9 modellin g but adjusted for key differences which include:
◾
BCBS requires 12 month through the economic cycle losses whereas IFRS 9 requires 12 months 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;
◾
IFRS 9 models do not include certain conservative BCBS model floors and downturn assessments and require discounting to the reporting date at
the original EIR rather than using the cost of capital to the date of default;
◾
Management adjustments are 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; and
◾
ECL is measured at the individual financial instrument level, however a collective approach where financial instruments with similar risk
characteristics are grouped together, with apportionment to individual financial instruments, is used where effects can only be seen at a collective
Notes to the financial statements
Performance/return
Barclays Bank PLC 2019 Annual Report on Form 20-F 118
level, for example for forward - looking information.
For the IFRS 9 impairment assessment, the Barclays Bank Group’ risk models are used to determine the PD, LGD and EAD. For Stage 2 and 3, the
Barclays Bank Group applies lifetime PDs but uses 12 month PDs for Stage 1. The ECL drivers of PD, EAD and LGD are modelled at an account level
which considers vintage, among other credit factors. Also, the assessment of significant increase in credit risk is based on the initial lifetime PD
curve, which accounts for the different credit risk underwritten over time.
Forbearance
A financial asset is subject to forbearance when it is modified due to the credit distress of the borrower. A modification made to the terms of an
asset due to forbearance will typically be assessed as a non - substantial modification that does not result in derecognition of the original loan,
except in circumstances where debt is exchanged for equity.
Both performing and non -performing forbearance assets are classified as Stage 3 except where it is established that the concession granted has
not resulted in diminished financial obligation and that no other regulatory definitions of default criteria has been triggered, in which case the asset
is classified as Stage 2. The minimum probationary period for non - performing forbearance is 12 months and for performing forbearance, 24
months. Hence, a minimum of 36 months is required for non - performing forbearance to move out of a forborne state.
No financial instrument in forbearance can transfer back to Stage 1 until all of the Stage 2 thresholds are no longer met and can only move out of
Stage 3 when no longer credit impaired.
Accounting for the impairment of financial assets under IAS 39 for 2017
Loans and other assets held at amortised cost
In accordance with IAS 39, the Barclays Bank Group assesses at each balance sheet date whether there is objective evidence that loan assets 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 fro m the assets. These events include:
◾
◾
◾
◾
◾
◾
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 adju sting 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 on non - accrual loans.
Uncollectable loans are written off against the related allowance for loan impairment on completion of the Barclays Bank Group ’s internal processes
when all reasonably expected recoverable amounts have been collected. Subsequent recoveries of amounts previously written off are credited to
the income statement.
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 available for sale reserve is removed from res erves 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 available for sale reserve is removed from reserves and
recognised in the income statement.
Notes to the financial statements
Performance/return
Barclays Bank PLC 2019 Annual Report on Form 20-F 119
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
IFRS 9 impairment involves several important areas of judgement, including estimating forward looking modelled parameters (PD, LGD and EAD),
developing a range of unbiased future economic scenarios, estimating expected lives and assessing significant increases in credit risk, based on the
Barclays Bank Group’s experience of managing credit risk. The determination of expected life is most material for Barclays credit card portfolios
which is obtained via behavioural life analysis to materially capture the risk of these facilities. The behavioural life analysis for US Cards has been
updated during the year to include more recent portfolio data, as a consequence the expected life of the US credit card portfolio has fallen fr o m 10
years to 7 years. These reductions led to management adjustment releases against impairment of £28m for US Cards.
Within the retail and small businesses portfolios, which comprise large numbers of small homogenous assets with similar risk characteristics where
credit scoring techniques are generally used, the impairment allowance is calculated using forward looking modelled parameters which are
typically run at account level. There are many 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 conside red to be reasonable and supportable.
For individually significant assets in Stage 3, impairment allowances are calculated on an individual basis and all relevant considerations that have a
bearing on the expected future cash flows across a range of econo mic scenarios are taken into account. These considerations can be subjective
and can include the business prospects for the customer, the realisable value of collateral, the Barclays Bank Group’s position relative to other
claimants, the reliability of customer information and the likely cost and duration of the work - out process. The level of the impairment allowance is
the difference between the value of the discounted expected future cash flows (discounted at the loan’s original effective interest rate), and its
carrying amount. Furthermore, judgements change with time as new information becomes available or as work - out strategies evolve, resulting in
frequent revisions to the impairment allowance as individual decisions are taken. Changes in these estimates would result in a change in the
allowances and have a direct impact on the impairment charge.
2019
2018
2017
a
Impairment
Charges
Recoveries
b
Total
Impairment
Charges
Recoveries
b
Total
Impairment
Charges
Recoveries
b
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
Loans and advances
1,214
(73)
1,141
774
(86)
688
1,724
(188)
1,536
Provision for undrawn contractually
committed facilities and guarantees provided
55
-
55
(48)
-
(48)
14
-
14
Loans impairment
1,269
(73)
1,196
726
(86)
640
1,738
(188)
1,550
Cash collateral and settlement balances
1
-
1
(1)
-
(1)
-
-
-
Financial investments
-
-
-
-
-
-
3
-
3
Financial instruments at fair value through
OCI
-
-
-
4
-
4
-
-
-
Other financial assets measured at cost
5
-
5
-
-
-
-
-
-
Credit impairment charges
c
1,275
(73)
1,202
729
(86)
643
1,741
(188)
1,553
Notes
a 2017 numbers are pre sented on an IAS 39 basis .
b Cash recoveries of previously written off amounts
c Barclays Bank PLC transferred its UK banking business on 1 April 2018 to Barclays Bank UK PLC. Results relating to the UK banking business for the three months ended 31 March
2018 (Impairment charges : £217m and recoveries : £16m ) and for the twelve months ended 31 December 2017 (Impairment charges : £ 929m and recoveries : £1 46m) have been
reported as discontinued operations
Write-offs subject to enforcement activity
The contractual amount outstanding on financial assets that were written off during the period ended 31 December 201 9 and that are still subject
to enforcement activity is £1,119m (2018: £1,152 m). This is lower than the write- offs presented in the movement in gross exposures and
impairment allowance table due to assets sold during the year post write- offs and post write- off recoveries.
Mo dification of financial assets
Financial assets of £1,311m (2018: £784m) were subject to non - substantial modification during the period, with a resulting loss of £20 m (2018:
£19m). The gross carrying amount at 31 December 201 9 of financial assets for which the loss allowance has changed to a 12 month ECL during
the year amounts to £ 401 m (2018: £:114m) .
Notes to the financial statements
Performance/return
Barclays Bank PLC 2019 Annual Report on Form 20-F 120
8 Operating expenses
2019
2018
2017
£m
£m
£m
Infrastructure costs
Property and equipment
368
380
792
Depreciation and amortisation
a
457
395
637
Lease payments
a
7
158
248
Impairment of property, equipment and intangible assets
3
2
19
Total infrastructure costs
835
935
1,696
Administration and general costs
Consultancy, legal and professional fees
362
400
505
Marketing and advertising
258
316
292
UK bank levy
185
223
306
Other administration and general expenses
3,513
3,285
3,038
Total administration and general costs
4,318
4,224
4,141
Staff costs
4,565
4,874
4,393
Provisions for litigation and conduct
264
1,706
448
Operating expenses
9,982
11,739
10,678
Note
a With adoption of IFRS 16 from 1 January 2019, the depreciation charge associated with right of use assets is reported within the depreciation and amortisation charge for 2019.
For further details on staff costs including accounting policies, refer to Not e 30.
9 Tax
Accounting for income taxes
Barclays Bank Group applies IAS 12
Income Taxes
in accounting for taxes on income. Income tax payable on taxable profits (current tax) is
recognised as an expense in the periods 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 recoverab le by offsetting against taxable profits
arising in the current or prior periods. Current tax is measured using tax rates and tax laws that have been enacted or substantively enacted at the
balance sheet date.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except in certain circumstances where the deferred
tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a
business combination and, at the time of the transaction, affects neither the accounting profit nor taxable prof it or loss. 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 to set-off and an
intention to settle on a net basis.
Barclays Bank Group considers an uncertain tax position to exist when it considers that ultimately, in the future, the amount of pr ofit subject to tax
may be greater than the amount initially reflected in the Barclays Bank Group’s tax returns. The Barclays Bank Group accounts for provisions in
respect of uncertain tax positions in two different ways.
A current tax provision is recogn ised 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 Barclays Bank Group ultimately expects to pay the tax authorit y to resolve the position. Effective from 1 January 2019, the Barclays
Bank Group changed its accounting policy on the accrual of interest and penalty amounts in respect of unc ertain income tax positions and now
recognises such amounts as an expense within profit before tax and will continue to do so in future periods. The prior periods’ tax charges have not
been restated because the accrual for interest and penalties in those p eriods in respect of uncertain tax positions was not material.
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 pr obable 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. The Barclays Bank Gr oup’s measurement of provisions is based upon its best estimate of the additional profit
Notes to the financial statements
Performance/return
Barclays Bank PLC 2019 Annual Report on Form 20-F 121
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 revi ewed and resolved together, the Barclays Bank Group 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.
Critical accounting estimates and judgements
There are two key areas of judgement that impact the reported tax position. Firstly, the level of provisioning for uncertain tax positions; and
secondly, the recognition and measurement of deferred tax assets.
The Barc lays Bank Group does not consider there to be a significant risk of a material adjustment to the carrying amount of current and deferred
tax balances, including provisions for uncertain tax positions in the next financial year. The provisions for uncertai n tax positions cover a diverse
range of issues and reflect advice from external counsel where relevant. It should be noted that only a proportion of the total uncertain tax
positions will be under audit at any point in time, and could therefore be subjec t to challenge by a tax authority over the next year.
Deferred tax assets have been recognised based on business profit forecasts. Details on the recog nition of deferred tax assets are provided in this
note.
2019
2018
2017
£m
£m
£m
Current tax charge/(credit)
Current year
a
327
94
(489)
Adjustments in respect of prior years
(50)
(200)
44
277
(106)
(445)
Deferred tax charge/(credit)
Current year
157
372
1,862
Adjustments in respect of prior years
(102)
(37)
(65)
55
335
1,797
Tax charge
332
229
1,352
Note
a From 2019, due to an IAS 12 update, the tax relief on payments in relation to AT1 instruments has been recognised in the tax charge of the income statement, whereas it was
previously recorded in retained earnings. Comparatives have been restated, reducing the tax charge for 2018 by £175m and 2017 by £174m. Further detail can be found in Note 1.
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 Ba rclays Bank Group’s profit before tax.
Notes to the financial statements
Performance/return
Barclays Bank PLC 2019 Annual Report on Form 20-F 122
2019
2019
2018
2018
2017
2017
£m
%
£m
%
£m
%
Profit before tax from continuing operations
3,112
1,286
1,758
Tax charge based on the standard UK corporation tax rate of 19% (2018: 19%,
2017: 19.25%)
593
19.0%
244
19.0%
339
19.3%
Impact of profits/losses earned in territories with different statutory rates to the
UK (weighted average tax rate is 26% (2018: 27.1%, 2017: 38.2%))
217
7.0%
104
8.1%
333
18.9%
Recurring items:
Non - creditable taxes including withholding taxes
146
4.7%
156
12.1%
191
10.9%
Impact of UK bank levy being non - deductible
35
1.1%
42
3.3%
59
3.4%
Non - deductible expenses
34
1.1%
67
5.2%
76
4.3%
Impact of Barclays Bank PLC's overseas branches being taxed both locally and in
the UK
15
0.5%
16
1.2%
(61)
(3.5%)
Tax adjustments in respect of share - based payments
(7)
(0.2%)
11
0.9%
2
0.1%
Changes in recognition of deferred tax and effect of unrecognised tax losses
(85)
(2.7%)
(104)
(8.1%)
(72)
(4.1%)
Banking surcharge and other items
a
(103)
(3.3%)
(69)
(5.4%)
(108)
(6.1%)
AT1 tax credit
a
(121)
(3.9%)
(123)
(9.6%)
(123)
(7.0%)
Adjustments in respect of prior years
(152)
(4.9%)
(237)
(18.4%)
(21)
(1.2%)
Non - taxable gains and income
(240)
(7.7%)
(232)
(18.0%)
(191)
(10.9%)
Non - recurring items:
One off re - measurement of US deferred tax assets
-
-
-
-
1,177
67.0%
Impact of the UK branch exemption on deferred tax assets
-
-
-
-
(276)
(15.7%)
Non - deductible provisions for UK customer redress
-
-
8
0.6%
-
-
Non - deductible provisions for investigations and litigation
-
-
346
26.9%
66
3.8%
Non - taxable gains and income on divestments
-
-
-
-
(39)
(2.2%)
Total tax charge
332
10.7%
229
17.8%
1,352
76.9%
Note
a From 2019, due to an IAS 12 update, the tax relief on payments in relation to AT1 instruments has been recognised in the tax charge of the income statement, whereas it was
previously recorded in retained earnings. The tax charge for the current period has been reduced by £ 171m (relief at the standar d UK corporation tax rate is £121m and the relief
at the banking surcharge rate is £ 50m). Comparatives have been restated, reducing the tax charge for 2018 by £175m and 2017 by £174m (relief at the standard UK corporation
tax rate is £123m (2017 and 2018) and the relief at the banking surcharge rate is £52m (2018) and £51m (2017)). The table above has the AT1 tax credit for the current year and
prior periods split between the AT1 tax cr edit line and the banking surcharge line. Further detail can be found in Note 1.
Factors driving the effective tax rate
The effective tax rate of 10.7% is lower than the UK corporation tax rate of 19 % primarily due to the impact of non - taxable gains and income in the
period, adjustments in respect of prior periods and tax relief on payments made under AT1 instruments. These factors, which have each decreased
the effective tax rate, are partially offset by the impact of profits earned outside the UK being taxed at local statutory tax rates that are higher than
the UK tax rate and non - creditable taxes.
Effective from 1 January 2019, a change in accounting standards requires the tax consequences of all p ayments on financial instruments that are
classified as equity for accounting purposes, where those payments are considered to be a distribution of profit, to be included in the income
statement tax charge. Excluding this accounting change which resulted in tax relief on payments in relation to AT1 instruments of £ 171 m (2018:
£175m) being included in the income statement tax charge, the Barclays Bank Group’s effective tax rate would have been 16.2 % (2018: 31 .4%).
Barclays Bank Group’s future tax charge will be sensitive to the geographic mix of profits earned and the tax rates in force in the jurisdictions that
the Group operates in. In the UK, legislation to reduce the corporation tax rate to 17% from 1 April 2020 has been enacted. However, the UK
Gover nment has announced its intention to introduce legislation to reverse the planned rate reduction and to maintain the current rate of 19%.
Tax in other comprehensive income
Tax relating to each component of other comprehensive income on page 98 can be found in the consolidated statement of comprehensive income
which includes within Other a tax credit of £16m (2018: £27m credit) on other items including share based payments .
Tax in respect of discontinued operations
Tax relating to the discontinued operations can be found in the disposal groups income statement (see Note 39). The tax charge of £nil (2018:
£138m) relates to the profit from the ordinary activities of the discontinued operations.
Notes to the financial statements
Performance/return
Barclays Bank PLC 2019 Annual Report on Form 20-F 123
Current tax assets and liabilities
Movements on current assets and liabilities were as follows:
Barclays Bank Group
2019
2018
£m
£m
Assets
1,713
376
Liabilities
(621)
(494)
As at 1 January
1,092
(118)
Income statement from continuing operations
a
(277)
106
Income statement from discontinued UK banking business
-
(90)
Other comprehensive income and reserves
a
293
(7)
Corporate income tax (received)/paid
(894)
409
Transfer to Barclays Bank UK PLC
b
-
677
Other movements
364
115
578
1,092
Assets
898
1,713
Liabilities
(320)
(621)
As at 31 December
578
1,092
Note
a Due to the IAS 12 update impacting AT1 tax credits, the 2018 comparative has been restated to reflect the £175m tax credit in the income statement , whereas it was previously
recorded in retained earnings . Further detail can be found in Note 1.
b Related to the transfer of current tax liabilities to Barclays Bank UK PLC as part of the disposal of the UK banking business.
Deferred tax assets and
liabilities
The deferred tax amounts on the balance sheet were as follows:
Barclays Bank Group
2019
2018
£m
£m
Intermediate Holding Company ("IHC Tax Group")
1,037
1,454
US Branch Tax Group
1,015
1,087
UK Tax Group
-
3
Other
408
426
Deferred tax asset
2,460
2,970
Deferred tax liability - UK Tax Group
(80)
-
Net deferred tax
2,380
2,970
US deferred tax assets in the IHC and the US Branch
The deferred tax asset in the IHC Tax Group of £1,037m (2018: £1,454m) includes £54m (2018: £220m) relating to tax losses and the deferred tax
asset in Barclays Bank PLC’s US Branch Tax Group of £1,015m (2018: £1,087m) includes £84m (2018: £167m) relating to tax losses. Under US tax
rules, losses occurring prior to 1 January 2018 can be carried forward and offset against profits for a period of 20 years. The losses first arose in
2011 in the IHC Tax Group and 2008 in the US Branch Tax Group and therefore, any unused amounts may begin to expire in 2031 and 2028
respectively. The deferred tax assets for the IHC and the US Branch Tax Groups’ tax losses are currently projected to be fully utilised by 2020.
UK Tax Group deferred tax assets/liabilities
The deferred tax liability in the UK Tax Group of £ 80 m (2018: £3m deferred tax asset) includes a deferred tax asset o f £268m (2018: £nil) relating
to tax losses which is offset by a £348m deferred tax liability relating to temporary differences. There is no time limit on utilisation of UK tax losses
and business profit forecasts indicate these will be fully recovered.
Other deferred tax assets
The deferred tax asset of £408m (2018: £426m) in other entities within the Barclays Bank Group includes £117m (2018: £142m) relating to tax
losses. These deferred tax assets relate to a number of different territories and their recognition is based on profit forecasts or local country law
which indicate that it is probable that the losses and temporary differences will be utilised.
Notes to the financial statements
Performance/return
Barclays Bank PLC 2019 Annual Report on Form 20-F 124
Of the deferred tax asset of £408m (2018: £426m), an amount of £148m (2018: £245m) relates to entities which have suffered a loss in either the
current or prior year. This has been taken into acco unt in reaching the above conclusion that these deferred tax assets will be fully recovered in the
future.
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 to set-off
and an intention to settle on a net basis.
Barclays Bank Group
Fixed asset
timing
differences
Fair value
through other
comprehensiv
e income
Cash
flow
hedges
Retirement
benefit
obligations
Loan
impairment
allowance
Other
provisions
Tax
losses
carried
forward
Share based
payments
and
deferred
compensati
on
Other
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Assets
758
175
38
39
359
112
529
309
1,336
3,655
Liabilities
(16)
(35)
(2)
(434)
-
-
-
-
(198)
(685)
At 1 January 2019
742
140
36
(395)
359
112
529
309
1,138
2,970
Income statement
66
-
-
(5)
(55)
23
17
(7)
(94)
(55)
Other comprehensive
income and reserves
-
(46)
(175)
(205)
(10)
2
-
8
71
(355)
Other movements
(118)
(2)
-
(4)
(10)
(10)
(23)
(5)
(8)
(180)
690
92
(139)
(609)
284
127
523
305
1,107
2,380
Assets
719
110
-
31
284
127
523
305
1,329
3,428
Liabilities
(29)
(18)
(139)
(640)
-
-
-
-
(222)
(1,048)
At 31 December 2019
690
92
(139)
(609)
284
127
523
305
1,107
2,380
Assets
a
1,232
188
1
49
735
157
596
341
1,346
4,645
Liabilities
(28)
(143)
(69)
(218)
-
-
-
-
(208)
(666)
At 1 January 2018
a
1,204
45
(68)
(169)
735
157
596
341
1,138
3,979
Income statement from
continuing operations
61
(9)
-
(124)
(76)
(62)
(104)
(28)
7
(335)
Income statement from
discontinued UK banking
business
(48)
-
-
-
-
-
-
-
-
(48)
Other comprehensive
income and reserves
-
97
103
(98)
(18)
8
1
(10)
(8)
75
Transfer to Barclays Bank
UK PLC
b
(447)
-
-
-
(279)
-
-
-
(21)
(747)
Other movements
(28)
7
1
(4)
(3)
9
36
6
22
46
742
140
36
(395)
359
112
529
309
1,138
2,970
Assets
758
175
38
39
359
112
529
309
1,336
3,655
Liabilities
(16)
(35)
(2)
(434)
-
-
-
-
(198)
(685)
At 31 December 2018
742
140
36
(395)
359
112
529
309
1,138
2,970
Notes
a Due to the adoption of IFRS 9 and IFRS 15 on 1 January 2018, additional deferred tax assets of £627m were recognised.
b Related to the transfer of deferred tax assets to Barclays Bank UK PLC as part of the disposal of the UK banking business.
Unrecognised deferred tax
Tax losses and temporary differences
Deferred tax assets have not been recognised in respect of gross deductible temporary differences of £208m (2018: £1 7 4 m), unused tax credits of
£247m (2018: £203 m), and gross tax losses of £18,582m (2018: £16,313 m). The tax losses include capital losses of £2,980m (2018: £3,225 m). Of
these tax losses, £41m (2018: £240 m) expire within five years, £239m (2018: £259 m) expire within six to ten years, £5,178m (2018: £948 m)
expire w ithin 11 to 20 years and £13,124m (2018: £14,866 m) can be carried forward indefinitely. Deferred tax assets have not been recognised in
respect o f these items because it is not probable that future taxable profits and gains will be available against which they can be utilised.
Barclays Bank Group investments in subsidiaries, branches and associates
Deferred tax is not recognised in respect of the value of Barclays Bank Group's investments in subsidiaries, branches and associates where the
Barclays Bank 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. The aggregate amount of these temporary differences for which deferred tax liabilities have not been reco gnised
was £0.7bn (2018: £0.6 bn).
Notes to the financial statements
Performance/return
Barclays Bank PLC 2019 Annual Report on Form 20-F 125
10 Dividends on ordinary shares and other equity instruments
The 2019 financial statements include £233m (2018: £14,585m) of dividends paid. A half year dividend was paid of £233m (2018: £149m). There
was £nil final dividend paid in relation to the prior year (2018: £142m) or £nil dividend in specie paid (2018: £14 ,294m). These result in a total
dividend for the year of £0.10 (2018: £6.23) per ordinary share.
Dividends paid on preference shares amounted to £ 41 m (2018: £204m). Dividends paid on the 4.75% €100 preference shares amounted to
£ 409.44 per share (2018: £421.16). Dividends paid on the 6.278% US$100 preference shares amounted to £485.94 per share (2018: £446.17).
Dividends paid on the 8.125% US$0.25 preference shares amounted to £ nil per share (2018: £1.54).
Dividends paid on other equity instruments amo unted to £660m (2018: £647m). For further detail on other equity instruments, please refer to Note
27.
The Directors have approved a full year dividend in respect of 2019 of £263m, which will be paid on 25 March 2020. The financial statements for
the year ended 31 December 2019 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 2020. Dividends are funded out of distributable reserves
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 126
The notes included in this section focus on assets and liabilities the Barclays Bank 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- length transaction with a willing
counterparty, which may be an observable marke t price or, where there is no quoted price for the instrument, may be an estimate based on
available market data. Detail regarding the Barclays Bank Group ’s approach to managing market risk can be found on page 39.
11 Trading portfolio
Accounting for trading portfolio assets and liabilities
In accordance with IFRS 9, 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 net trading income (Note 5).
Barclays Bank Group
2019
2018
£m
£m
Debt securities and other eligible bills
51,881
57,134
Equity securities
56,000
39,565
Traded loans
5,378
7,234
Commodities
78
105
Trading portfolio assets
113,337
104,038
Debt securities and other eligible bills
(22,038)
(24,125)
Equity securities
(13,174)
(12,489)
Trading portfolio liabilities
(35,212)
(36,614)
12 Financial assets at fair value through the income statement
Accounting for financial assets mandatorily at fair value
Financial assets that are held for trading are recognised at fair value through profit or loss. In addition, financial assets are held at fair value through
profit or loss if they do not contain contractual terms that give rise on specified dates to cash flows that are SPPI, or if the financial asset is not held
in a business model that is either (i) a business model to collect the contractual cash flows or (ii) a business model that is achieved by both
collecting contractual cash flows and selling.
Accounting for financial assets designated at fair value
Financial assets, other than those held for trading, are classified in this category if they are so irrevocably designated at inception and the use of the
designation removes or significantly reduces an accounting mismatch.
Subsequent changes in fair value for these instruments are recognised in the income statement in net investment income, except if reporting it in
trading income reduces an accounting mismatch.
The details on how the fair value amounts are derived for financial assets at fair value are described in Note 16.
Barclays Bank Group
2019
2018
£m
£m
Loans and advances
1,333
1,387
Debt securities
3,995
3,855
Reverse repurchase agreements and other similar secured lending
40
106
Financial assets designated at fair value
5,368
5,348
Loans and advances
17,804
14,257
Debt securities
1,225
660
Equity securities
6,548
5,172
Reverse repurchase agreements and other similar secured lending
97,783
119,285
Other financial assets
742
528
Financial assets mandatorily at fair value
124,102
139,902
Total
129,470
145,250
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 127
Credit risk of financial assets 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 for loans and advances. The table does not include debt securities and reverse repurchase agreements
and other similar secured lending designated at FV as they have minimal exposure to credit risk. Reverse repurchase agreements are collateralised
and debt securities are primarily relating to high quality sovereigns.
Barclays Bank Group
Maximum exposure as at 31 December
Changes in fair value during the year
ended
Cumulative changes in fair value from
inception
2019
2018
2019
2018
2019
2018
£m
£m
£m
£m
£m
£m
Loans and advances designated at
fair value, attributable to credit risk
a
1,333
1,387
2
2
(5)
(8)
Note
a Loans and advances credit risk hedged by credit derivatives for Barclays Bank Group is £nil (2018: £nil) and for Barclays Bank PLC is £nil (2018: £nil)
13 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 Barclays Bank
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. Derivatives are used to hedge interest rate, credit risk, inflation risk, 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
All derivative instruments are held at fair value through profit or loss, except for derivatives that are in a designated cash flow or net investment
hedge accounting relationship. 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 financial liability (the ho st), which, had it been a standalone 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 an d the combined instrument is not measured at fair value through profit or loss, then they are accounted for in the
same way as derivatives. For financial assets, the requirements are whether the financial asset contain contractual terms that give rise on specified
dates to cash flows that are SPPI, and consequently the requirements for accounting for embedded derivatives are not applicable to financial
assets.
Hedge accounting
The Barclays Bank Group applies the requirements of IAS 39
Financial Instruments: Recognition and Measurement
The Barclays Bank Group applies hedge accounting to represent , the economic effects of its interest rate, currency and contractually linked inflation
risk management strategies. Where derivative s are held for risk management purposes, and when transactions meet the required criteria for
documentation and hedge effectiveness, the Barclays Bank 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.
The Barclays Bank Group has elected to early adopt the ‘Amendments to IAS 39 and IFRS 7 Interest Rate Benchmark Reform’ issued in September
2019. In accordance with the transition provisions, the amendments have been adopted retrospectively to hedging relationships that existed at the
start of the reporting period or were designated thereafter, and to the amount accumulated in the cash flow hedge reserve at that date.
The amendments provide temporary relief from applying specific hedge accounting requirements to hedging relation ships directly affected by IBOR
(‘Interbank Offered Rates’) reform. The reliefs have the effect that IBOR reform should not generally cause hedge accounting to terminate.
However, any hedge ineffectiveness continues to be recorded in the income statement. Furthermore, the amendments set out triggers for when the
reliefs will end, which include the uncertainty arising from interest rate benchmark reform no longer being present.
In summary, the reliefs provided by the amendments that apply to the Barclays Ba nk Group are:
◾
When considering the ‘highly probable’ requirement, the Barclays Bank Group has assumed that the IBOR interest rates upon which our hedged
items are based do not change as a result of IBOR Reform.
◾
In assessing whether the hedge is expected to be highly effective on a forward - looking basis the Barclays Bank Group has assumed that the IBOR
interest rates upon which the cash flows of the hedged items and the interest rate swaps that hedge them are based are not altered by IBOR
reform.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 128
◾
The Barclays Bank Group will not discontinue hedge accounting during the period o f IBOR - related uncertainty solely because the retrospective
effectiveness falls outside the required 80 –125% range.
◾
The Barclays Bank Group has not recycled the cash flow hedge reserve relating to the period after the reforms are expected to take effect.
◾
The Barclays Bank Group has assessed whether the hedged IBOR risk component is a separately identifiable risk only when it first designates a
hedged item in a fair value hedge and not on an ongoing basis.
Further amendments are expected for future accounting periods following completion of the second part of the IASB’s two - phased project which
focuses on the impacts of IBOR reform on financial reporting.
Fair value hedge accounting
Changes in fair value of derivatives that q ualify 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 amort ised 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 incom e statement. For items classified as fair value through other comprehensive income, the hedge accounting adjustment is
included in other comprehensive income.
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 o r 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 cumulativ e 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 recog nised in equity is immediately transferred to the
income statement.
Hedges of net investments
The Barclays Bank Group’s net investments in foreign operations, including monetary items accounted for as part of the net investment, are hedged
for foreign cu rrency 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 compre hensive 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 o peration, or other reductions in the Barclays Bank Group’s
investment in the operation.
Barclays Bank Group
Notional contract amount
Fair value
Assets
Liabilities
£m
£m
£m
As at 31 December 2019
Total derivative assets/(liabilities) held for trading
41,778,195
229,459
(228,338)
Total derivative assets/(liabilities) held for risk management
109,762
182
(602)
Derivative assets/(liabilities)
41,887,957
229,641
(228,940)
As at 31 December 2018
Total derivative assets/(liabilities) held for trading
43,920,658
222,522
(219,527)
Total derivative assets/(liabilities) held for risk management
116,441
161
(65)
Derivative assets/(liabilities)
44,037,099
222,683
(219,592)
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 129
Further information on netting arrangements of derivative financial instruments can be found within Note 17.
The fair values and notional amounts of derivatives held for trading are set out in the following table:
Derivatives held for trading and risk management
Barclays Bank Group
Notional contract amount
Fair value
Assets
Liabilities
£m
£m
£m
Derivatives held for trading
As at 31 December 2019
Foreign exchange derivatives
OTC derivatives
4,910,084
56,535
(56,793)
Derivatives cleared by central counterparty
74,136
84
(145)
Exchange traded derivatives
18,520
12
(31)
Foreign exchange derivatives
5,002,740
56,631
(56,969)
Interest rate derivatives
OTC derivatives
12,631,723
140,553
(133,408)
Derivatives cleared by central counterparty
17,088,755
862
(859)
Exchange traded derivatives
5,041,948
1,251
(1,265)
Interest rate derivatives
34,762,426
142,666
(135,532)
Credit derivatives
OTC derivatives
399,386
5,253
(5,399)
Derivatives cleared by central counterparty
426,130
2,962
(2,687)
Credit derivatives
825,516
8,215
(8,086)
Equity and stock index derivatives
OTC derivatives
232,050
10,628
(15,785)
Exchange traded derivatives
841,994
10,178
(10,849)
Equity and stock index derivatives
1,074,044
20,806
(26,634)
Commodity derivatives
OTC derivatives
7,327
303
(256)
Exchange traded derivatives
106,142
838
(861)
Commodity derivatives
113,469
1,141
(1,117)
Derivatives with subsidiaries
-
-
-
Derivative assets/(liabilities) held for trading
41,778,195
229,459
(228,338)
Total OTC derivatives held for trading
18,180,570
213,272
(211,641)
Total derivatives cleared by central counterparty held for
trading
17,589,021
3,908
(3,691)
Total exchange traded derivatives held for trading
6,008,604
12,279
(13,006)
Derivatives with subsidiaries held for trading
Derivative assets/(liabilities) held for trading
41,778,195
229,459
(228,338)
Derivatives held for risk management
Derivatives designated as cash flow hedges
Interest rate swaps
2,085
28
(1)
Interest rate derivatives cleared by central counterparty
43,594
-
-
Derivatives designated as cash flow hedges
45,679
28
(1)
Derivatives designated as fair value hedges
Interest rate swaps
7,619
124
(601)
Forward foreign exchange
-
-
-
Interest rate derivatives cleared by central counterparty
55,319
-
-
Derivatives designated as fair value hedges
62,938
124
(601)
Derivatives designated as hedges of net investments
Forward foreign exchange
1,145
30
-
Foreign exchange derivatives cleared by central
counterparty
-
-
-
Derivatives designated as hedges of net investments
1,145
30
-
Derivative assets/(liabilities) held for risk management
109,762
182
(602)
Total OTC derivatives held for risk management
10,849
182
(602)
Total derivatives cleared by central counterparty held for risk
management
98,913
-
-
Derivative assets/(liabilities) held for risk management
109,762
182
(602)
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 130
Derivatives held for trading and risk management
Barclays Bank Group
Notional contract amount
Fair value
Assets
Liabilities
£m
£m
£m
Derivatives held for trading
As at 31 December 2018
Foreign exchange derivatives
OTC derivatives
5,200,824
63,982
(63,832)
Derivatives cleared by central counterparty
72,526
163
(233)
Exchange traded derivatives
23,585
7
(7)
Foreign exchange derivatives
5,296,935
64,152
(64,072)
Interest rate derivatives
OTC derivatives
9,978,858
123,962
(119,295)
Derivatives cleared by central counterparty
15,794,162
974
(1,014)
Exchange traded derivatives
11,087,714
356
(323)
Interest rate derivatives
36,860,734
125,292
(120,632)
Credit derivatives
OTC derivatives
386,508
6,575
(5,239)
Derivatives cleared by central counterparty
372,567
4,180
(4,280)
Credit derivatives
759,075
10,755
(9,519)
Equity and stock index derivatives
OTC derivatives
190,496
9,711
(11,830)
Exchange traded derivatives
692,435
11,171
(12,066)
Equity and stock index derivatives
882,931
20,882
(23,896)
Commodity derivatives
OTC derivatives
9,756
521
(408)
Exchange traded derivatives
111,227
920
(1,000)
Commodity derivatives
120,983
1,441
(1,408)
Derivatives with subsidiaries
-
-
-
Derivative assets/(liabilities) held for trading
43,920,658
222,522
(219,527)
Total OTC derivatives held for trading
15,766,442
204,751
(200,604)
Total derivatives cleared by central counterparty held for trading
16,239,255
5,317
(5,527)
Total exchange traded derivatives held for trading
11,914,961
12,454
(13,396)
Derivatives with subsidiaries held for trading
-
-
-
Derivative assets/(liabilities) held for trading
43,920,658
222,522
(219,527)
Derivatives held for risk management
Derivatives designated as cash flow hedges
OTC interest rate derivatives
2,622
18
(7)
Interest rate derivatives cleared by central counterparty
45,995
-
-
Derivatives designated as cash flow hedges
48,617
18
(7)
Derivatives designated as fair value hedges
OTC interest rate derivatives
2,598
143
(48)
Interest rate derivatives cleared by central counterparty
62,258
-
-
Derivatives designated as fair value hedges
64,856
143
(48)
Derivatives designated as hedges of net investments
OTC foreign exchange derivatives
2,968
-
(10)
Derivatives designated as hedges of net investment
2,968
-
(10)
Derivative assets/(liabilities) held for risk management
116,441
161
(65)
Total OTC derivatives held for risk management
8,188
161
(65)
Total derivatives cleared by central counterparty held for risk
management
108,253
-
-
Derivative assets/(liabilities) held for risk management
116,441
161
(65)
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 131
Hedge accounting
Hedge accounting is applied predominantly for the following risks:
◾
Interest rate risk – arises due to a mismatch between fixed interest rates and floating interest rates. Interest rate risk also includes exposure to
inflation risk for certain types of investments.
◾
Currency risk – arises due to assets or liabilities being denominated in different currencies than the functiona l currency of the relevant entity. At a
consolidated level, currency risk also arises when the functional currency of subsidiaries are different from the parent.
◾
Contractually linked inflation risk – arises from financial instruments within contractually specified inflation risk. The Barclays Bank Group does
not hedge inflation risk that arises from other activities.
In order to hedge these risks, the Barclays Bank Group uses the following hedging instruments:
◾
Interest rate derivatives to swap interest rat e exposures into either fixed or variable rates.
◾
Currency derivatives to swap foreign currency net investment exposure to local currency.
◾
Inflation derivatives to swap inflation exposure into either fixed or variable interest rates.
In some cases, certain items which are economically hedged may be ineligible hedged items for the purposes of IAS 39, such as core deposits and
equity. In these instances, a proxy hedging solution can be utilised whereby portfolios of floating rate assets are designated as eligible hedged items
in cash flow hedges.
In some hedging relationships, the Barclays Bank Group designates risk components of hedged items as follows:
◾
Benchmark interest rate risk as a component of interest rate risk, such as the LIBOR or Risk Free Rate (RFR) component.
◾
Inflation risk as a contractually specified component of a debt instrument.
◾
Spot exchange rate risk for foreign currency financial assets or financial liabilities.
◾
Components of cash flows of hedged items, for example ce rtain interest payments for part of the life of an instrument.
Using the benchmark interest rate risk results in other risks, such as credit risk and liquidity risk, being excluded from the hedge accounting
relationship. LIBOR is considered the predominan t interest rate risk and therefore the hedged items change in fair value on a fully proportionate
basis with reference to this risk.
In respect of many of the Barclays Bank Group’s hedge accounting relationships, the hedged item and hedging instrument change frequently due
to the dynamic nature of the risk management and hedge accounting strategy. The Barclays Bank Group applies hedge acc ounting to dynamic
scenarios, predominantly in relation to interest rate risk, with a combination of hedged items in order for its financial statements to reflect as closely
as possible the economic risk management undertaken. In some cases, if the hedge accounting objective changes, the relevant hedge accounting
relationship is de - designated and is replaced with a different hedge accounting relationship.
Changes in the GBP value of net investments due to foreign currency movements are captured in the curr ency translation reserve, resulting in a
movement in CET1 capital. The Barclays Bank Group mitigates this by matching the CET1 capital movements to the revaluation of the foreign
currency RWA exposures. Net investment hedges are designated where necessary to reduce the exposure to movement in a particular exchange
rate to within limits mandated by Risk. As far as possible, existing external currency liabilities are designated as the hedging instruments.
The hedging instruments share the same risk exposures as the hedged items. Hedge effectiveness is determined with reference to quantitative
tests, predominantly regression testing, but to the extent hedging instruments are exposed to different risks than the hedged items, this could
result in hedge ineffectiveness or hedge accounting failures.
Sources of ineffectiveness include the following:
◾
Mismatches between the contractual terms of the hedged item and hedging instrument, including basis differences.
◾
Changes in credit risk of the hedging instruments.
◾
If a hedging relationship becomes over - hedged, for example in hedges of net investments if the net asset value designated at the start of the
period falls below the amount of the hedging instrument.
◾
Cash flow hedges using external swaps with non - zero fair valu es.
◾
The effects of the forthcoming reforms to IBOR , because these might take effect at a different time and have a different impact on hedged items
and hedging instruments
Across all benchmarks which Barclays is materially exposed to, there is still uncertainty regarding the precise timing and effects of IBOR reform.
There is yet to be full consensus regarding methodologies for converging existing IBORs to their final benchmark rates. As such, Barclays has not
incorporated any change in assumptions fo r affected benchmarks into its expectations or calculations. Barclays does, however, assume sufficient
liquidity in IBOR linked benchmarks to provide reliable valuation calculations of both hedged items and hedging instruments (notwithstanding
reliefs alre ady applied within the financial reporting).
Interest Rate Benchmark Reform
Following the financial crisis, the reform and replacement of benchmark interest rates such as IBOR has become a priority for global regulators.
Since the changes are market driven, there is currently some uncertainty around the timing and precise nature of these changes.
The Barclays Bank Group’s r isk exposure is directly affected by interest rate benchmark reform, across both its cash flow hedge accounting
activities; where IBOR - linked derivatives are designated as a cash flow hedge of IBOR - linked cash flows, and its fair value hedge accounting
activities; where IBOR - linked derivatives are designated as a fair value hedge of fixed interest rate assets and liabilities.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 132
The Barclays Bank Group’s risk exposure is predominately to GBP, USD, EUR, JPY and AUD LIBOR with the vast majority concentrated in derivatives
within the Corporate and Investment Bank. Some additional exposure resides on floating rate loans and advances and debt securities held and
issued within the Corporate and Investment Bank.
Approaches to transition will vary product by product, and counterparty by counterparty.
Barclays expected derivative contracts facing central clearing counterparties to follow a market - wide, standardised approach to reform. Whereas
bilateral derivative agreements, loan agreements and other cash securities to largely be negotiated bilaterally with the counterparty.
There are key differences between IBORs and RFRs. IBORs are ‘term rates’, which means that they are published for a borrowing period (for
example three months), and they are ‘forward - looking’, because they are published at the beginning of a borrowing period, based upon an
estimated inter - bank borrowing cost for the period. RFRs are typically ‘backward - looking’ rates, as they are based upon overnight rates from actual
transactions, and are there fore published at the end of the overnight borrowing period. Furthermore, IBORs include a credit spread over the RFR.
Therefore, to transition existing contracts and agreements to RFR, adjustments for term and credit differences may need to be applied to RFR-
linked rates to enable the two benchmarks to be economically equivalent upon transition. The methodologies for determining these adjustments
are undergoing in- depth consultations by industry working groups, on behalf of the respective global regulators and related market participants.
Barclays has established a Group - wide LIBOR Transition Programme, with oversight from the Barclays Group Finance Director and with cross-
business line and functions - support governance. The Transition Programme follows a ri sk management approach, based upon recognised ‘change
delivery’ control standards, to drive strategic execution, and identify, manage and resolve key risks and issues as they arise. Accountable Executives
are in place within key working groups, with overal l Board oversight delegated to the Barclays PLC Board Risk Committee and the Barclays PLC
Group Finance Director. Barclays performs a prominent stewardship role to drive orderly transition via our representation on official sector and
industry working grou ps across all major jurisdictions and product classes. The Barclays Bank Group is actively engaging with the counterparties to
include appropriate fallback provisions in its floating rate assets and liabilities with maturities after 2021, when most IBORs are expected to cease to
exist. We expect that the hedging instruments will be modified by the amendments to the 2006 ISDA definitions that will include fallback provisions
for when the existing IBORs are permanently discontinued. Additionally, the Barclays Group Finance Director is Chair of the UK’s ‘Working Group on
Sterling Risk-Free Reference Rates’, whose mandate is to catalyse a broad - based transition to using SONIA (‘Sterling Overnight Index Average’) as
the primary sterling interest rate benchmark in bond, loan and derivatives markets. Further, hedge accounting specific impacts of IBOR reform are
expected as transition progresses, with impact on financial reporting becoming clearer following anticipated completion of Phase 2 of the IASB’s
IBOR Reform project.
The following table summarises the significant hedge accounting exposures impacted by the IBOR reform as at 31 December 2019:
Barclays Bank Group
Nominal amount
of hedged items
directly impacted
by IBOR reform
Nominal amount
of hedging
instruments
directly impacted
by IBOR reform
Current benchmark rate
Expected convergence to RFR
£m
£m
GBP London Interbank Offered rate (LIBOR)
Reformed Sterling Overnight Index Average (SONIA)
23,911
24,339
USD LIBOR / Effective Federal Funds Rate (EFFR)
Secured Overnight Financing Rate (SOFR)
38,667
37,911
JPY LIBOR
Tokyo Overnight Average (TONA)
1,567
1,511
AUD LIBOR
Bank Bill Swap Rate (BBSW) / Overnight Cash Rate (AONIA)
1,183
1,183
All Other IBORs
Various Other RFRs
1,281
1,102
Total IBOR Notionals
66,609
66,046
The Barclays Bank Group ’s exposure risk management also includes the use of the Euro Interbank Offered Rate (‘EURIBOR’). The calculation
methodology of EURIBOR changed during 2019. In July 2019, the Belgian Financial Services and Markets Authority granted authorisation with
respect to EURIBOR under the European Union Benchmarks Regulation. This allows market participants to continue to use EURIBOR after 1 January
2020 for both existing and new contracts. The Barclays Bank Group expects that EURIBOR will continue to exist as a benchmark rate for the
foreseeable future. The Barclays Bank Group does not anticipate changing the hedged risk to a different benchmark. For these reasons, the Barclays
Bank Group does not consider its fair v alue or cash flow hedges of the EURIBOR benchmark interest rate to be directly affected by interest rate
benchmark reform at 31 December 2019.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 133
Amount, timing and uncertainty of future cash flows
The following table shows the hedging instruments which are carried on the Barclays Bank ’s balance sheet:
Barclays Bank Group
Carrying value
Nominal amount
Change in fair
value used as a
basis to
determine
ineffectiveness
Nominal amount
directly impacted
by IBOR reform
Derivative assets
Derivative
liabilities
Loan liabilities
Hedge type
Risk category
£m
£m
£m
£m
£m
£m
As at 31 December 2019
Fair value
Interest rate risk
111
(104)
-
55,691
(786)
33,805
Inflation risk
13
(497)
-
7,247
(92)
5,345
Cash flow
Interest rate risk
24
(1)
-
44,421
816
26,896
Inflation risk
4
-
-
1,258
31
-
Net investment
Foreign exchange risk
30
-
(8,076)
9,221
(282)
-
Total Hedging
Instruments
182
(602)
(8,076)
117,838
(313)
66,046
As at 31 December 2018
Fair value
Interest rate risk
125
(44)
-
61,331
(329)
n/a
Inflation risk
18
(4)
-
3,525
29
n/a
Cash flow
Interest rate risk
18
(7)
-
48,617
(248)
n/a
Net investment
Foreign exchange risk
-
(10)
(12,332)
15,300
(745)
n/a
Total Hedging
Instruments
161
(65)
(12,332)
128,773
(1,293)
n/a
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 134
The followi ng table shows the hedged items effect on the Barclays Bank:
Hedged items in fair value hedges
Barclays Bank Group
Accumulated fair value adjustment
included in carrying amount
Carrying amount
Total
Of which:
Accumulated fair
value adjustment
on items no
longer in a hedge
relationship
Change in fair
value used as a
basis to
determine
ineffectiveness
Hedge
ineffectiveness
recognised in the
income
statement
a
Hedged item statement of financial position classification and risk category
£m
£m
£m
£m
£m
2019
Assets
Loans and advances at amortised cost
- Interest rate risk
1,083
91
24
36
(1)
- Inflation risk
525
325
-
3
-
Financial assets at fair value through other comprehensive
income
- Interest rate risk
21,243
734
467
1,699
(15)
- Inflation risk
7,146
94
-
118
(13)
Debt securities classified as amortised cost
- Interest rate risk
600
-
-
-
-
- Inflation risk
2,258
(41)
-
(41)
1
Liabilities
Debt securities in issue
- Interest rate risk
(32,304)
(782)
(460)
(938)
27
Total Hedged Items
551
421
31
877
(1)
2018
Assets
Loans and advances at amortised cost
- Interest rate risk
924
63
54
(236)
(84)
- Inflation risk
512
312
-
2
(1)
Financial assets at fair value through other comprehensive
income
- Interest rate risk
26,340
392
-
(75)
20
- Inflation risk
2,907
(21)
-
(50)
(18)
Liabilities
Debt securities in issue
- Interest rate risk
(32,508)
(295)
(317)
590
14
Total Hedged Items
(1,825)
451
(263)
231
(69)
Note
a Hedge ineffectiveness is recognised in net interest income.
For items classified as fair value through other comprehensive income , the hedge accounting adjustment is not included in the carrying amount,
but rather adjusts other comprehensive income .
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 135
Hedged items in cash flow hedges and hedges of net investments in foreign operations
Barclays Bank Group
Change in value
of hedged item
used as the
basis for
recognising
ineffectiveness
Balance in
cash flow
hedging
reserve for
continuing
hedges
Balance in
currency
translation
reserve for
continuing
hedges
Balances
remaining in cash
flow hedging
reserve for which
hedge accounting
is no longer
applied
Balances
remaining in
currency
translation
reserve for which
hedge accounting
is no longer
applied
Hedging gains
or losses
recognised in
other
comprehensiv
e income
Hedge
ineffectivenes
s recognised
in the income
statement
a
Description of hedge relationship and hedged risk
£m
£m
£m
£m
£m
£m
£m
2019
Cash flow hedge of interest rate risk
Loans and advances at amortised cost
(826)
(142)
-
(366)
-
(802)
(10)
Cash flow hedge of inflation risk
Debt securities classified as amortised cost
(28)
(26)
-
-
-
(26)
3
Total cash flow hedges
(854)
(168)
-
(366)
-
(828)
(7)
Hedge of net investment in foreign
operations
USD foreign operations
209
-
1,092
-
-
209
-
EUR foreign operations
70
-
(1)
-
15
70
-
Other foreign operations
3
-
1
-
217
3
-
Total foreign operations
282
-
1,092
-
232
282
-
2018
Cash flow hedge of interest rate risk
Loans and advances at amortised cost
191
61
-
88
-
189
(57)
Total cash flow hedges
191
61
-
88
-
189
(57)
Hedge of net investment in foreign
operations
USD foreign operations
719
-
1,646
-
-
719
-
EUR foreign operations
-
-
-
-
86
-
-
Other foreign operations
25
-
(3)
-
239
25
(1)
Total foreign operations
744
-
1,643
-
325
744
(1)
Note
a Hedge ineffectiveness is recognised in net interest income.
The following table profiles the expected notional values of current hedging instruments for fair value hedging in future years:
2020
2021
2022
2023
2024
2025 and later
As at 31 December 2019
£m
£m
£m
£m
£m
£m
Barclays Bank Group
Fair value hedges of interest rate risk
Notional amount
52,734
42,100
34,228
28,698
22,077
19,754
Fair value hedges of inflation risk
Notional amount
6,360
5,204
4,495
3,524
3,021
2,009
For Barclays Bank Group, there are 876 (2018: 975) interest rate risk fair value hedges with an average fixed rate of 1.6% (2018: 2.3%) across the
relationships and 82 (2018: 44) inflation risk fair value hedges with an average rate of 0.8% (2018: 1.0%) across the relatio nships.
The Barclays Bank 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:
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 136
To tal
Up to one
year
One
to two years
Two
to three years
Three to four
years
Four
to five years
More than
five years
£m
£m
£m
£m
£m
£m
£m
2019
Barclays Bank Group
Forecast receivable cash flows
1,870
365
335
320
309
259
282
2018
Barclays Bank Group
Forecast receivable cash flows
2,526
562
592
477
356
255
284
The maximum length of time over which the Barclays Bank 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 (2018 : 10 years).
The effect on the income statement and other comprehensive income of recycling amounts in respect of cash flow hedges and net investment
hedges of foreign operations is set out in the following table:
Barclays Bank Group
2019
2018
Amount recycled from
other comprehensive
income due to hedged item
affecting income statement
Amount recycled from
other comprehensive
income due to sale or
disposal of investment
Amount recycled from other
comprehensive income due
to hedged item affecting
income statement
Amount recycled from other
comprehensive income due
to sale or disposal of
investment
Description of hedge relationship and hedged risk
£m
£m
£m
£m
Cash flow hedge of interest rate risk
Recycled to interest income
105
36
213
-
Hedge of net investment in foreign operations
Recycled to other income
-
(15)
-
(41)
A detailed reconciliation of the movements of the cash flow hedging reserve and the currency translation reserve is as follows:
2019
2018
Cash flow hedging
reserve
Currency
translation
reserve
Cash flow hedging
reserve
Currency
translation reserve
£m
£m
£m
£m
Barclays Bank Group
Balance on 1 January
(123)
3,928
184
3,084
Currency translation movements
(5)
(771)
(8)
803
Hedging gains/(losses) for the year
828
240
(189)
-
Amounts reclassified in relation to cash flows affecting profit or loss
(141)
(15)
(213)
41
Tax
(171)
-
103
-
Balance on 31 December
388
3,382
(123)
3,928
14 Financial assets at fair value through other comprehensive income
Accounting for financial assets at fair value through other comprehensive income (‘FVOCI’) under IFRS 9 effective from 1 January 2018
Financial assets that are debt instruments held in a business model that is achieved by both collecting contractual cash flows and selling and that
contain contractual terms that give rise on specified dates to cash flows that are SPPI are measured at FVOCI. They are subsequently re - measured
at fair value and changes therein (except for those relating to impairment, interest income and foreign currency exchange gains and losses) are
recognised in other comprehensi ve income until the assets are sold. Interest (calculated using the effective interest method) is recognised in the
income statement in net interest income (Note 3). Upon disposal, the cumulative gain or loss recognised in other comprehensive income is
inc luded in net investment income.
In determining whether the business model is achieved by both collecting contractual cash flows and selling financial assets, it is determined that
both collecting contractual cash flows and selling financial assets are integral to achieving the objective of the business model. The Barclays Bank
Group will consider past sales and expectations about future sales to establish if the business model is achieved .
For equity securities that are not held for trading, the Barclays Bank Group may make an irrevocable election on initial recognition to present
subsequent changes in the fair value of the instrument in other comprehensive income (except for dividend income which is recognised in profit or
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 137
loss). Gains or losses on the de - recognition of these equity securities are not transferred to profit or loss. These assets are also not subject to the
impairment requirements and therefore no amounts are recycled to the income statement. Where the Barclays Bank Group has not ma de the
irrevocable election to present subsequent changes in the fair value of the instrument in other comprehensive income, equity securities are
measured at fair value through profit or loss.
Accounting for financial investments under IAS 39 for 2017
Available for sale financial assets are held at fair value with gains and losses being included in other comprehensive income. The Barclays Bank
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 net interest income or, net investment income. 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 amort ised cost. The Barclays Bank 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.
Barclays Bank Group
2019
2018
£m
£m
Debt securities and other eligible bills
44,781
44,315
Equity securities
1
11
Loans and advances
624
668
Financial assets at fair value through other comprehensive income
45,406
44,994
15 Financial liabilities designated at fair value
Accounting for liabilities designated at fair value through profit and loss
In accordance with IFRS 9, financial liabilities may be designated at fair value, with gains and losses taken to the income statement within net
trading income (Note 5) and net inv estment income (Note 6).
Movements in own credit are reported thro ugh other comprehensive income, unless
the effects of changes in the liability's credit risk would creat e or enlarge an accounting mismatch in profit and loss. In these scenarios, all gains and
losses on that liability (including the effects of changes in the credit risk of the liability) are presented in profit and loss. On derecognition of the
financial liability no amount relating to own credit risk are recycled to the income statement. Th e Barclays Bank 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 Barclays Bank Gro up on the basis of its fair value, or includes terms that have substantive derivative
characteristics (Note 13).
The details on how the fair value amounts are arrived for financial liabilities designated at fair value are described in Note 16.
Barclays Bank Group
2019
2018
Fair value
Contractual
amount due
on maturity
Fair value
Contractual
amount due
on maturity
£m
£m
£m
£m
Debt securities
49,559
56,891
46,649
54,159
Deposits
25,526
25,725
31,706
32,053
Repurchase agreements and other similar secured borrowing
128,686
128,845
139,386
139,626
Other financial liabilities
675
675
-
-
Financial liabilities designated at fair value
204,446
212,136
217,741
225,838
The cumulative own credit net loss recognis ed for Barclays Bank Group is £ 373 m ( 2018: £121m).
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 138
16 Fair value of financial instruments
Accounting for financial assets and liabilities – fair values
Financial instruments that are held for trading are recognised at fair value through profit or loss. In addition, financial assets are held at fair value
through profit or loss if they do not contain contractual terms that give rise on specified dates to cash flows that are SPPI, or if the financial asset is
not held in a business model that is either (i) a business model to collect the contractual cash flows or (ii) a business model that is achieved by both
collecting contractual cash flows and selling. Subsequent changes in fair value for these instruments are recognised in the income statement in net
investment income, except if reporting it in trading income reduces an accounting mismatch.
All financial instruments are initially recognised at fair value on the date of initial recognition (including transaction costs, other than financial
instruments held at fair va lue through profit or loss) and depending on the subsequent classification of the financial 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 Barclays Bank 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 sourced market inputs including, for example, interest rate yield curves, equities and commodities prices,
option volatilities and currency rates.
For financial liabilities measured at fair value, the carrying amount reflects the effect on fair value of changes in own credit spreads derived from
observable market data such as in primary issuance and redemption activity for structured notes.
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 unob servable 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 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 inclu de
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, dependent on the significance of the unobservable input to the
overall valuation. Unobservable inputs are determined based on the b est 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 147 .
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 13
Fair value measurement
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 wh ere 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 ba sis.
Valuation technique using observable inputs – Level 2
Assets and liabilities classified as Level 2 have been valued using models whose inputs are observable 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.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 139
The following table shows Barclays Bank 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
2019
2018
Valuation technique using
Valuation technique using
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Barclays Bank Group
£m
£m
£m
£m
£m
£m
£m
£m
Trading portfolio assets
59,968
51,105
2,264
113,337
51,029
49,396
3,613
104,038
Financial assets at fair value through the
income statement
10,300
115,008
4,162
129,470
8,918
131,682
4,650
145,250
Derivative financial assets
5,439
221,048
3,154
229,641
6,813
210,655
5,215
222,683
Financial assets at fair value through other
comprehensive income
11,577
33,400
429
45,406
15,751
28,888
355
44,994
Investment property
-
-
13
13
-
-
9
9
Total assets
87,284
420,561
10,022
517,867
82,511
420,621
13,842
516,974
Trading portfolio liabilities
(19,645)
(15,567)
-
(35,212)
(19,401)
(17,210)
(3)
(36,614)
Financial liabilities designated at fair value
(82)
(204,021)
(343)
(204,446)
(76)
(217,404)
(261)
(217,741)
Derivative financial liabilities
(5,305)
(219,646)
(3,989)
(228,940)
(6,152)
(208,697)
(4,743)
(219,592)
Total liabilities
(25,032)
(439,234)
(4,332)
(468,598)
(25,629)
(443,311)
(5,007)
(473,947)
The following table shows Barclays Bank Group’s Level 3 assets and liabilities that are held at fair value disaggregated by product type:
Level 3 Assets and liabilities held at fair value by product type
2019
2018
Assets
Liabilities
Assets
Liabilities
Barclays Bank Group
£m
£m
£m
£m
Interest rate derivatives
605
(812)
2,478
(2,456)
Foreign exchange derivatives
291
(298)
192
(185)
Credit derivatives
539
(342)
1,381
(331)
Equity derivatives
1,710
(2,528)
1,136
(1,743)
Commodity derivatives
9
(9)
28
(28)
Corporate debt
521
-
456
-
Reverse repurchase and repurchase agreements
-
(167)
768
-
Non - asset backed loans
3,280
-
4,452
-
Asset backed securities
756
-
688
-
Equity cash products
1,228
-
698
(3)
Private equity investments
112
-
190
-
Other
a
971
(176)
1,375
(261)
Total
10,022
(4,332)
13,842
(5,007)
Note
a Other includes commercial real estate loans, funds and fund-linked products , issued debt, government sponsored debt and investment property.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 140
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 an d
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 b ased 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, observability and sensitivity analysis for material products within Level 3, are described below.
Interest rate derivatives
Description:
floors, inflation options, balance guaranteed swaps and other exotic interest rate derivatives.
Valuation:
discount the expected future cash flows of trades. Instruments with optionality are valued using volatilities implied from market inputs, and use
industry standard or bespoke models depending on the product type.
Observability:
Unobservable inputs are generally set by referencing liquid market instruments and applying extrapolation techniques or inferred via another
reasonable method.
Foreign exchange d erivatives
Description:
Derivatives linked to the foreign exchange (FX) market. The category includes FX forward contracts, FX swaps and FX options. The
majority are traded as over the counter (OTC) derivatives.
Valuation:
interest rates, FX volatilities, interest rate volatilities, FX interest rate correlations and others as appropriate.
Observability:
input and underlying. Unobservable inputs are set by referencing liquid market instruments and applying extrapolation techniques, or inferred via
another reasonable method.
Credit derivatives
Description:
securitised pro duct). The category includes single name and index credit default swaps (CDS) and asset backed CDS.
Valuation:
from broker data, third party vendors or priced to proxies.
Observability:
observable if products with significant sensitivity to the inputs are actively traded in a liquid market. Unobservable valuation inputs are generally
determined with reference to recent transactions or inferred from observable trades of the same issuer or similar entities.
Equity derivatives
Description
: Exchange traded or OTC derivatives linked to equity indices and single names. The category includes vanilla and exotic equity
products.
Valuation:
equity repurchase curves and, for multi-asset products, correlations.
Observability:
Unob servable inputs are set by referencing liquid market instruments and applying extrapolation techniques, or inferred via another reasonable
method.
Commodity derivatives
Description:
power and natural gas.
Valuation:
techniques. Valuation inputs include forward curves, volatilities implied from market observable inputs and correlations.
Observability:
each input and underlying. Unobservable inputs are set with reference to similar observable products, or by applying extrapolation techniques to
observable inputs.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 141
Corporate debt
Description:
Valuation:
sources.
Observability:
yields or CDS spreads for actively traded instruments issued by or referencing the same (or a similar) issuer.
Level 3 sensitivity:
market for similar bonds.
Reverse repurchase and repurchase agreements
Description:
lending agreements. The agreements are primarily short - term in nature.
Valuation:
standard models that incorporate market interest rates and repurchase rates, based on the specific details of the transaction.
Observability:
Unobservable inputs are generally set by referencing liquid market instruments and applying extrapolation techniques, or inferred via another
reasonable method.
Non - asset backed loans
Description:
Valuation:
Observability:
funding costs, the level of comparable assets such as gilts, issuer credit quality and other factors.
Asset backed securities
Description:
backed securities, commercial mortgage backed securities, CDOs, collateralised loan obligations (CLOs) and other asset backed securities.
Valuation:
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
value ratio and geographic concentration) and credit ratings (original and current).
Observability:
flow analysis, the instrument is considered unobservable.
Equity cash products
Description:
Valuation:
Observability:
reference to actively traded instruments that are similar in nature, or inferred via another reasonable method.
Private equity investments
Description:
Valuation:
which 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 companies. While the valuation of unquoted equity instruments
is subjective by nature, the relevant methodologies are commonly applied by other market part icipants and have been consistently applied over
time.
Observability:
Unobservable inputs include earnings estimates, mu ltiples of comparative companies, marketability discounts and discount rates.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 142
Other
Description:
investment property.
Assets and liabilities reclas sified between Level 1 and Level 2
During the period , there were no material transfers between Level 1 to Level 2. (2018: there were no material transfers between Level 1 and Level
2).
Level 3 movement analysis
The following table summarises the movements in the Level 3 balances 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 a non - recurring basis.
Asset and liability transfers between Level 2 and Level 3 are primarily due to 1) an increase or decrease in observable market activity related to an
input or 2) a change in the significance of the unobservable input, with assets and liabilities classified as Level 3 if an unobservable input is deemed
significant.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 143
Analysis of movements in Level 3 assets and liabilities
As at 1
January
2019
Total gains and losses
in the period
recognised in the
income statement
Total gains
or losses
recognised
in OCI
Transfers
As at 31
December
2019
Purchases
Sales
Issues
Settlements
Trading
income
Other
income
In
Out
Barclays Bank Group
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Corporate debt
388
126
(52)
(311)
1
45
(77)
120
Non - asset backed loans
2,263
1,844
(2,799)
(134)
24
200
(424)
974
Asset backed securities
664
202
(166)
(30)
16
(30)
656
Equity cash products
136
62
(40)
(31)
293
(28)
392
Other
162
(1)
(24)
(15)
122
Trading portfolio assets
3,613
2,234
(3,057)
(446)
(60)
554
(574)
2,264
Non - asset backed loans
1,836
235
(204)
99
(1)
(1)
1,964
Equity cash products
559
66
(2)
3
209
835
Private equity investments
191
5
(9)
(2)
(17)
(55)
113
Other
2,064
5,716
(5,720)
(9)
12
(33)
24
(804)
1,250
Financial assets at fair value
through the income statement
4,650
6,022
(5,729)
(217)
114
158
24
(860)
4,162
Non - asset backed loans
283
60
343
Asset backed securities
116
(30)
86
Equity cash products
2
(1)
(1)
Other
353
(135)
(218)
Financial assets at fair value
through other comprehensive
income
355
399
(31)
(135)
59
(218)
429
Investment property
9
5
(1)
13
Trading portfolio liabilities
(3)
3
Financial liabilities designated at
fair value
(261)
(179)
10
(42)
41
67
(2)
(27)
50
(343)
Interest rate derivatives
22
(9)
88
(92)
(177)
(38)
(206)
Foreign exchange derivatives
7
25
(12)
(32)
5
(7)
Credit derivatives
1,050
(59)
3
(866)
76
(9)
3
198
Equity derivatives
(607)
(296)
(35)
(2)
(296)
(37)
453
(820)
Net derivative financial
instruments
a
472
(364)
(32)
(755)
(324)
(255)
423
(835)
Total
8,835
8,117
(8,839)
(42)
(1,512)
(203)
155
59
296
(1,176)
5,690
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 144
Analysis of movements in Level 3 assets and liabilities
As at 1
January
2018
Purchases
Sales
Issues
Settlements
Total gains and losses
in the period
recognised in the
income statement
Total gains
or losses
recognised
in OCI
Transfers
As at 31
December
2018
Trading
income
Other
income
In
Out
Barclays Bank Group
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Corporate debt
871
108
(88)
(23)
9
39
(528)
388
Non - asset backed loans
166
5,514
(3,480)
-
-
71
(8)
2,263
Asset backed securities
627
205
(168)
(2)
(21)
58
(35)
664
Equity cash products
68
18
(9)
-
(16)
107
(32)
136
Other
245
18
(55)
-
(20)
(32)
-
-
145
(139)
162
Trading portfolio assets
1,977
5,863
(3,800)
(45)
(60)
-
420
(742)
3,613
Non - asset backed loans
6,073
364
(4,432)
(194)
25
-
1,836
Private equity investments
688
188
(7)
(231)
2
(10)
60
(499)
191
Equity cash products
398
87
(1)
-
1
74
-
-
559
Other
360
6,624
(4,920)
(47)
29
18
-
-
2,064
Financial assets at fair value
through the income statement
7,519
7,263
(9,360)
(472)
57
82
60
(499)
4,650
Equity cash products
36
(16)
(18)
2
Private equity investments
129
(129)
Other
40
(1)
314
353
Financial assets at fair value
through other comprehensive
income
205
(16)
(1)
314
(147)
355
Investment property
116
9
(115)
(1)
9
Trading portfolio liabilities
(4)
-
-
-
-
(3)
-
-
-
4
(3)
Financial liabilities designated at
fair value
(480)
-
-
(4)
14
33
(3)
-
(225)
404
(261)
Interest rate derivatives
(150)
1
(1)
-
196
(25)
-
-
(71)
72
22
Foreign exchange derivatives
37
-
-
-
(9)
5
-
-
(13)
(13)
7
Credit derivatives
1,146
(6)
3
-
(12)
(85)
-
-
7
(3)
1,050
Equity derivatives
(896)
72
(570)
-
125
73
1
-
128
460
(607)
Commodity derivatives
-
-
-
-
-
-
-
-
-
-
-
Net derivative financial
instruments
a
137
67
(568)
-
300
(32)
1
-
51
516
472
Total
9,470
13,202
(13,859)
(4)
(203)
(5)
79
(1)
620
(464)
8,835
Note
a The derivative financial instruments are represented on a net basis. On a gross basis, derivative financial assets are £3,154m (2018: £5,215m) and derivative financial liabilit ies are
£3,989m (2018: £4,743 m).
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 145
Unrealised gains and losses on Level 3 financial assets and liabilities
The following tables disclose 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 year end
2019
2018
Income statement
Other
compre -
hensive
income
Income statement
Other
compre -
hensive
income
Barclays Bank Group
Trading
income
Other
income
Total
Trading
income
Other
income
Total
As at 31 December
£m
£m
£m
£m
£m
£m
£m
£m
Trading portfolio assets
(57)
-
-
(57)
(60)
-
-
(60)
Financial assets at fair value through the income
statement
101
199
-
300
44
68
-
112
Fair value through other comprehensive income
-
-
60
60
-
-
(1)
(1)
Investment property
-
(1)
-
(1)
-
(1)
-
(1)
Trading portfolio liabilities
-
-
-
-
(3)
-
-
(3)
Financial liabilities designated at fair value
64
-
-
64
55
-
-
55
Net derivative financial instruments
(459)
-
-
(459)
(14)
-
-
(14)
Total
(351)
198
60
(93)
22
67
(1)
88
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:
Valuation technique(s)
a
Significant unobservable inputs
2019
Range
2018
Range
Min
Max
Min
Max
Units
b
Derivative financial
instruments
c
Interest rate derivatives
Discounted cash flows
Inflation forwards
1
3
1
2
%
Credit spread
41
1,620
6
897
bps
Comparable pricing
Price
-
37
-
100
points
Option model
Inflation volatility
47
190
33
174
bps vol
Interest rate volatility
8
431
10
199
bps vol
IR - IR correlation
(30)
100
(26)
100
%
Credit derivatives
Discounted cash flows
Credit spread
72
200
142
209
bps
Comparable pricing
Price
-
155
10
96
points
Equity derivatives
Option model
Equity volatility
1
200
2
81
%
Equity - equity correlation
(20)
100
(100)
100
%
Discounted cash flow
Discounted margin
(500)
1,100
(171)
301
bps
Non -derivative financial
instruments
Non - asset backed loans
Discounted cash flows
Loan spread
31
624
30
196
bps
Credit spread
180
1,223
25
800
bps
Price
-
133
-
118
points
Comparable pricing
Price
-
123
-
100
points
Asset backed securities
Comparable pricing
Price
-
99
-
102
points
Other
d
Discounted cash flows
Credit spread
126
649
143
575
bps
Notes
a A range has not been provided for Net Asset Value as there would be a wide range reflecting the diverse nature of the positions .
b The units used to disclose ranges for significant unobservable inputs are percentages, points and basis points. 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%.
c 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 41-1,620bps (2018: 6-897bps).
d Other includes commercial real estate loans, funds and fu nd-linked products, issued debt, government sponsored debt and investment property.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 146
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 interrelationships can be identified between significant unobservable inputs used in fair value measurement, a description of those
interrelationships is included below.
Forwards
A price or rate that is applicable to a financial transaction that will take place in the future.
In general, a significant increase in a forward in isolation will result in a fair value increase for the contracted receiver of the underlying (currency,
bond, commodity, etc.), but the sensitivity is dependent on the specific terms of the instrument.
Cred it 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 demands for taking on exposure to the credit risk o f 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 a fair value decrease for a cash asset.
For a derivative instrument, a significant increase in credit spread in isolation can result in a fair value increase or decrease depending on the
specific terms of the instrument.
Volatility
Volatility is a measure of the variability or uncertainty in return for a given derivative underlying. It is an estimate of how much a particular
underlying instrument input or index will change in value over time. In general, volatilities are implied from observed option prices. For
unobservable options the implied volatility may reflect additional assumptions about the nature of the underlying risk, and the strike/maturity
profile of a specific contract.
In general a significant increase in volatility in isolation will result in a fair value increase for the holder of a simple option, but the sensitivity is
dependent on the specific terms of the instrument.
There may be interrelationships between unobservable volatilities and other unobservable inputs ( e.g. when equity prices fall, implied equity
volatilities generally rise) but these are generally specific to individual markets and may vary over time.
Correlation
Correlation is a measure of the relationship between the movements of two variables. Corre lation can be a significant input into valuation of
derivative contracts with more than one underlying instrument. 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 fair value increase or decrease 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 instrument, then adjusting that yield (or spread) to account for relevant differences such as maturity or credit quality.
Alternatively, a price - to- price basis can be assumed between the comparable and unobservable instruments in order to establish a value.
In general, a significant increase in comparable price in isolation will result in an increase in the price of the unobservable instrument. For
derivatives, a ch ange in the comparable price in isolation can result in a fair value increase or decrease 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 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 near zero defaults since inception. Wh ile the overall loan spread range is from 31bps to 624 bps (2018 : 30bps
to 196 bps), 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 fair value decrease for a loan.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 147
Sensitivity analysi s of valuations using unobservable inputs
2019
2018
Favourable changes
Unfavourable changes
Favourable changes
Unfavourable changes
Income
statement
Equity
Income
statement
Equity
Income
statement
Equity
Income
statement
Equity
£m
£m
£m
£m
£m
£m
£m
£m
Interest rate derivatives
44
-
(127)
-
80
-
(162)
-
Foreign exchange derivatives
5
-
(7)
-
7
-
(10)
-
Credit derivatives
73
-
(47)
-
126
-
(73)
-
Equity derivatives
114
-
(119)
-
110
-
(112)
-
Commodity derivatives
-
-
-
-
1
-
(1)
-
Corporate debt
11
-
(16)
-
10
-
(2)
-
Non asset backed loans
125
8
(228)
(8)
141
-
(210)
-
Equity cash products
123
-
(175)
-
121
-
(155)
-
Private equity investments
16
-
(25)
-
-
-
(10)
-
Other
a
1
-
(1)
-
2
-
(2)
-
Total
512
8
(745)
(8)
598
-
(737)
-
Note
a Other includes commercial real estate loans, funds and fund-linked products, issued debt, government sponsored debt and investment property.
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 £ 520 m (2018: £598 m) or to decrease fair values by up to £ 753 m (2018 : £737m) with
substantially all the potential effect impacting prof it and loss rather than reserves .
Fair value adjustments
Key balance sheet valuation adjustments are quantified below :
2019
2018
£m
£m
Exit price adjustments derived from market bid - offer spreads
(420)
(451)
Uncollateralised derivative funding
(57)
(47)
Derivative credit valuation adjustments
(135)
(125)
Derivative debit valuation adjustments
155
237
Exit price adjustments derived from market bid - offer spreads
Barclays Bank Group uses mid - 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, bi d - offer adjustments are recorded to reflect
the exit level for the expected close out strategy. The methodology for determining the bid - 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 quotes such as broker data. Less liquid instruments may not have a directly observable bid - offer
level. In such instances, an exit price adjustment may be derived from an observable bid - offer level for a comparable liquid instrument, or
determined by calibrating to derivative prices, or by scenario or historical analysis.
Exit price adjustments derived from market bid - of fer spreads h ave decreased by £31m to £420m
as a result of movements in market bid offer
spreads.
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 credit support annex (CSA). The CSA 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.
Uncollateralised
A fair value adjustment of £57 m 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 rehypothec ation
of collateral received. This adjustment is referred to as the Funding Fair Valu e Adjustment (FFVA). FFVA has increased by £10m to £57 m as a
result of increase in underlying derivative exposures.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 148
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 valu ation components incorporated into such levels.
The effect of incorporating this scaling factor at 31 December 2019 was to
reduce FFVA by £170 m (2018: £141 m).
Derivative credit and debit valuation adjustments
CVA and DVA are incorporated into derivative valuations to reflect the impact on fair value of counte rparty credit risk and Barclays Bank Group’s
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 are not limited to) corporates, sovereigns and sovereign agencies and supranationals.
Exposu re at default is generally estimated through the simulation of underlying risk factors through approximating with a more vanilla structure, or
by using current or scenario - based mark to market as an estimate of future exposure.
Probability of default and recovery rate information is generally sourced from the CDS markets. Where this information is not available, or
considered unreliable, alternative approaches are taken based on mapping internal counterparty ratings onto historical or market - based default
and recovery information. In particular, this applies to sovereign related names where the effect of using the recovery assumptions implied in CDS
levels would imply a £36 m (2018: £50m) increase in CVA.
Correlation between counterparty credit and underlying derivative risk factors, termed ‘wrong - way,’ or ‘right - way’ risk, is not systematically
incorporated into the CVA calculation but is adjusted where the underlying exposure is directly related to the counterparty.
CVA increased by £10m to £135 m as a result of increase in underlying derivative exposures offset by general tightening in Credit Spreads. DVA
decreased by £82m to £155 m, as a result of tightening in Barclays’ credit spreads.
Barclays continues to monitor market practices and activity to ensure the approach to uncollateralised derivative valuation remains appropriate.
Portfolio exemptions
Barclays Bank Group uses the portfolio exemption in IFRS 13
Fair Value Measurement
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 mar ket conditions. Accordingly, Barclays Bank 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 unobse rvable inputs
The amount that has yet to be recognised in income that relates to the difference between the transaction price (the fair value at initial recognition)
and the amount that would have arisen had valuation models using unobservable inputs been used on initial recognition, less amounts
subsequently recognised, is £100 m (201 8: £127 m) for financial instruments measured at fair value and £ 31 m (2018: £31 m) for financial
instruments carried at amortised cost. The decrease in financial instruments measured at fair value of £27 m (2018: £32m increase) was driven by
additions £40 m (2018: £65 m) offset by a transfer out of £nil (2018: £15m) to Barclays Bank UK PLC and £67 m (2018: £18 m) of amortisation and
r eleases. The decrease of £ nil (2018: £222m) in financial instruments carried at amortised cost was driven by the transfer out of £nil (2018:
£222m) to Barclays Bank UK PLC and £2m (2018: £2m) of amortization and releases offset by additions of £2m (2018: £2m).
Third party credit enhancements
Structured and brokered certificates of deposit issued by Barclays Bank 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 Bank Group and other banks pay for deposit insurance
coverage. The carrying value of these issued certificates of deposit that are designated under the IFRS 9 fair value option includes this third party
credit enhancement.
The on - balance sheet value of these brokered certificates of deposit amounted to £3,218 m (2018: £4,797 m).
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 149
Comparison of carrying amounts and fair values
The following tables summarises the fair value of financial assets and liabilities m easured at amortised cost on Barclays Bank Group’s and Barclays
Bank PLC ’s balance sheet:
Barclays Bank Group
2019
2018
Carrying
amount
Fair value
Level 1
Level 2
Level 3
Carrying
amount
Fair value
Level 1
Level 2
Level 3
As at 31 December
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Financial assets
Loans and advances at
amortised cost
a
141,636
141,251
6,827
69,289
63,133
136,959
137,435
223
66,703
68,452
Reverse repurchase agreements
and other similar secured
lending
1,731
1,731
-
1,731
-
1,613
1,613
-
1,613
-
Financial liabilities
Deposits at amortised cost
(213,881)
(213,897)
(135,398)
(78,494)
(5)
(199,337)
(199,337)
(157,440)
(41,897)
-
Repurchase agreements and
other similar secured borrowing
(2,032)
(2,032)
-
(2,032)
-
(7,378)
(7,378)
-
(7,378)
-
Debt securities in issue
(33,536)
(33,529)
-
(31,652)
(1,877)
(39,063)
(39,083)
-
(36,967)
(2,116)
Subordinated liabilities
(33,425)
(34,861)
-
(34,861)
-
(35,327)
(36,174)
-
(36,174)
-
Note
a The fair value hierarchy for finance lease receivables presented within loans and advances at amortised cost, with fair value amounting to £2,002m (2018: £2,057m), is not
required as part of the standard.
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 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.
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 in Note
18.
Loans and advances at amortised cost
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 rat es.
Reverse repurchase agreements and other similar secured lending
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 in Note 1.
Deposits at amortised cost
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 - term debt securities.
The fair valu e for deposits with longer - term maturities, mainly 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.
Repurc hase agreements and other similar secured borrowing
The fair value of repurchase agreements approximates carrying amounts as these balances are generally short dated.
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.
Subordinated liabilities
Fair values for dated and undated convertible and non - convertible loan capital are based on quoted market rates for the issuer concerned or issuers
with similar terms and conditions.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 150
17 Offsetting financial assets and financial liabilities
In accordance with IAS 32
Financial Instruments: Presentation
, the Barclays Bank 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-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 balan ce sheet netting.
The ‘Net amounts’ presented in the table below are not intended to represent the Barclays Bank Group ’s actual exposure to credit risk, as a variety
of credit mitigation strategies are employed in addition to netting and collateral arrange ments.
Barclays Bank Group
Amounts subject to enforceable netting arrangements
Amounts not
subject to
enforceable
netting
arrangements
c
Balance sheet
total
d
Effects of offsetting on -balance sheet
Related amounts not offset
Gross amounts
Amounts
offset
a
Net amounts
reported on the
balance sheet
Financial
instruments
Financial
collateral
b
Net amount
As at 31 December 2019
£m
£m
£m
£m
£m
£m
£m
£m
Derivative financial assets
260,611
(32,546)
228,065
(176,022)
(38,872)
13,171
1,576
229,641
Reverse repurchase agreements
and other similar secured lending
e
373,775
(276,234)
97,541
-
(97,541)
-
2,013
99,554
Total assets
634,386
(308,780)
325,606
(176,022)
(136,413)
13,171
3,589
329,195
Derivative financial liabilities
(255,005)
31,180
(223,825)
176,022
38,343
(9,460)
(5,115)
(228,940)
Repurchase agreements and other
similar secured borrowing
e
(405,166)
276,234
(128,932)
-
128,930
(2)
(1,786)
(130,718)
Total liabilities
(660,171)
307,414
(352,757)
176,022
167,273
(9,462)
(6,901)
(359,658)
As at 31 December 2018
Derivative financial assets
239,344
(18,687)
220,657
(172,014)
(36,977)
11,666
2,026
222,683
Reverse repurchase agreements
and other similar secured lending
e
353,660
(235,703)
117,957
-
(117,515)
442
3,047
121,004
Total assets
593,004
(254,390)
338,614
(172,014)
(154,492)
12,108
5,073
343,687
Derivative financial liabilities
(233,492)
18,229
(215,263)
172,014
32,900
(10,349)
(4,329)
(219,592)
Repurchase agreements and other
similar secured borrowing
e
(375,841)
235,703
(140,138)
-
140,099
(39)
(5,724)
(145,862)
Total liabilities
(609,333)
253,932
(355,401)
172,014
172,999
(10,388)
(10,053)
(365,454)
Notes
a
Amounts offset for Derivative financial assets additionally includes cash collateral netted of £4,099m (2018: £2,187m). Amounts offset for Derivative financial liabilities additionally
include s cash collateral netted of £ 5,465m (2018: £ 2,645m). Settlements assets and liabilities have been offset amounting to £ 14,079m (2018: £ 23,095m).
b
Financial collateral of £ 38,872m (2018: £36,977m) was received in respect of derivative assets, including £ 33,469m (2018: £31,475m) of cash collateral and £ 5,403m (2018:
£ 5,502m) of non -cash collateral. Financial collateral of £38,343m (2018: £32,900m) was placed in respect of derivat ive liabilities, including £35,423m (2018: £ 29,783m) of cash
collateral and £ 2,920m (2018: £ 3,117 m) of non -cash collateral. The collateral amounts are limited to net balance sheet exposure so as to not include over -collateralisation.
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 arrang ements and ‘Amounts not subject to enforceable
netting arrangements’.
e
Reverse Repurchase agreements and other similar secured lending of £ 99,554m (2018: £1 21,004m) is split by fair value £ 97, 823m (2018: £1 19,391m) and amortised cost
£ 1,731m (2018: £ 1,613m). Repurchase agreements and other similar secured borrowing of £ 130,718m (2018: £1 45,862m) is split by fa ir value £ 128,686m (2018: £138,484m)
and amortised cost £ 2,032m (2018: £ 7,378m).
Derivative assets and liabilities
The ‘Financial instruments’ column identifies financial assets and liabilities that are subject to set 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 and close-out netting applied across all outstanding transactions covered by the agreements if an event of default or other
predetermined events occur.
Financial collateral refers to cash and non - 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.
Reverse repurchase and 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 Agreements and Global Master Securities Lending Agreements, whereby all outstanding transactions with the same counterparty can
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2019 Annual Report on Form 20-F 151
be offset and close-out netting applied across all outstanding transactions 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 Barclays Bank Group are further explained in
the Credit risk mitigation section on page s 38 and 39.
Notes to the financial statements
Assets at amortised cost and other investments
Barclays Bank PLC 2019 Annual Report on Form 20-F 152
The notes included in this section focus on the Barclays Bank Group’s loans and advances and deposits at amortised cost, leases, property, plant
and equipment and goodwill and intangible assets. Details regarding the Barclays Bank Group’s liquidity and capital position can be found on pages
72 to 83.
18 Loans and advances and deposits at amortised cost
Accounting for loans and advances and deposits held at amortised cost under IFRS 9 effective from 1 January 2018
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
ex penses to represent the effective interest rate of the asset or liability. Balances deferred on - balance sheet as effective interest rate adjustments
are amortised to interest income over the life of the financial instrument to which they relate.
Financial assets that are held in a business model to collect the contractual cash flows and that contain contractual terms that give rise on specified
dates to cash flows that are SPPI, are measured at amortised cost. The carrying value of these financial assets at initial recognition includes any
directly attributable transaction costs. Refer to note 1 for details on ‘solely payments of principal and interest’.
In determining whether the business model is a ‘hold to collect’ model, the objective of the business model must be to hold the financial asset to
collect contractual cash flows rather than holding the financial asset for trading or short - term profit taking purposes. While the objective of the
business model must be to hold the financial asset to collect contractual cash flows this does not mean the Barclays Bank Group is required to hold
the financial assets until maturity. When determining if the business model objective is to collect contractual cash flows the Barclays Bank Group
will consider past sales and expectations about future sales.
Accounting for loans and advances and deposits held at amortised cost under IAS 39 for 2017
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. Balances deferred on - balanc e sheet as effective interest rate
adjustments are amortised to interest income over the life of the financial instrument to which they relate.
Loans and advances and deposits at amortised cost
Barclays Bank Group
2019
2018
As at 31 December
£m
£m
Loans and advances at amortised cost to banks
9,722
10,228
Loans and advances at amortised cost to customers
121,015
124,891
Debt securities at amortised cost
10,899
1,840
Total loans and advances at amortised cost
141,636
136,959
Deposits at amortised cost from banks
18,144
15,569
Deposits at amortised cost from customers
195,737
183,768
Total deposits at amortised cost
213,881
199,337
19 Property, plant and equipment
Accounting for property, plant and equipment
The Barclays Bank Group applies IAS 16
Property Plant and Equipment
Investment Properties
.
Property, plant and equipment is stated at cost, which includes direct and incremental acquisition costs less accumulated depreciation and
provisions for imp airment, if required. Subsequent costs are capitalised if these result in enhancement of 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 Barclays Bank Group uses the followin g annual rates in
calculating depreciation:
Annual rates in calculating depreciation
Depreciation rate
Freehold land
Freehold buildings and long - leasehold property (more than 50 years to run)
Leasehold property over the remaining life of the lease (less than 50 years to run)
Costs of adaptation of freehold and leasehold property
Equipment installed in freehold and leasehold property
Computers and similar equipment
Fixtures and fittings and other equipment
Not depreciated
2 - 3.3%
Over the remaining life of the lease
6 - 10%
6 - 10%
17 - 33%
9 -20%
Notes to the financial statements
Assets at amortised cost and other investments
Barclays Bank PLC 2019 Annual Report on Form 20-F 153
Costs of adaptation and installed equipment are depreciated over the shorter of the life of the lease or the depreciation rates noted in the table
above.
Investment property
The Barclays Bank 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.
Barclays Bank Group
Investment
property
Property
Equipment
Leased assets
Right of use assets
a
Total
£m
£m
£m
£m
£m
£m
Cost
As at 31 December 2018
9
1,463
1,079
9
-
2,560
Effects of changes in accounting policies (see
Note 1)
-
-
-
-
580
580
As at 1 January 2019
9
1,463
1,079
9
580
3,140
Additions
5
233
182
-
45
465
Disposals
-
(19)
(144)
-
(6)
(169)
Exchange and other movements
(1)
(42)
(46)
-
2
(87)
As at 31 December 2019
13
1,635
1,071
9
621
3,349
Accumulated depreciation and impairment
As at 31 December 2018
-
(658)
(946)
(9)
-
(1,613)
Effects of changes in accounting policies (see
Note 1)
-
-
-
-
(71)
(71)
As at 1 January 2019
-
(658)
(946)
(9)
(71)
(1,684)
Additions
-
-
(31)
-
-
(31)
Depreciation charge
-
(72)
(65)
-
(75)
(212)
Disposals
-
13
142
-
-
155
Exchange and other movements
-
20
34
-
-
54
As at 31 December 2019
-
(697)
(866)
(9)
(146)
(1,718)
Net book value
13
938
205
-
475
1,631
Cost
As at 1 January 2018
116
2,243
1,066
9
-
3,434
Transfer of UK banking business
-
(958)
-
-
-
(958)
Additions
9
155
79
-
-
243
Disposals
(115)
(45)
(101)
-
-
(261)
Change in fair value of investment properties
(3)
-
-
-
-
(3)
Exchange and other movements
2
68
35
-
-
105
As at 31 December 2018
9
1,463
1,079
9
-
2,560
Accumulated depreciation and impairment
As at 1 January 2018
-
(983)
(923)
(9)
-
(1,915)
Transfer of UK banking business
-
448
-
-
-
448
Additions
-
(60)
(32)
-
-
(92)
Depreciation charge
-
(61)
(58)
-
-
(119)
Impairment charge
-
(1)
-
-
-
(1)
Disposals
-
22
94
-
-
116
Exchange and other movements
-
(23)
(27)
-
-
(50)
As at 31 December 2018
-
(658)
(946)
(9)
-
(1,613)
Net book value
9
805
133
-
-
947
Note
a Right of use (ROU) asset balances relate to Property Leases under IFRS 16, which Barclays adopted on 1 January 2019. Refer to Note 20 for further details.
Property rentals of £ 1 0 m (2018: £6m) have been included in other income within Barclays
Bank
Group.
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 appr opriately qualified independent valuers. Refer to Note 16 for
further details.
Notes to the financial statements
Assets at amortised cost and other investments
Barclays Bank PLC 2019 Annual Report on Form 20-F 154
20 Leases
Accounting for leases under IFRS 16 effective from 1 January 2019
IFRS 16 applies to all leases with the exception of licenses of intellectual property, rights held by licensing agree ment within the scope of IAS 38
Intangible Assets,
Agriculture
natural gas and similar non - regenerative resources. IFRS 16 includes an accounting policy choice for a lessee to elect not to apply IFRS 16 to
remaining assets within the scope of IAS 38
When the Barclays Bank Group is the lessee, it is required to recognise both:
◾
A lease liability, measured at the present value of remaining cash flows on the lease, and
◾
A right of use (ROU) asset, measured at the amount of the initial measurement of the lease liability, plus any lease payments made prior to
commencement date, initial direct costs, and estimated costs of restoring the underlying asset to the condition required by the lease, less any
lease incentives received .
Subsequently the lease liability will increase for the accrual of interest, resulting in a constant rate of return throughout the life of the lease, and
reduce when payments are made. The right of use asset will amortise to the income statement over the life of the lease. The lease liability is
remeasured when there is a cha nge in the one of the following:
◾
Future lease payments arising from a change in an index or rate;
◾
The Barclays Bank Group ’s estimate of the amount expected to be payable under a residual value guarantee; or
◾
The Barclays Bank Group ’s assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured a corresponding adjustment is made to the carrying amount of the ROU asset, o r is recorded in the income
statement if the carrying amount of the ROU asset has been reduced to nil.
On the balance sheet, the ROU assets are included within property, plant and equipment and the lease liabilities are included within other liabilities.
The Barclays Bank Group applies the recognition exemption in IFRS 16 for leases with a term not exceeding 12 months . For these leases the lease
payments are recognised as an expense on a straight line basis over the lease term unless another systematic basis is more appropriate.
When the Barclays Bank Group is the lessor, the lease must be classified as either a finance lease or an operating lease. A finance lease is a lease
which confers substantially all the risks and rewards of the leased assets on the lessee. An operating lease is a lease where substantially all of the
risks and rewards of the leased asset remain with the lessor.
When the lease is deemed a finance lease, 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.
When the lease is deemed an operating lease, the lease income is recognised on a straight- line basis over the period of the lease unless another
systematic basis is more appropriate. The Barclays Bank Group holds the leased assets on - balance sheet within property, plant and equipment.
Accounting for finance leases under IAS 17 for 2018 and 2017
Under IAS 17, a finance lease is a lease which confers substantially all the risks and rewards of the leased assets on the lessee. Where the Barclays
Bank 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 Barclays Bank
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.
Accounting for operating leases under IAS 17 for 2018 and 2017
An operating lease under IAS 17 is a lease where substantially all of the risks and rewards of the leased assets remain with the lessor. Where the
Barclays Bank 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 Barclays Bank Gr oup holds the leased assets on - balance sheet within property, plant and equipment.
Where the Barclays Bank 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 anothe r systematic basis is more appropriate.
As a Lessor
Finance lease receivables are included within loans and advances at amortised cost. The Barclays Bank Group specialises in the provision of leasing
and other asset finance facilities across a broad range of asset types to business and individual customers.
Notes to the financial statements
Assets at amortised cost and other investments
Barclays Bank PLC 2019 Annual Report on Form 20-F 155
The following table sets out a maturity analysis of lease receivables, showing the lease payments to be received after the reporting date:
2019
2018
Gross
investment in
finance lease
receivables
Future finance
income
Present value
of minimum
lease
payments
receivable
Un-
guaranteed
residual
values
Gross
investment in
finance lease
receivables
Future finance
income
Present value
of minimum
lease
payments
receivable
Un -guaranteed
residual values
£m
£m
£m
£m
£m
£m
£m
£m
Barclays Bank Group
-
-
-
-
Not more than one year
1,403
(115)
1,288
77
1,333
(110)
1,223
86
One to two year
909
(76)
833
53
827
(69)
758
53
Two to three year
593
(49)
544
45
599
(49)
550
55
Three to four year
354
(28)
326
43
401
(38)
363
20
Four to five year
123
(8)
115
19
185
(15)
170
20
Over five years
115
(17)
98
22
381
(44)
337
22
Total
3,497
(293)
3,204
259
3,726
(325)
3,401
256
The Barclays Bank Group does not have any material operating leases as a lessor.
The impairment allowance for finance lease receivables amounted to £55m (2018: £87m).
Finance lease income
Finance lease income is included within interest income. The following table shows amounts recognised in the income statement during the year.
Barclays Bank Group
2019
£m
Finance income from net investment in lease
141
Profit on sales
6
As a Lessee
The Barclays Bank Group leases various offices, branches and other premises under non - cancellable lease arrangements to meet its operational
business requirements. In some instances, Barclays Bank Group will sublease property to third parties when it is no longer need ed to meet business
requirements. Currently, Barclays Bank Group does not have any material subleasing arrangements .
ROU asset balances relate to property leases only. Refer to Note 19 for a breakdown of the carrying amount of ROU assets.
The Barclays Bank Group recognised total expense of £ 3 m for short term leases during the year . The portfolio of short term leases to which
Barclays Bank Group is exposed at the end of the year is not dissimilar to the expenses recognised in the year.
Lease liabilities
2019
£m
As at 31 December 2018
-
Effect of changes in accounting policies (see Note 1)
569
As at 1 January 2019
569
Interest expense
25
New leases
43
Disposals
(7)
Cash payments
(106)
Exchange and other movements
5
As at 31 December 2019 (see Note 22)
529
Notes to the financial statements
Assets at amortised cost and other investments
Barclays Bank PLC 2019 Annual Report on Form 20-F 156
The below table sets out a maturity analysis of undiscounted lease liabilities, showing the lease payments to be paid after the reporting date.
Undiscounted lease liabilities maturity analysis
Barclays Bank Group
Barclays Bank PLC
2019
2019
£m
£m
Not more than one year
112
34
One to two years
86
30
Two to three years
66
28
Three to four years
57
27
Four to five years
52
26
Five to ten years
199
120
Greater than ten years
84
53
Total undiscounted lease liabilities as at 31 December 2019
656
318
In addition to the cash flows identified above, Barclays Bank Group is exposed to:
◾
Variable lease payments: This variability will typically arise from either inflation index instruments or market based pricing adjustments.
Currently, Barclays Bank Group has 71 leases out of the total 143 leases which have variable lease payment terms based on market based pricing
adjustments. Of the gross cash flows identified above, £ 403 m is attributable to leases with some degree of variability predominately linked to
market based pricing adjustments.
◾
Extension and termination options: The table above represents Barclays Bank Group’s best estimate of future cash out flows for leases, including
assumptions regarding the exercising of contractual extension and termination options. The above gross cash flows have been reduced by
£408m for leases where Barclays Bank Group are highly expected to exercise an early termination option. However, there is no significant impact
where Barclays Bank Group is expected to exercise an extension option.
The Barclays Bank Group currently does not have any significant sale and lease back transactions. The Barclays Bank Group does not have any
restrictions or covenants imposed by the lessor on its property leases which restrict its businesses.
Operating lease commitments under IAS 17 in 2018
In 2018, o perating lease rentals of £158 m were included in infrastructure costs.
The prior year comparative table for future minimum lease payments by the Barclays Bank Group under non - cancellable operating leases ar e as
follows:
Barclays Bank Group
2018
Property
£m
Not more than one year
115
Over one year but not more than five years
258
Over five years
698
Total
1,071
21 Goodwill and intangible assets
Accounting for goodwill and intangible assets
Goodwill
The carrying value of goodwill is determined in accordance with IFRS 3
Business Combinations
Impairment of Assets.
Goodwill arising on the acquisition of subsidiaries represents the excess of the fair value of the purchase consideration over the fair value of the
Barclays Bank 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 the cash generating unit (CGU) including goodwill with the present value of the pre - tax cash flows, discounted at a
rate of interest that reflects the inhe rent risks, of the CGU to which the goodwill relates, or the CGU’s fair value if this is higher.
Intangible assets
Notes to the financial statements
Assets at amortised cost and other investments
Barclays Bank PLC 2019 Annual Report on Form 20-F 157
Intangible assets other than goodwill are accounted for in accordance with IAS 38
Intangible Assets
.
Intangible assets are initially reco gnised 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
Internally generated software
a
Other software
Customer lists
Licences and other
Not amortised
12 months to 6 years
1 2 months to 6 years
12 months to 25 years
12 months to 25 years
Intangible assets are reviewed for impairment when there are indications that impairment may have occurred.
Note
a Exceptions to the above 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.
Intangible assets
Goodwill
Internally
generated
software
Other software
Customer lists
Licences and
other
Total
£m
£m
£m
£m
£m
£m
Barclays Bank Group
Cost
As at 1 January 2019
Additions and disposals
(33)
(15)
(128)
(39)
(82)
Exchange and other movements
(6)
(45)
(4)
(41)
(35)
(131)
As at 31 December 2019
Accumulated amortisation and impairment
As at 1 January 2019
(111)
(812)
(78)
(1,277)
(354)
(2,632)
Disposals
-
Amortisation charge
-
(154)
(13)
(44)
(34)
(245)
Impairment charge
-
(2)
-
-
-
(2)
Exchange and other movements
-
As at 31 December 2019
(111)
(870)
(54)
(1,159)
(340)
(2,534)
Net book value
Notes to the financial statements
Assets at amortised cost and other investments
Barclays Bank PLC 2019 Annual Report on Form 20-F 158
Goodwill
Internally
generated
software
Other software
Customer lists
Licences and
other
Total
£m
£m
£m
£m
£m
£m
Barclays Bank Group
Cost
As at 1 January 2018
4,710
1,287
96
1,547
490
8,130
Transfer of UK banking business
(4,276)
(90)
(4,366)
Additions and disposals
(8)
11
13
16
Exchange and other movements
11
63
(7)
83
29
179
As at 31 December 2018
445
1,342
100
1,540
532
3,959
Accumulated amortisation and impairment
As at 1 January 2018
(860)
(787)
(75)
(1,210)
(313)
(3,245)
Transfer of UK banking business
750
79
829
Additions and disposals
161
(1)
12
172
Amortisation charge
(156)
(11)
(78)
(31)
(276)
Impairment charge
(1)
(1)
Exchange and other movements
(1)
(29)
9
(68)
(22)
(111)
As at 31 December 2018
(111)
(812)
(78)
(1,277)
(354)
(2,632)
Net book value
334
530
22
263
178
1,327
Goodwill
Goodwill is allocated to business operations according to business segments as follows:
Barclays Bank Group
2019
2018
£m
£m
Consumer, Cards and Payments
295
334
Total net book value of goodwill
295
334
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. Cash flow projections take into account
change s in the market in which a business operates including the level of growth, competitive activity, and the impacts of regulatory change. The
estimation of pre - tax cash flows is sensitive to the periods for which detailed forecasts are available and to assumptions regarding long - term
sustainable cash flows.
Goodwill within the Consumer, Cards and Payments segment was £ 295 m (201 8: £334 m). The carrying value of the CGUs have been determined by
using net asset values. The recoverable amounts of the CGUs, calculated as value in use, have been determined using cash flow predictions based
on financial budgets approved by management, covering a five- year period, with a terminal growth rat e of 1.5% (2018: 0.0% to 3.5 %) applied
thereafter. The forecasted cash flows have been discounted at a pre - tax rate of 1 1 .0% to 13. 2 % (2018 : 11.1% to 13. 7 %). Based on these
assumptions, the total recoverable amount exceeded the carrying amount including goodwill by £7,288m (2018: £10 ,553 m). A one percentage point
change in the discount rate or terminal growth rate would increase or decrease the recoverable amount by £1,108m (2018: £1,618m) and £730m
(2018: £1,148 m) respectively. A reduction in the forecast cash flows of 1 5 % per annum (2018: 10%) would redu ce the recoverable amount by
£896m (2018: £1,675 m).
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 estimate 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 regula rly bought and sold.
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
Barclays Bank PLC 2019 Annual Report on Form 20-F 159
The notes included in this section focus on the Barclays Bank 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
obligat ion, and it can be reliably estimated. Contingent liabilities reflect potential liabilities that are not recognised on the balance sheet.
22 Other liabilities
Barclays Bank Group
2019
2018
£m
£m
Accruals and deferred income
2,419
2,680
Other creditors
2,116
2,345
Items in the course of collection due to other banks
175
141
Obligation under Finance Lease
-
4
Lease liabilities
a
529
-
Other liabilities
5,239
5,170
Note
a Lease liabilities represents the minimum lease payments under the lease discounted at the rate implicit in the lease.
23 Provisions
Accounting for provisions
The Barclays Bank Group applies IAS 37
Provisions, Contingent Liabilities and Contingent Assets
in accounting for non - 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; for example, when the Barclays Bank Group has a detailed formal plan for restructuring a
business and has raised v alid expectations in those affected by the restructuring by announcing its main features or starting to implement the plan.
Provision is made for undrawn loan commitments if it is probable that the facility will be drawn and result in the recognition of an asset at an
amount less than the amount advanced.
Critical accounting estimates and judgements
The financial reporting of provisions involves a significant degree of judgement and is complex. Identifying whether a present obligation exists and
estimating the probability, timing, nature and quantum of the outflows that may arise from past events requires judgements to be made based on
the specific facts and circumstances relating to individual events and often requires specialist professional advice. When matters are at an early
stage, accounting judgements and estimates can be difficult because of the high degree of uncertainty involved. Management continues to monitor
matters as they develop to re - evaluate on an ongoing basis whether provisions should be recognised, however there can remain a wide range of
possible outcomes and uncertainties, particularly in relation to legal, competition and regulatory matters, and as a result it is often not practicable
to make meaningful estimates even when matters are at a more advanced stage.
The complexity of such matters often requires the input of specialist professional advice in making assessments to produce estimates. Customer
redress and legal, competition and regulatory matters are areas where a higher degree of professional judgement is required. The amount that is
recognised as a provision can also be very sensitive to the assumptions made in calculating it. This gives rise to a large range of potential outcomes
which require judgement in determining an appr opriate provision level. See below for information on payment protection redress and Note 25 for
more detail of legal, competition and regulatory matters.
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
Barclays Bank PLC 2019 Annual Report on Form 20-F 160
Undrawn
contractually
committed
facilities and
guarantees
provided
a
Legal,
competition and
regulatory
matters
Onerous
contracts
Redundancy
and
restructuring
Customer
redress
Sundry
provisions
Total
£m
£m
£m
£m
£m
£m
£m
Barclays Bank Group
As at December 2018
90
68
217
127
411
214
1,127
Effects of changes in accounting policies
b
(46)
-
-
-
-
-
(46)
As at 1 January 2019
44
68
217
127
411
214
1,081
Additions
11
86
373
20
286
35
811
Amounts utilised
(30)
(60)
-
(66)
(302)
(48)
(506)
Unused amounts reversed
-
(29)
(332)
(15)
(16)
(13)
(405)
Exchange and other movements
(5)
(2)
(6)
5
(5)
(17)
(30)
As at 31 December 2019
20
63
252
71
374
171
951
Note
a Undrawn contractually committed facilities and guarantees provisions are accounted for under IFRS 9.
b Upon adoption of IFRS 16 on 1 January 2019, £46m of onerous lease provisions in Barclays Bank Group were transferred to right of use asset impairment allowance. Please see
page 107 in note 1 for further detail.
Provisions expected to be recovered or settled within no more than 12 months after 31 December 201 9 for Barclays Bank Group were £739 m
(2018: £791 m) .
Onerous contracts
Onerous contract provisions comprise an estimate of the costs involved with fulfilling the terms and conditions of contracts net of any expected
benefits 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.
Undrawn contractually committed facilities and guarantees
Impairment allowance under IFRS 9 considers both the drawn and the undrawn counterparty exposure. For retail portfolios, the total impairment
allowance is allocated to the drawn exposure to the extent that the allowance does not exceed the exposure as ECL is not reported separately. Any
excess is reported on the liability side of the balance sheet as a provision. For wholesale portfolios the impairment allowance on the undrawn
exposure is reported on the liability side of the balance sheet as a provision . P rovisions are made if it is probable that a facility will be drawn and
the resulting asset is expected to have realisable value that is less than the amount advanced.
��
aCustomer 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 Barclays Bank Group ’s business activities. Provisions for other customer
redress include smaller p rovisions across the corporate businesses which are expected to be utilised in the next 12 - 24 months.
Legal, competition and regulatory matters
The Barclays Bank Group is engaged in various legal proceedings, both in the UK and a number of other overseas jurisdictions, including the US. For
further information in relation to legal proceedings and discussion of the associated uncertainties, please refer to Note 25.
Sundry provisions
This category includes provisions that do not fit into any of the other categories, such as fraud losses and dilapidation provisions
.
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
Barclays Bank PLC 2019 Annual Report on Form 20-F 161
24 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 likelihood of an outflow of economic resources is remote.
The following table summarises the nominal principal amount of contingent liabilities and commitments which are not recorded on - balance sheet:
Barclays Bank Group
2019
2018
£m
£m
Guarantees and letters of credit pledged as collateral security
17,006
15,046
Performance guarantees, acceptances and endorsements
6,771
4,348
Total contingent liabilities
23,777
19,394
43
4
Documentary credits and other short - term trade related transactions
1,291
1,741
Standby facilities, credit lines and other commitments
268,736
256,027
Total commitments
270,027
257,768
17,660
11,703
Provisions held against contingent liabilities and commitments equal £252m (2018: £217m) for Barclays Bank Group .
Further details on contingent liabilities relating to legal and competition and regulatory matters can be found in Note 25.
25 Legal, competition and regulatory matters
Barclays Bank Group face legal, competition and regulatory challenges, many of which are beyond our control. The extent of the impact 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 recognition of provisions in relation to such matters involves critical accounting estimates and judgments in accordance with the relevant
accounting po licies as described in Note 23, Provisions. We have not disclosed an estimate of the potential financial impact or effect on the Barclays
Bank Group of contingent liabilities where it is not currently practicable to do so. Various matters detailed in this note seek damages of an
unspecified amount. While certain matters specify the damages claimed, such claimed amounts do not necessarily reflect the Barclays Bank
Group’s potential financial exposure in respect of those matters.
Investigations into certain advisory services agreements and other matters and civil action
FCA proceedings
In 2008, Barclays Bank PLC and Qatar Holdings LLC entered into two advisory service agreements (the Agreements). The Financial Conduct
Authority (FCA), is conducting an inve stigation into whether the Agreements may have related to Barclays PLC’s capital raisings in June and
November 2008 (the Capital Raisings) and therefore should have been disclosed in the announcements or public documents relating to the Capital
Raisings. I n 2013, the FCA issued warning notices (the Notices) finding that Barclays PLC and Barclays Bank PLC acted recklessly and in breach of
certain disclosure - related listing rules, and that Barclays PLC was also in breach of Listing Principle 3. The financial penalty provided in the Notices
is £50m. Barclays PLC and Barclays Bank PLC continue to contest the findings. The FCA action has been stayed due to the UK Serious Fraud Office
(SFO) proceedings pending against certain former Barclays executives. All charge s brought by the SFO against Barclays PLC and Barclays Bank PLC
in relation to the Agreements were dismissed in 2018.
Civil action
PCP Capital Partners LLP and PCP International Finance Limited (PCP) are seeking damages of approximately £1.6bn from Barclays Bank PLC for
fraudulent misrepresentation and deceit, arising from alleged statements made by Barclays Bank PLC to PCP in relation to the terms on which
securities were to be issued to potential investors, allegedly including PCP, in the November 2008 capital raising. Barclays Bank PLC is defending the
claim and trial is scheduled to commence in June 2020.
Investigation into historic hiring practices
In 2019, the Barclays Group reached a settlement of $6.4m with the US Securities and Exchanges Co mmission (SEC) in relation to certain of its
hiring practices in Asia, resolving this matter.
Investigations into LIBOR and other b enchmarks and related civil actions
Regulators and law enforcement agencies, including certain competition authorities, from a number of governments have been conducting
investigations relating to Barclays Bank PLC’s involvement in allegedly manipulating certain financial benchmarks, such as LIBOR. The SFO has
closed its investigation with no action to be taken against the Barclays Group. Various individuals and corporates in a range of jurisdictions have
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
Barclays Bank PLC 2019 Annual Report on Form 20-F 162
threatened or brought civil actions against the Barclays Group and other banks in relation to the alleged manipulation of LIBOR and/or other
benchmarks. Certain actions rem ain pending.
USD LIBOR civil actions
The majority of the USD LIBOR cases, which have been filed in various US jurisdictions, have been consolidated for pre - trial purposes in the US
District Court in the Southern District of New York (SDNY). The complaints are substantially similar and allege, among other things, that Barclays
PLC, Barclays Bank PLC, Barclays Capital Inc. (BCI) and other financial institutions individually and collectively violated provisions of the US Sherman
Antitrust Act (Antitrust Act), the US Commodity Exchange Act (CEA), the US Racketeer Influenced and Corrupt Organizations Act (RICO), the
Securities Exchange Act of 1934 and various state laws by manipulating USD LIBOR rates.
Putative class actions and individual actions seek unspecif ied damages with the exception of five lawsuits, in which the plaintiffs are seeking a
combined total in excess of $1.25bn in actual damages and additional punitive damages against all defendants, including Barclays Bank PLC. Some
of the lawsuits also seek trebling of damages under the Antitrust Act and RICO. Barclays has previously settled certain claims. Two of the class
action settlements where Barclays has paid $20m and $7.1m, respectively, remain subject to final court approval and/or the right of class members
to opt out of the settlement to file their own claims.
Sterling LIBOR civil actions
In 2016, two putative class actions filed in the SDNY against Barclays Bank PLC, BCI and other Sterling LIBOR panel banks alleging, among other
things, that the defendants manipulated the Sterling LIBOR rate in violation of the Antitrust Act, CEA and RICO, were consolidated. The defendants’
motion to dismiss the claims was granted in December 2018. The plaintiffs have appealed the dismissal.
Japanese Yen LIBOR civil actions
In 2012, a putative class action was filed in the SDNY against Barclays Bank PLC and other Japanese Yen LIBOR panel banks by a lead plaintiff
involved in exchange - traded derivatives and members of the Japanese Bankers Association’s Euroyen Tokyo Interbank Offered Rate (Euroyen
TIBOR) panel. The complaint alleges, among other things, manipulation of the Euroyen TIBOR and Yen LIBOR rates and breaches of the CEA and
the Antitrust Act. In 2014, the court dismissed the plaintiff’s antitrust claims in full, but the plaintiff’s CEA claims remain pending.
In 2015, a second putative class action, making similar allegations to the above class action, was filed in the SDNY against Barclays PLC, Barclays
Bank PLC and BCI. In 2017, this action was dismissed in full and the plaintiffs have appealed the dismissal.
SIBOR/SOR civil action
In 2016, a putative class action was filed 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). In October 2018, the court dismissed all claims against
Barclays PLC, Barclays Bank PLC and BCI. The plaintiffs have appealed the dismissal.
ICE LIBOR civil actions
In 2019, several putative class actions have been filed in the SDNY against Barclays PLC, Barclays Bank PLC, BCI, other financial institution
defendants and Intercontinental Exchange Inc. and certain of its affiliates (ICE), asserting antitrust claims that defendants manipulated USD LIBO R
through defendants’ submissions to ICE. These actions have been consolidated. The defendants have filed a motion to dismiss.
Non -US benchmarks civil actions
Legal proceedings (which include the claims referred to below in ‘Local authority civil actions concerning LIBOR’) have been brought or threatened
against Barclays Bank PLC (and, in certain cases, Barclays Bank UK PLC) in the UK in connection with alleged manipulation of LIBOR, EURIBOR and
other benchmarks. Proceedings have also been brought in a num ber of other jurisdictions in Europe and Israel. Additional proceedings in other
jurisdictions may be brought in the future.
Foreign Exchange i nvestigations and related civil actions
In 2015, the Barclays Group reached settlements totalling approximately $2.38bn with various US federal and state authorities and the FCA in
relation to investigations into certain sales and trading practices in the Foreign Exchange market. Under the related plea agreement with the US
Department of Justice (DoJ), which receiv ed final court approval in January 2017, the Barclays Group agreed to a term of probation of three years.
The Barclays Group also continues to provide relevant information to certain authorities.
The European Commission is one of a number of authorities still conducting an investigation into certain trading practices in Foreign Exchange
markets. The European Commission announced two settlements in May 2019 and the Barclays Group paid penalties totalling approximately
€210m. In June 2019, the Swiss Competi tion Commission announced two settlements and the Barclays Group paid penalties totalling
approximately CHF 27m. The financial impact of the ongoing matters is not expected to be material to the Barclays Bank Group’s operating results,
cash flows or financ ial position.
A number of individuals and corporates in a range of jurisdictions have also threatened or brought civil actions against the Barclays Group and
other banks in relation to alleged manipulation of Foreign Exchange markets, and may do so in the future. Certain actions remain pending.
FX opt out civil action
In 2018, Barclays Bank PLC and BCI settled a consolidated action filed in the SDNY, alleging manipulation of Foreign Exchange markets
(Consolidated FX Action), for a total amount of $384m. Also in 2018, a group of plaintiffs who opted out of the Consolidated FX Action filed a
complaint in the SDNY against Barclays PLC, Barclays Bank PLC, BCI and other defendants.
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
Barclays Bank PLC 2019 Annual Report on Form 20-F 163
Retail basis civil action
In 2015, a putative class action was filed against several international banks, including Barclays PLC and BCI, on behalf of a proposed class of
individuals who exchanged currencies on a retail basis at bank branches (Retail Basis Claims). The SDNY has ruled that the Retail Basis Claims are
not covered by the settlement agreement in the Consolidated FX Actio n. The Court subsequently dismissed all Retail Basis Claims against the
Barclays Group and all other defendants. The plaintiffs have filed an amended complaint.
State law FX civil action
In 2017, the SDNY dismissed consolidated putative class actions brought under federal and various state laws on behalf of proposed classes of (i)
stockholders of Exchange Traded Funds and others who purportedly were indirect investors in FX instruments, and (ii) investors who traded FX
instruments through FX dealers or brokers not alleged to have manipulated Foreign Exchange Rates. The plaintiffs’ amended complaint as to their
state law claims is pending.
Non -US FX civil actions
In addition to the actions describe d above, legal proceedings have been brought or are threatened against Barclays PLC, Barclays Bank PLC, BCI and
Barclays Execution Services Limited (BX) in connection with alleged manipulation of Foreign Exchange in the UK, a number of other jurisdictions in
Europe, Israel and Australia and additional proceedings may be brought in the future.
Metals investigations and related civil actions
Barclays Bank PLC previously provided information to the DoJ, the US Commodity Futures Trading Commission and other authorities in connection
with investigations into metals and metals-based financial instruments.
A number of US civil complaints, each on behalf of a proposed class of plaintiffs, have been consolidated and transferred to the SDNY. The
complaints allege that Barclays Bank PLC and other members of The London Gold Market Fixing Ltd. manipulated the prices of gold and gold
derivative contracts in violation of US antitrust and other federal laws. This consolidated putative class action remains pending. A separate US civil
complaint by a proposed class of plaintiffs against a number of banks, including Barclays Bank PLC, BCI and BX (formerly, Bar clays Capital Services
Limited), alleging manipulation of the price of silver in violation of the CEA, the Antitrust Act and state antitrust and consumer protection laws, has
been dismissed as against the Barclays entities. The plaintiffs have the option to seek the court’s permission to appeal.
Civil actions have also been filed in Canadian courts against Barclays PLC, Barclays Bank PLC, Barclays Capital Canada Inc. and BCI on behalf of
proposed classes of plaintiffs alleging manipulation of gold and silver prices.
US residential mortgage related civil actions
There are various pending civil actions relating to US Residential Mortgage - Backed Securities (RMBS), including four actions arising from
unresolved repurch ase requests submitted by Trustees for certain RMBS, alleging breaches of various loan - level representations and warranties
(R&Ws) made by Barclays Bank PLC and/or a subsidiary acquired in 2007 (the Acquired Subsidiary). The unresolved repurchase requests received
as at 31 December 2019 had an original unpaid principal balance of approximately $2.1bn. The Trustees have also alleged that the relevant R&Ws
may have been breached with respect to a greater (but unspecified) amount of loans than previously stated in the unresolved repurchase requests.
These repurchase actions are ongoing. In one repurchase action, the New York Court of Appeals held that claims related to certain R&Ws are time-
barred. Barclays Bank PLC has reached a settlement to resolve two of the repurchase actions, which is subject to final court approval. The financial
impact of the settlement is not expected to be material to the Barclays Bank Group’s operating results, cash flows or financial position. The
remaining two repurchase actions are pending.
Government and agency securities civil actions and related matters
Certain governmental authorities are conducting investigations into activities relating to the trading of certain government and agency securities in
various markets. The Barclays Group provided information in cooperation with such investigations. Civil actions have also been filed on the basis of
similar allegations, as described below.
Treasury auction securities civil actions
Consolidated putative class action complaints filed in US federal court against Barclays Bank PLC, BCI and other financial institutions under the
Antitrust Act and state common law allege that the defendants (i) conspired to manipulate the US Treasury securities market and/or (ii) conspired
to prevent the creation of certain platforms by boycotting or threatening to boycott such trading platforms. The defendants have filed a motion to
dismiss.
In addition, certain plaintiffs have filed a related, direct action against BCI and certain other financial institutions, alleging that defendants conspired
to fix and manipulate the US Treasury securities mar ket in violation of the Antitrust Act, the CEA and state common law.
Supranational, Sovereign and Agency bonds civil actions
Civil antitrust actions have been filed in the SDNY and Federal Court of Canada in Toronto against Barclays Bank PLC, BCI, BX (for merly, Barclays
Services Limited), Barclays Capital Securities Limited and, with respect to the civil action filed in Canada only, Barclays Capital Canada, Inc. and
other financial institutions alleging that the defendants conspired to fix prices and restrain competition in the market for US dollar - denominated
Supranational, Sovereign and Agency bonds.
In one of the actions filed in the SDNY, the court granted the defendants’ motion to dismiss the plaintiffs’ complaint with respect to Barclays Bank
P LC and certain Barclays Group entities. Defendants have filed a motion to dismiss those plaintiffs’ remaining claims against BCI. The remaining
action filed in the SDNY is stayed.
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
Barclays Bank PLC 2019 Annual Report on Form 20-F 164
Variable Rate Demand Obligations civil actions
Civil actions have been filed against Barclays Bank PLC and BCI and other financial institutions alleging the defendants conspired or colluded to
artificially inflate interest rates set for Variable Rate Demand Obligations (VRDOs). VRDOs are municipal bond s with interest rates that reset on a
periodic basis, most commonly weekly. Two actions in state court have been filed by private plaintiffs on behalf of the states of Illinois and
California. Two putative class action complaints, which have been consolida ted, have been filed in the SDNY.
Government bond civil actions
In a putative class action filed in the SDNY in 2019, plaintiffs alleged that BCI and certain other bond dealers conspired to fix the prices of US
government sponsored entity bonds in violation of US antitrust law. BCI has agreed a settlement of $87m, subject to court approval. In 2019, the
Louisiana Attorney General and the City of Baton Rouge each filed a complaint against Barclays Bank PLC and other financial institutions m aking
similar allegations as the class action plaintiffs.
In 2018, a separate putative class action against various financial institutions including Barclays PLC, Barclays Bank PLC, BCI, Barclays Bank Mexico,
S.A., and certain other subsidiaries of the Gr oup was consolidated in the SDNY. The plaintiffs asserted antitrust and state law claims arising out of
an alleged conspiracy to fix the prices of Mexican Government bonds. Barclays PLC has settled the claim, subject to court approval. The financial
impact of the settlement is not material to the Barclays Bank Group’s operating results, cash flows or financial position.
BDC Finance L.L.C.
In 2008, BDC Finance L.L.C. (BDC) filed a complaint in the NY Supreme Court, demanding damages of $298m, alleging that Barclays Bank PLC had
breached a contract in connection with a portfolio of total return swaps governed by an ISDA Master Agreement (collectively, the Agreement).
Following a trial on certain liability issues, the court ruled in December 2018 that Barclay s Bank PLC was not a defaulting party, which was affirmed
on appeal.
In 2011, BDC’s investment advisor, BDCM Fund Adviser, L.L.C. and its parent company, Black Diamond Capital Holdings, L.L.C. also sued Barclays
Bank PLC and BCI in Connecticut State Court for unspecified damages allegedly resulting from Barclays 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. This case is currently stayed.
Civil actions in r espect of the US Anti -Terrorism Act
There are a number of civil actions, on behalf of more than 4,000 plaintiffs, filed in US federal courts in the US District Court in the Eastern District
of New York ( EDNY) and SDNY against Barclays Bank PLC and a number of other banks. The complaints generally allege that Barclays Bank PLC
and those banks engaged in a conspiracy to facilitate US dollar - denominated transactions for the Government of Iran and various Ira nian banks,
which in turn funded acts of terrorism that injured or killed plaintiffs or plaintiffs’ family members. The plaintiffs seek to recover damages for pain,
suffering and mental anguish under the provisions of the US Anti- Terrorism Act, which allow for the trebling of any proven damages.
The court granted the defendants’ motion to dismiss one action in the EDNY, and plaintiffs have filed a notice of appeal. The defendants have
moved to dismiss two other EDNY actions. The court also granted the defendants’ motion to dismiss another action in the SDNY, but the plaintiffs
have moved to file an amended complaint. The remaining actions are stayed pending decisions in these cases.
Interest rate swap and credit default swap US civil actions
Barclays PLC, Barclays Bank PLC and BCI, together with other financial institutions that act as market makers for interest rate swaps (IRS) are
named as defendants in several antitrust class actions which were consolidated in the SDNY in 2016. The complaints allege the defendants
conspired to prevent the development of exchanges for IRS and demand unspecified money damages.
In 2018, trueEX LLC filed an antitrust class action in the SDNY against a number of financial institutions including Barclays PLC, Barclays B ank PLC
and BCI based on similar allegations with respect to trueEX LLC’s development of an IRS platform. In 2017, Tera Group Inc. filed a separate civil
antitrust action in the SDNY claiming that certain conduct alleged in the IRS cases also caused the plaintiff to suffer harm with respect to the Credit
Default Swaps market. In November 2018 and July 2019, respectively, the court dismissed certain claims in both cases for unjust enrichment and
tortious interference but denied motions to dismiss the federal and state antitrust claims, which remain pending.
Portuguese Competition Authority investigation
The Portuguese Competition Authority found that a subsidiary of Barclays Bank PLC and other banks violated competition law by exchanging
information about retail credit products relating to mortgages, consumer lending and lending to small and medium enterprises. The Barclays Group
applied for immunity and received no fine.
Investigation into collections and recoveries relating to unsecured lending
Since February 2018, the FCA has been investigating whether the Barclays Group implemented effective systems and controls with respect to
collections and recoveries and whether it paid due consideration to the interests of customers in default and arrears. The FCA investigation is at an
advanced stage.
HM Revenue & Customs (HMRC) assessments concerning UK Value Added Tax
In 2018, HMRC issued notices that have the effect of removing certain overseas subsidiaries that have operations in the UK from Barclays’ UK VAT
group, in which group supplies between members are generally free from VAT. The notices have retrospective effect and correspond to
assessments of £181m ( inclusive of interest), of which Barclays would expect to attribute an amount of approximately £128m to Barclays Bank UK
PLC and £53m to Barclays Bank PLC. HMRC’s decision has been appealed to the First Tier Tribunal (Tax Chamber).
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
Barclays Bank PLC 2019 Annual Report on Form 20-F 165
Local authority civil actions concerning LIBOR
Following settlement by Barclays Bank PLC of various governmental investigations concerning certain benchmark interest rate submissions referred
to above in ‘Investigations into LIBOR and other benchmarks and related civil actions’, in the UK, certain local authorities have brought claims
against Barclays Bank PLC (and, in certain cases, Barclays Bank UK PLC) asserting that they entered into loans in reliance on misrepresentations
made by Barclays Bank PLC in respect of its conduct in relation to LIBOR. Barclays has applied to strike out the claims.
General
The Barclays Bank Group is engaged in various other legal, competition and regulatory matters in the UK, the US and a number of other overseas
jurisdictions. It is subject to legal proceedings brought by and against the Barclays Bank 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 management and protection, money laundering, financial crime, employment, environmental and other statutory and common
law issues.
The Barclays Bank Group is also subject to enquiries and examinations, requests for infor mation, 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 Barclays Bank
Group is or has been engaged. The Barclays Bank Group is cooperating with the relevant authorities and keeping all relevant agencies briefed as
appropriate in relation to these m atters and others described in this note on an ongoing basis.
At the present time, Barclays Bank PLC 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 (including formerly active matters or those matters arising after the date of this note)
will not be material to Barclays Bank PLC’s results, operations or cash flow for a particular period, depending on, among other things, the amount of
the loss resulting from the matter(s) and the amount of profit otherwise reported for the reporting period.
Notes to the financial statements
Capital instruments, equity and reserves
Barclays Bank PLC 2019 Annual Report on Form 20-F 166
The notes included in this section focus on the Barclays Bank 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 - cont rolling interests). For more information on
capital management and how the Barclays Bank Group maintains sufficient capital to meet our regulatory requirements refer to page 40 .
26 Subordinated liabilities
Accounting for subordinated liabilities
Subordinated liabilities are measured at amortised cost using the effective interest method under IFRS 9.
Barclays Bank Group
2019
2018
£m
£m
As at 1 January
35,327
24,193
Issuances
6,785
221
Redemptions
(7,804)
(3,246)
Other
(883)
14,159
As at 31 December
33,425
35,327
Issuances of £6,785m comprises £3,534m intra - group loans from and £3,093m intra - group notes to Barclays PLC as well as £158m externally
issued USD Floating Rate Notes.
Redemptions of £7,804m comprises £3,033m externally issued Step-up Callable Perpetual Reserve Capital Instruments, £43m externally issued
EUR Floating Rate Notes, £ 4,556m intra - gr oup loans from Barclays PLC, £158m externally issued USD Floating Rate Notes and £14m externally
issued JPY Floating Rate Loans. Other movements predominantly include foreign exchange and accrued interest, partially offset by fair value hedge
adjustments.
Subordinated liabilities include accrued interest and compris e undated and dated subordinated liabilities as follows:
Barclays Bank Group
2019
2018
£m
£m
Undated subordinated liabilities
1,073
4,313
Dated subordinated liabilities
32,352
31,014
Total subordinated liabilities
33,425
35,327
None of the Ba rclays Bank Group’s subordinated liabilities are secured.
Undated subordinated liabilities
Barclays Bank Group
2019
2018
Initial call date
£m
£m
Barclays Bank PLC externally issued subordinated liabilities
Tier One Notes (TONs)
6% Callable Perpetual Core Tier One Notes
2032
16
16
6.86% Callable Perpetual Core Tier One Notes (USD 179m)
2032
203
199
Reserve Capital Instruments (RCIs)
6.3688% Step-up Callable Perpetual Reserve Capital Instruments
2019
-
34
14% Step-up Callable Perpetual Reserve Capital Instruments
2019
-
3,189
5.3304% Step-up Callable Perpetual Reserve Capital Instruments
2036
53
51
Undated Notes
7.125% Undated Subordinated Notes
2020
165
173
6.125% Undated Subordinated Notes
2027
42
42
Junior Undated Floating Rate Notes (USD 38m)
Any interest payment date
29
30
Undated Floating Rate Primary Capital Notes Series 1 (USD 167m)
Any interest payment date
92
95
Undated Floating Rate Primary Capital Notes Series 2 (USD 295m)
Any interest payment date
191
199
Undated Floating Rate Primary Capital Notes Series 3
Any interest payment date
21
21
Bonds
9.25% Perpetual Subordinated Bonds (ex - Woolwich Plc)
2021
81
83
9% Permanent Interest Bearing Capital Bonds
At any time
44
44
Loans
5.03% Reverse Dual Currency Undated Subordinated Loan (JPY 8,000m)
2028
55
56
5% Reverse Dual Currency Undated Subordinated Loan (JPY 12,000m)
2028
81
81
Total undated subordinated liabilities
1,073
4,313
Notes to the financial statements
Capital instruments, equity and reserves
Barclays Bank PLC 2019 Annual Report on Form 20-F 167
Undated subordinated liabilities
Undated subordinated liabilities are issued by Barclays Bank PLC and its subsidiaries for the development and expansion of their business and to
strengthen their capital bases. The principal terms of the undated subordinated liabilities are described below:
Subordination
All undated subordinated liabilities rank be hind the claims against the bank of depositors and other unsecured unsubordinated creditors and
holders of dated subordinated liabilities in the following order: Junior Undated Floating Rate Notes; other issues of Undated Notes, Bonds and Loans
ranking par i passu with each other; followed by TONs and RCIs ranking pari passu with each other.
Interest
All undated subordinated liabilities bear 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 1, Series 2 and Series 3 Undated Notes which are floating rate at rates fixed periodically in advance based
on the related interbank rate.
After the initial call date, in the event that they are not redeemed, the 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 subordinated liabilities will bear interest at rates
fixed periodically in advance based on London interbank rates.
Payment of interest
Barclays Bank PLC is not obliged to make a payment of interest on its Undated Notes, Bonds and Loans excluding the 9.25% 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 Barclays Bank PLC. Barclays Bank PLC is not obliged to make a payment of interest on its 9.25% Perpetual Subordinated Bonds if, in the
imm ediately preceding 12 month interest period, a dividend has not been paid on any class of its share capital. Interest not paid becomes payable
in each case if such a dividend is subsequently paid or in certain other circumstances. During the year, Barclays Bank PLC and Barclays PLC
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 Barclays Bank PLC satisfies a specified solvency test.
Barclays Bank PLC 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, and (ii) the coupon payment date falling on or nearest to the tenth anniversary of the d ate o f deferral of such
payment. Whilst such deferral is continuing, neither Barclays Bank PLC nor Barclays PLC may (i) declare or pay a dividend, subject to certain
exceptions, on any of its ordin ary shares or preference shares and (ii) certain restrictions on the redemption, purchase or reduction of their
respective share capital and certain other securities also apply.
Barclays Bank PLC may elect to defer any payment of interest on the TONs if it determines that it is, or such payment would result in it bein g, in
non - 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 Barclays Bank PLC next makes a payment of interest on the TONs, neither Barclays Bank PLC 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 Barclays Bank PLC’s Reserve Capital Instrum ents and (ii) certain restrictions on the redemption, purchase
or reduction of their respective share capital and certain other securities also apply.
Repayment
All undated subordinated liabilities are repayable, at the option of Barclays Bank PLC general ly in whole at the initial call date and on any
subsequent coupon or interest payment date or in the case of the 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 subor dinated liabilities is repayable, at the option of Barclays Bank PLC, in whole for
certain tax reasons, either at any time, or on an interest payment date. There are no events of default except non - payment of principal or
mandatory interest. Any repayments require the prior approval of the PRA.
Other
All issues of undated subordinated liabilities are non -convertible.
Notes to the financial statements
Capital instruments, equity and reserves
Barclays Bank PLC 2019 Annual Report on Form 20-F 168
26 Subordinated liabilities
continued
Dated subordinated liabilities
Barclays Bank Group
2019
2018
Initial call date
Maturity date
£m
£m
Barclays Bank PLC externally issued subordinated liabilities
Floating Rate Subordinated Notes (EUR 50m)
2019
-
45
5.14% Lower Tier 2 Notes (USD 1,094m)
2020
832
851
6% Fixed Rate Subordinated Notes (EUR 1,500m)
2021
1,375
1,474
9.5% Subordinated Bonds (ex - Woolwich Plc)
2021
239
256
Subordinated Floating Rate Notes (EUR 100m)
2021
85
89
10% Fixed Rate Subordinated Notes
2021
2,157
2,194
10.179% Fixed Rate Subordinated Notes (USD 1,521m)
2021
1,123
1,143
Subordinated Floating Rate Notes (EUR 50m)
2022
43
45
6.625% Fixed Rate Subordinated Notes (EUR 1,000m)
2022
957
1,032
7.625% Contingent Capital Notes (USD 3,000m)
2022
2,453
2,502
Subordinated Floating Rate Notes (EUR 50m)
2023
42
45
5.75% Fixed Rate Subordinated Notes
2026
350
351
5.4% Reverse Dual Currency Subordinated Loan (JPY 15,000m)
2027
105
107
6.33% Subordinated Notes
2032
62
61
Subordinated Floating Rate Notes (EUR 68m)
2040
58
61
External issuances by other subsidiaries
2021 - 2024
358
384
Barclays Bank PLC notes issued intra -group to Barclays PLC
2% Fixed Rate Subordinated Callable Notes (EUR 1,500m)
2023
2028
1,309
1,361
3.75% Fixed Rate Resetting Subordinated Callable Notes (SGD 200m)
2025
2030
116
116
5.20% Fixed Rate Subordinated Notes (USD 1,367m)
2026
1,036
1,001
4.836% Fixed Rate Subordinated Callable Notes (USD 1,200m)
2027
2028
944
911
5.088% Fixed - to- Floating Rate Subordinated Callable Notes (USD 1,300m)
2029
2030
994
-
5.25% Fixed Rate Subordinated Notes (USD 827m)
2045
651
-
4.95% Fixed Rate Subordinated Notes (USD 1,250m)
2047
849
-
Floating Rate Subordinated Notes (USD 456m)
2047
350
-
Barclays Bank PLC intra -group loans from Barclays PLC
Various Fixed Rate Subordinated Loans
7,548
10,147
Various Subordinated Floating Rate Loans
1,094
1,023
Various Fixed Rate Subordinated Callable Loans
5,225
3,754
Total dated subordinated liabilities
32,352
31,014
Dated subordinated liabilities
Dated subordinated liabilities are issued by Barclays Bank PLC and respective subsidiaries for the development and expansion of their business and
to strengthen their respective capital bases. The principal terms of the dated subordinated liabilities are describ ed below:
Currency and maturity
In addition to the individual dated subordinated liabilities listed in the table, the £1 5 ,864 m of intra - group loans is made up of various fixed, fixed to
floating and floating rate loans from Barclays PLC with notio nal amou nts denominated in USD 13, 187 m , EUR 3,024m , GBP 250m , JPY 2 33,600m,
AUD 1, 715m, SEK 500m , NOK 970m and CHF 175m , with maturities ranging from 2020 to 2047. Certain intra - group loans have a call date one year
prior to their maturity .
Subordination
All dated subordinated liabilities, both externally issued and issued intra - group to Barclays PLC, rank behind the claims against the bank of
depositors and other unsecured unsubordinated creditors but before the claims of the undated subordinated liabilities and the holders of their
equity. The Barclays Bank PLC intra - group loans from Barclays PLC rank pari passu amongst themselves but ahead of the Barclays Bank PLC notes
issued intra - group to Barclays PLC and the Barclays Bank PLC externally issued subor dinated liabilities. The external dated subordinated liabilities
issued by subsidiaries, are similarly subordinated as the external subordinated liabilities issued by Barclays Bank PLC .
Interest
Interest on floating rate notes and loans is set by referen ce to market rates at the time of issuance and fixed periodically in advance, based on the
related interbank or local bank rates.
Interest on fixed rate notes and loans is set by reference to market rates at the time of issuance and fixed until maturity.
Notes to the financial statements
Capital instruments, equity and reserves
Barclays Bank PLC 2019 Annual Report on Form 20-F 169
Interest on fixed rate callable notes and loans is set by reference to market rates at the time of issuance and fixed until the call date. After the call
date, in the event that the notes or loans are not redeemed, the interest rate will be re - set to either a fixed or floating rate until maturity based on
market rates.
Repayment
Those subordinated liabilities 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 subordinated liabilities outstanding at 31 December 2019 are 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 cert ain
changes in legislation or regulations.
Any repayments prior to maturity may require, in the case of Barclays Bank PLC, 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 Barclays Group)
for nil consideration in the event the Barclays PLC consolidated CRD IV CET1 ratio (FSA October 2012 transitional statement) falls below 7.0%.
27 Ordinary shares, share premium, and other equity
Called up share capital, allotted and fully paid
Ordinary share
capital
Preference
share capital
Share premium
Total share
capital and
share premium
Other equity
instruments
£m
£m
£m
£m
£m
As at 1 January 2019
2,342
6
-
2,348
7,595
AT1 securities issuance
-
-
-
-
2,302
AT1 securities redemption
-
-
-
-
(1,574)
As at 31 December 2019
2,342
6
-
2,348
8,323
As at 1 January 2018
2,342
19
12,092
14,453
8,982
AT1 securities issuance
-
-
-
-
1,925
AT1 securities redemption
-
-
-
-
(1,242)
Redemption of preference shares
-
(13)
-
(13)
-
Capital reorganisation
-
-
(12,092)
(12,092)
-
Net equity impact of intra - group transfers
-
-
-
-
(2,070)
As at 31 December 2018
2,342
6
-
2,348
7,595
Ordinary shares
The issued ordinary share capital of Barclays Bank PLC, as at 31 December 2019, comprised 2,342 m (201 8: 2,342m) ordinary shares of £1 each.
Preference shares
The issued preference share capital of Barclays Bank PLC, as at 31 December 201 9 , comprised 1,000 Sterling Preference Shares of £1 each (201 8 :
1,000); 31,856 Euro Preference Shares of €100 each (201 8: 31,856); and 58,133 US Dollar Preference Shares of $100 each (201 8 : 58,133).
Ordinary share capital, p reference share Capital and share premium constitutes 100 % (201 8 : 10 0%) of total share capital and share premium
issued.
Sterling £1 Preference Shares
1,000 Sterling cumulative callable preference shares of £1 each £1 Preference Shares) were issued on 31 December 2004 at nil premium.
��
(theThe £1 Preference Shares entitle the holders thereof to receive Sterling cumulative cash dividends out of distributable profits of Barclays Bank PLC,
semi-annually at a rate reset semi-annually equal to the Sterling interbank offered rate for six-month sterling deposits.
Barclays Bank PLC shall be obliged to pay such dividends if: (1) it has profits available for the purpose of distribution under the Companies Act 2006
as at each dividend payment date; and (2) it is solvent on the relevant dividend payment date, provided that a capital regulations condition is
satisfied on such dividend payment date. The dividends shall not be due and payable on the relevant dividend payment date except to the extent
that Barclays Bank PLC could make such pa yment and still be solvent immediately thereafter. Barclays Bank PLC shall be considered solvent on any
date if: (1) it is able to pay its debts to senior creditors as they fall due; and (2) its auditors have reported within the previous six months that its
Notes to the financial statements
Capital instruments, equity and reserves
Barclays Bank PLC 2019 Annual Report on Form 20-F 170
assets exceed its liabilities. If Barclays Bank PLC shall not pay, or shall pay only in part, a dividend for a period of seven days or more after the due
date for payment, the holders of the £1 Preference Shares may institute proceedings for the winding - up of Barclays Bank PLC. No remedy against
Barclays Bank PLC shall be available to the holder of any £1 Preference Shares for the recovery of amounts owing in respect of £1 Preference
Shares other than the institution of proceedings for the winding - up of B arclays Bank PLC and/or proving in such winding - up.
On a winding - up or other return of capital (other than a redemption or purchase by Barclays Bank PLC of any of its issued shares, or a reduction of
share capital, permitted by the Articles of Barclays Ba nk PLC and under applicable law), the assets of Barclays Bank PLC available to shareholders
shall be applied in priority to any payment to the holders of ordinary shares and any other class of shares in the capital of Barclays Bank PLC then in
issue rankin g junior to the £1 Preference Shares on such a return of capital and pari passu on such a return of capital with the holders of any other
class of shares in the capital of Barclays Bank PLC then in issue (other than any class of shares in the capital of Ba rclays Bank PLC then in issue
ranking in priority to the £1 Preference Shares on a winding - up or other such return of capital), in payment to the holders of the £1 Preference
Shares of a sum equal to the aggregate of: (1) an amount equal to the dividends accrued thereon for the then current dividend period (and any
accumulated arrears thereof) to the date of the commencement of the winding - up or other such return of capital; and (2) an amount equal to £1
per £1 Preference Share. After payment of the full am ount of the liquidating distributions to which they are entitled, the holders of the £1
Preference Shares will have no right or claim to any of the remaining assets of Barclays Bank PLC and will not be entitled to any further participation
in such return o f capital.
The £1 Preference Shares are redeemable at the option of Barclays Bank PLC, in whole but not in part only, subject to the Companies Act 2006 and
its Articles. Holders of the £1 Preference Shares are not entitled to receive notice of, or to attend, or vote at, any general meeting of Barclays Bank
PLC.
Euro Preference Shares
140,000 Euro 4.75% non- cumulative callable preference shares of €100 each (the 4.75% Preference Shares) were issued on 15 March 2005 for a
consideration of €1,383.3m (£966.7m ), of which the nominal value was €14m and the balance was share premium. The 4.75% Preference Shares
entitle the holders thereof to receive Euro non - cumulative cash dividends out of distributable profits of Barclays Bank PLC, annually at a fixed rate of
4 .75% per annum on the amount of €10,000 per preference share until 15 March 2020, and thereafter quarterly at a rate reset quarterly equal to
0.71% per annum above the Euro interbank offered rate for three - month Euro deposits.
The 4.75% Preference Shares are redeemable at the option of Barclays Bank PLC, in whole but not in part only, on 15 March 2020, and on each
dividend payment date thereafter at €10,000 per share plus any dividends accrued for the then current dividend period to the date fixed for
red emption.
US Dollar Preference Shares
100,000 US Dollar 6.278% non - cumulative callable preference shares of $100 each (the 6.278% Preference Shares), represented by 100,000
American Depositary Shares, Series 1, were issued on 8 June 2005 for a consideration of $995.4m (£548.1m), of which the nominal value was
$10m and the balance was share premium. The 6.278% Preference Shares entitle the holders thereof to receive US Dollar non - cumulative cash
dividends out of distributable profits of Barclays Bank PLC, semi-annually at a fixed rate of 6.278% per annum on the amount of $10,000 per
preference share until 15 December 2034, and thereafter quarterly at a rate reset quarterly equal to 1.55% per annum above the London interbank
offered rate for three - month US Dollar deposits.
The 6.278% Preference Shares are redeemable at the option of Barclays Bank PLC, in whole but not in part only, on 15 December 2034, and on
each dividend payment date thereafter at $10,000 per share plus any dividends accrued for the then current dividend period to the date fixed for
redemption.
106 million US Dollar 8.125% non - cumulative callable preference shares of $0.25 each (the 8.125% Preference Shares), represented by 106 million
American Depositary Shares, Series 5, were issued on 11 April 2008 and 25 April 2008 for a total consideration of $2,650m (£1,345m), of which
the nominal value was $26.5m and the balance was share premium. The 8.125% Preference Shares entitle the holders thereof to receive US Dollar
non - cumulative c ash dividends out of distributable profits of Barclays Bank PLC, quarterly at a fixed rate of 8.125% per annum on the amount of
$25 per preference share.
The 8.125% Preference Shares were redeemed in full on December 15, 2018, with payment being made on M onday, December 17, 2018.
No redemption or purchase of any 4.75% Preference Shares and the 6.278% Preference Shares (together, the Preference Shares) may be made by
Barclays Bank PLC without the prior approval of the UK PRA and any such redemption will be subject to the Companies Act 2006 and the Articles of
Barclays Bank PLC.
On a winding - up of Barclays Bank PLC or other return of capital (other than a redemption or purchase of shares of Barclays Bank PLC, or a
reduction of share capital), a holder of Pr eference Shares will rank in the application of assets of Barclays Bank PLC available to shareholders: (1)
junior to the holder of any shares of Barclays Bank PLC in issue ranking in priority to the Preference Shares; (2) equally in all respects with holde rs of
other preference shares and any other shares of Barclays Bank PLC in issue ranking pari passu with the Preference Shares; and (3) in priority to the
holders of ordinary shares and any other shares of Barclays Bank PLC in issue ranking junior to the P reference Shares.
The holders of the £13m 6% Callable Perpetual Core Tier One Notes and the $179m 6.86% Callable Perpetual Core Tier One Notes of Barclays Bank
PLC (together, the TONs) and the holders of the £35m 5.3304% Step-up Callable Perpetual Reserve Capital Instruments, the £33m 6.3688% Step-
up Callable Perpetual Reserve Capital Instruments and the £3,000m 14% Step-up Callable Perpetual Reserve Capital Instruments of Barclays Bank
PLC (together, the RCIs) would, for the purposes only of calculating the amounts payable in respect of such securities on a winding - up of Barclays
Notes to the financial statements
Capital instruments, equity and reserves
Barclays Bank PLC 2019 Annual Report on Form 20-F 171
Bank PLC, subject to limited exceptions and to the extent that the TONs and the RCIs are then in issue, rank pari passu with the holders of the most
senior class or classes of pre ference shares then in issue in the capital of Barclays Bank PLC. Accordingly, the holders of the preference shares
would rank equally with the holders of such TONs and RCIs on such a winding - up of Barclays Bank PLC (unless one or more classes of shares of
Barclays Bank PLC ranking in priority to the preference shares are in issue at the time of such winding - up, in which event the holders of such TONs
and RCIs would rank equally with the holders of such shares and in priority to the holders of the preferenc e shares).
Subject to such ranking, in such event, holders of the preference shares will be entitled to receive out of assets of Barclays Bank PLC available for
distributions to shareholders, liquidating distributions in the amount of €10,000 per 4.75% Preference Share and $10,000 per 6.278% Preference
Share, plus, in each case, an amount equal to the accrued dividend for the then current dividend period to the date of the commencement of the
winding - up or other such return of capital. If a dividend is not paid in full on any preference shares on any dividend payment date, then a dividend
restriction shall apply.
This dividend restriction will mean that neither Barclays Bank PLC nor Barclays PLC may (a) declare or pay a dividend (other than payment by
Barclays PLC of a final dividend declared by its shareholders prior to the relevant dividend payment date, or a div idend paid by Barclays Bank PLC to
Barclays PLC) on any of their respective ordinary shares, other preference shares or other share capital or (b) redeem, purchase, reduce or
otherwise acquire any of their respective share capital, other than shares of Bar clays Bank PLC held by Barclays PLC or a wholly owned subsidiary,
until the earlier of: (1) the date on which Barclays Bank PLC next declares and pays in full a preference dividend; and (2) the date on or by which all
the preference shares are redeemed in full or purchased by Barclays Bank PLC.
Holders of the preference shares are not entitled to receive notice of, or to attend, or vote at, any general meeting of Barclays Bank PLC. Barclays
Bank PLC is not permitted to create a class of shares ranking as r egards participation in the profits or assets of Barclays Bank PLC in priority to the
preference shares, save with the sanction of a special resolution of a separate general meeting of the holders of the preference shares (requiring a
majority of not less than three - fourths of the holders of the preference shares voting at the separate general meeting) or with the consent in writing
of the holders of three - fourths of the preference shares.
Except as described above, the holders of the preference shares hav e no right to participate in the surplus assets of Barclays Bank PLC.
Capital Reorganisation
On 11 September 2018, the High Court of Justice in England and Wales confirmed the cancellation of the share premium account of Barclays Bank
PLC, with the balanc e of £ 12,092 m credited to retained earnings.
Other equity instruments
Other equity instruments of £ 8,323 m (201 8 : £ 7 ,595 m) include AT1 securities that are issued to the market by Barclays PLC . Barclays PLC uses
funds from the market issuance to purchase AT1 from Barclays Bank Group . The AT1 securities are perpetual securities with no fixed maturity and
are structured to q ualify as AT1 instruments under prevailing capital rules applicable as at the relevant issue date.
In 201 9, there were three issuances of AT1 instruments, in the form of Fixed Rate Resetting Perpetual Subordinated Contingent Convertible
Securities (201 8 : one issuance) totalling £ 2 ,302 m (201 8 : £ 1 ,925 m ). There w ere also two redemption s in 201 9 (201 8 : one redemption) totalling
£ 1,574 m (2018: £1,242m) .
AT1 equity instruments
2019
2018
Initial call date
£m
£m
AT1 equity instruments - Barclays Bank Group
6.625% Perpetual Subordinated Contingent Convertible Securities (USD 1,211m)
2019
-
715
6.5% Perpetual Subordinated Contingent Convertible Securities (EUR 1,077m)
2019
-
860
8.0% Perpetual Subordinated Contingent Convertible Securities (EUR 1,000m)
2020
836
836
7.875% Perpetual Subordinated Contingent Convertible Securities
2022
1,000
1,000
7.875% Perpetual Subordinated Contingent Convertible Securities (USD 1,500m)
2022
1,136
1,136
7.25% Perpetual Subordinated Contingent Convertible Securities
2023
500
500
7.75% Perpetual Subordinated Contingent Convertible Securities (USD 2,500m)
2023
1,925
1,925
5.875% Perpetual Subordinated Contingent Convertible Securities
2024
623
623
8% Perpetual Subordinated Contingent Convertible Securities (USD 2,000m)
2024
1,509
-
7.125% Perpetual Subordinated Contingent Convertible Securities
2025
299
-
6.375% Perpetual Subordinated Contingent Convertible Securities
2025
495
-
Total AT1 equity instruments
8,323
7,595
28 Reserves
Currency translation reserve
The currency translation reserve represents the cumulative gains and losses on the retranslation of the Barclays Bank Group net investment in
foreign operations, net of the effects of hedging.
Notes to the financial statements
Capital instruments, equity and reserves
Barclays Bank PLC 2019 Annual Report on Form 20-F 172
Fair value through other comprehensive income reserve
The fair value through other comprehensive income reserve represent s the changes in the fair value of fair value through other comprehensive
income investments since initial recognition.
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.
Own credit r eserve
The own credit reserve reflects the cumulative own credit gains and losses on financial liabilities at fair value. Amounts in the own credit reserve are
not recycled to profit or loss in future periods.
Other reserves and other shareholders’ equity
Other reserves relate to redeemed ordinary and preference shares issued by the Barclays Bank Group.
Included in other shareholders’ equity are capital notes which bear interest at rates fixed periodically in advance, based on London interbank rates.
These notes are repayable at the option of the Barclays Bank PLC , in whole on any interest payment date. B arclays Bank PLC is not obliged to make
a payment of interest on its capital notes if, in the preceding six months, a dividend has not been declared or paid on any class of shares of Barclays
PLC .
Barclays Bank Group
2019
2018
£m
£m
Currency translation reserve
3,383
3,927
Fair value through other comprehensive income reserve
(139)
(298)
Cash flow hedging reserve
388
(123)
Own credit reserve
(373)
(121)
Other reserves and other shareholders' equity
(24)
(24)
Total
3,235
3,361
29
Non -controlling interests
Profit attributable to non-
controlling interest
Equity attributable to non-
controlling interest
Dividends paid to non-
controlling interest
2019
2018
2019
2018
2019
2018
£m
£m
£m
£m
£m
£m
Other non - controlling interests
-
-
-
2
-
-
Notes to the financial statements
Employee benefits
Barclays Bank PLC 2019 Annual Report on Form 20-F 173
The notes included in this section focus on the costs and commitments associated with employing our staff.
30 Staff costs
Accounting for staff costs
The Barclays Bank Group applies IAS 19
Employee benefits
Short- term employee benefits
provide the services to which the payments relate.
Performance costs
and are recognised over the period of service that employees are required to work to qualify for the payment s.
Deferred cash and share awards are made to employees to incentivise performance over the period employees provide services. To receive payment
under an award, employees must provide service over the vesting period. The period over which the expense for deferred cash and share awards is
recognised is based upon the period employees consider their services contribute to the awards. For past awards, the Barclays Bank 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. In r elation to awards granted
from 2017 , the Ba rclays Bank 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 accounting policies for share - based payments, and pensions and other post- retirement benefits are included in Note 31 and Note 32 respectively.
2019
2018
2017
c
£m
£m
£m
Performance costs
1,104
1,300
917
Salaries
a
2,373
2,269
2,229
Social security costs
269
263
272
Post -retirement benefits
b
184
302
208
Other compensation costs
237
246
119
Total compensation costs
4,167
4,380
3,745
Other resourcing costs
Outsourcing
211
287
472
Redundancy and restructuring
69
87
24
Temporary staff costs
48
54
100
Other
70
66
52
Total other resourcing costs
398
494
648
Total staff costs
4,565
4,874
4,393
Notes
a
£ 123m (2018: £ 54m; 2017: £238m) of Group compensation was capitalised as internally generated software.
b
Post -retirem ent benefits charge includes £126m (2018: £ 99m; 2017: £1 10m) in respect of defin ed contribution schemes and £57m (2018: £ 203m; 2017: £ 97m) in respect of
defined benefit schemes.
c
In 2017, £472m of performance costs recharged by Barclays Execution Services Limited to B arclays B ank PLC has been included in Other administration and general expenses
within Operating expenses. For further details on Operating expenses refer to Note 8.
31 Share -based payments
Accounting for share -based payments
The Barclays Group applies IFRS 2
Share - based Payments
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 empl oyee services received in respect of the shares or share options granted is recognised in the income
statement over the period that employees provide services. The overall cost of the award is calculated using the number of shares and options
expected to v est 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 the non - 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 intere st rate, the expected volatility of the share price over the life of the option and other
Notes to the financial statements
Employee benefits
Barclays Bank PLC 2019 Annual Report on Form 20-F 174
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 other
non - vesting co nditions – such as continuing to make payments into a share - based savings scheme.
The charge for the year arising from share based payment schemes was as follows:
Charge for the year
2019
2018
2017
£m
£m
£m
Share Value Plan
4
40
87
Deferred Share Value Plan
240
195
65
Others
148
131
55
Total equity settled
392
366
207
Cash settled
3
1
1
Total share based payments
395
367
208
The terms of the main current plans are as follows:
Share Value Plan (SVP)
The SVP was introduced in March 2010. SVP awards have been
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, five or seven years.
Participants do not pay to receive an award or to receive a release of shares. For awards granted before Dec ember 2017 , the grantor may also make
a dividend equivalent payment to participants on release of a SVP award. SVP awar ds are also made to eligible employees for recruitment purposes.
All awards are subject to potential forfeiture in certain leaver scenarios.
Deferred Share Value Plan (DSVP)
The DSVP was introduced in February 2017. The terms of the DSVP are materially the same as the terms of the SVP as described above, save that
Executive Directors are not eligible to participate in the DSVP and the DSVP operates ov er market purchase shares only.
Other schemes
In addition to the SVP and DSVP, the Barclays Group opera tes a number of other schemes settled in Barclays PLC Shares including Sharesave (both
UK and Ireland ), Sharepurchase (both UK and overseas), and the Barclays Group Long Term Incentive Plan . A delivery of upfront shares to ‘Material
Risk Takers’ can be mad e as a Share Incentive Award (Holding Period) .
Share option and award plans
The weighted average fair value per award granted, weighted average share price at the date of exercise/release of shares during the year,
weighted average contractual remaining life and number of options and awards outstanding (including those exercisable) at the balance sheet date
were as follows:
2019
2018
Weighted average
fair value per
award granted in
year
Weighted average
share price at
exercise/ release
during year
Weighted
average
remaining
contractual
life in years
Number of
options/
awards
outstanding
(000s)
Weighted average
fair value per
award granted in
year
Weighted average
share price at
exercise/ release
during year
Weighted
average
remaining
contractual
life in years
Number of
options/
awards
outstanding
(000s)
£
£
£
£
SVP
a,b
1.43
1.59
1
2,940
1.99
2.11
<1
58,370
DSVP
a,b
1.43
1.60
1
294,209
1.94
2.10
1
183,962
Others
a
0.40 -1.60
1.57 -1.70
0 -3
37,481
0.36 - 2.11
1.82 - 2.11
0 - 3
38,092
SVP and DSVP 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 to the financial statements
Employee benefits
Barclays Bank PLC 2019 Annual Report on Form 20-F 175
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:
SVP
a,b
DSVP
a,b
Others
a,c
Number (000s)
Number (000s)
Number (000s)
Weighted average
ex. price (£)
2019
2018
2019
2018
2019
2018
2019
2018
Outstanding at beginning of
year/acquisition date
58,370
167,476
183,962
115,929
38,092
129,307
1.39
1.39
Transfers in the year
d
823
(2,450)
2,111
(2,547)
(3,042)
(90,609)
-
-
Granted in the year
1,653
855
197,231
119,668
101,881
61,736
1.19
1.51
Exercised/released in the year
(56,316)
(102,752)
(74,379)
(39,820)
(91,337)
(56,498)
1.21
1.50
Less: forfeited in the year
(1,590)
(4,759)
(14,716)
(9,268)
(7,081)
(5,844)
1.51
1.52
Less: expired in the year
-
-
-
-
(1,032)
-
2.00
1.72
Outstanding at end of year
2,940
58,370
294,209
183,962
37,481
38,092
1.27
1.39
Of which exercisable:
-
-
-
-
5,499
4,083
1.31
1.90
Notes
a Options/award granted over Barclays PLC shares.
b Weighted average exercise price is not applicable for SVP and DSVP awards as these are not share option schemes.
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 2,693,798). The weighted average
exercise price relates to Shar esave.
d Awards of employees transferred between Barclays Bank Group and the rest of the Group.
Awards and options granted to employees and former employees of Barclays Bank Group under the Barclays Group share plans may be satisfied
using new issue shares, treasury shares and market purchase shares of Barclays PLC. Awards granted to employees and former employees of
Barclays Bank Group under DSVP may only be satisfied using market purchase shares of Barclays PLC.
There were no significant modifications to the share based payments arrangements in 201 9 and 201 8.
As at 31 December 201 9 , the total liability arising from cash- settled share based payments transactions was £ 3m (2018 : £2m).
Notes to the financial statements
Employee benefits
Barclays Bank PLC 2019 Annual Report on Form 20-F 176
32 Pensions and post -retirement benefits
Accounting for pensions and post -retirement benefits
The Barclays Bank Group operates a number of pension schemes and post- employment benefit schemes.
Defined contribution schemes
Any contributions unpaid at the balance sheet date are included as a liability.
Defined benefit schemes
the scheme assets after applying the asset ceiling test.
Each scheme’s obligations are calculated using the projected unit credit me thod. 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 actuari al 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
statements over the period that the employees provide services to the Barclays Bank Group , using a methodology similar to that for defined b enefit
pension schemes.
Pension schemes
UK Retirement Fund (UKRF)
The UKRF is Barclays Bank Group’s main scheme, representing 97% of Barclays Bank Group’s total retirement benefit obligations. Barclays Bank
PLC is the principal employer of the UKRF. 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 increase of up to 2% a year may also be added at Barclays’ discretion. The costs of ill-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 although
additional contributions are required if pre - retirement investment returns are n ot sufficient to provide for the benefits.
◾
The 1964 Pension Scheme. Most employees recruited before July 1997 built up benefits in this non - contributory defined benefit scheme in
respect of service up to 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 contri butions. 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
expec ted.
Barclays Pension Savings Plan (BPSP)
The BPSP is a defined contribution scheme providing benefits for all new UK hires from 1 October 2012, BPSP is not subject to the same investment
return, inflation or life expectancy risks for Barclays that define d benefit schemes are. Members’ benefits reflect contributions paid and the level of
investment returns achieved.
Other
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 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 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
Barclays Bank P lc.
The Trustee Board comprises six Management Directors selected by Barclays, of whom three are independent Directors with no relationship with
Barclays (and who are not members of the UKRF), plus three Member Nominated Directors selected from eligible active staff, deferred 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 pro vider (Legal & General Assurance Society Limited), and is regulated by the FCA.
Similar principles of pension governance apply to Barclays Bank PLC’s other pension schemes, depending on local legislation.
Notes to the financial statements
Employee benefits
Barclays Bank PLC 2019 Annual Report on Form 20-F 177
Amounts recognised
The following tables include amounts recognised in the income statement and an analysis of benefit obligations and scheme assets for all Barclays
Bank 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.
Income statement charge
2019
2018
£m
£m
Current service cost
58
64
Net finance cost
(48)
(24)
Past service cost
-
134
Other movements
1
5
Total
11
179
The Barclays Bank Group is the principal employer of the UKRF and hence Scheme Assets and Defined Benefit Obligations relating to the UKRF are
recognised within the Barclays Bank Group. Barclays Bank UK Plc and Barclays Execution services Limited are participa ting employers in the UKRF
and their share of the UKRF service cost is borne by them. Of the £226 m current service cost in the table on the next page, £90 m rela tes to Barclays
Bank UK Plc and £78 m relates to Ba rclays Execution services Limited. While the entire current service cost is accounted for in the Barclays Bank
Group on balance sheet, the income statement charge is accounted for across all the participating employers.
Balance sheet reconciliation
2019
2018
Barclays Bank Group Total
Of which relates to UKRF
Barclays Bank Group Total
Of which relates to UKRF
£m
£m
£m
£m
Benefit obligation at beginning of the year
(28,237)
(27,301)
(30,243)
(29,160)
Current service cost
(226)
(210)
(240)
(226)
Interest costs on scheme liabilities
(747)
(718)
(705)
(677)
Past service cost
(134)
(140)
Remeasurement (loss)/gain - financial
(3,087)
(2,964)
1,129
1,075
Remeasurement (loss)/gain - demographic
223
214
(242)
(245)
Remeasurement (loss)/gain - experience
277
266
(75)
(94)
Employee contributions
(5)
(1)
(4)
(1)
Benefits paid
1,459
1,410
2,205
2,167
Exchange and other movements
45
72
Benefit obligation at end of the year
(30,298)
(29,304)
(28,237)
(27,301)
Fair value of scheme assets at beginning of the
year
29,722
29,036
30,922
30,112
Interest income on scheme assets
795
774
729
709
Employer contribution
755
731
754
741
Settlements
(2)
(106)
-
Remeasurement - return on plan assets greater
than discount rate
2,312
2,230
(400)
(360)
Employee contributions
5
1
4
1
Benefits paid
(1,459)
(1,410)
(2,205)
(2,167)
Exchange and other movements
(35)
24
Fair value of scheme assets at the end of the year
32,093
31,362
29,722
29,036
Net surplus/(deficit)
1,795
2,058
1,485
1,735
Retirement benefit assets
2,108
2,058
1,768
1,735
Retirement benefit liabilities
(313)
(283)
-
Net retirement benefit assets/(liabilities)
1,795
2,058
1,485
1,735
Included within the Barclays Bank Group’s benefit obligation was £ 760 m (2018: £757 m) relating to overseas pensions and £ 166 m (2018: £172 m)
relating to other post- employment benefits.
Notes to the financial statements
Employee benefits
Barclays Bank PLC 2019 Annual Report on Form 20-F 178
As at 31 December 2019 , the UKRF’s scheme assets were in surplus versus IAS 19 obligations by £2, 058m (2018 : £ 1 ,735 m). The movement for the
UKRF was driven by higher than assumed asset returns, payment of deficit reduction contributions, updated mortality assumptions, and lower than
expected inflation, partially offset by a decrease in the discount rate .
The weighted average duration of the benefit payments reflected in the defined benefit obligation for the UKRF is 17 years. The UKRF expected
benefits are projected to be paid out for in excess of 50 years, although 25% of the total benefits are expected to be paid in the next 10 years; 30%
in years 11 to 20 and 25% in years 20 to 30. The remainder of the benefits are expected to be paid beyond 30 years.
Of the £1,410 m (2018: £2,16 7m) UKRF bene fits paid out, £580 m (2018: £1,420 m) related to transfers out of the fund.
Where a scheme’s assets exceed its obligation, an asset is recognised to the extent that it does not exceed the present value of future contribution
holidays or refunds of contribu tions (the asset ceiling). In the case of the UKRF the asset ceiling is not applied as, in certain specified circumstances
such as wind - up, the Barclays Bank Group expects to be able to recover any surplus. Similarly, a liability in respect of future minimum funding
requirements is not recognised.
The Trustee does not have a substantive right to augment benefits, nor do they have the right to wind up the plan
except in the dissolution of the Barclays Bank Group or termination of contributions by the Barclays Bank Grou p. The application of the asset ceiling
to other plans and recognition of additional liabilities in respect of future minimum funding requirements are 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.
Key UKRF financial assumptions
2019
2018
% p.a.
% p.a.
Discount rate
1.92
2.71
Inflation rate (RPI)
3.02
3.25
The UKRF discount rate assumption for 2019 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 forward rates after year 3 0 are flat. The RPI inflation
assumption for 2019 was set by reference to the Bank of England’s implied inflation curve, assuming the forward rates remain flat after 30 years.
The inflation assumption incorporates a deduction of 20 basis points as an allow ance for an inflation risk premium. The methodology used to
derive the discount rate and price inflation assumptions is consistent with that used at the prior year end, except for a switch to holding forward
rates rather spot rates flat after year 30.
The UKRF’s post- retirement mortality assumptions are based on a best estimate assumption derived from an analysis in 2019 of the UKRF’s own
post- retirement mortality experience, and taking account of recent evidence from published mortality surveys. An allowa nce has been made for
future mortality improvements based on the 2018 core projection model published by the Continuous Mortality Investigation Bureau subject to a
long - term trend of 1.5% per annum in future improvements. The methodology used is consistent with the prior year end, except that the 2017 core
projection model was used at 2018, and a long - trend of 1.25% p er annum was applied. The table below shows how the assumed life expectancy at
60, for members of the UKRF, has varied over the past three yea rs:
Assumed life expectancy
2019
2018
2017
Life expectancy at 60 for current pensioners (years)
– Males
27.1
27.7
27.8
– Females
29.3
29.4
29.4
Life expectancy at 60 for future pensioners currently aged 40 (years)
– Males
28.9
29.2
29.3
– Females
31.1
31.0
31.0
The assumption for future transfers out has been removed, to reflect lower volumes experienced in 2019 and immaterial volumes expected going
forwards. The previous assumption was that 5% of the benefit obligation in respect of deferred members will transfer out during 2020, 2.5% in
2021, tapering down to 0% from 2022 onwards.
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, except in the case of the inflation sensitivity where other assumptions that
depend on assumed inflation have also been amended correspondingly. 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 shou ld not be interpreted
as Barclays expressing any specific view of the probability of such movements happening.
Notes to the financial statements
Employee benefits
Barclays Bank PLC 2019 Annual Report on Form 20-F 179
Change in key assumptions
2019
2018
(Decrease)/Incre
ase in UKRF
defined benefit
obligation
(Decrease)/Increa
se in UKRF defined
benefit obligation
£bn
£bn
Discount rate
0.50% p.a. increase
(2.3)
(2.1)
0.25% p.a. increase
(1.2)
(1.1)
0.25% p.a. decrease
1.2
1.1
0.50% p.a. decrease
2.6
2.4
Assumed RPI
0.50% p.a. increase
1.5
1.3
0.25% p.a. increase
0.8
0.7
0.25% p.a. decrease
(0.7)
(0.6)
0.50% p.a. decrease
(1.4)
(1.3)
Life expectancy at 60
One year increase
1
0.9
One year decrease
(1)
(0.9)
Assets
A long - 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 - term retu rns and some asset classes may be
more volatile than others. The long - term investment strategy ensures, among other aims, that investments are adequately diversified.
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.
The value of the assets of the schemes and their percentage in relation to total scheme assets were as follows:
Analysis of scheme assets
Barclays Bank Group Total
Of which relates to UKRF
Value
% of total
fair value of
scheme
assets
Value
% of total
fair value of
scheme
assets
£m
%
£m
%
As at 31 December 2019
Equities
2,349
7.3
2,174
6.9
Private equities
2,083
6.5
2,083
6.6
Bonds - fixed government
3,447
10.7
3,175
10.1
Bonds - index - linked government
11,036
34.4
11,027
35.2
Bonds - corporate and other
9,234
28.8
9,042
28.8
Property
1,644
5.1
1,633
5.2
Infrastructure
1,558
4.9
1,558
5.0
Cash and liquid assets
742
2.3
670
2.2
Fair value of scheme assets
32,093
100.0
31,362
100.0
As at 31 December 2018
Equities
3,349
11.3
3,211
11.1
Private equities
1,995
6.7
1,995
6.9
Bonds - fixed government
3,320
11.2
3,062
10.5
Bonds - index - linked government
10,945
36.8
10,936
37.7
Bonds - corporate and other
6,371
21.4
6,197
21.3
Property
1,712
5.8
1,702
5.9
Infrastructure
1,196
4.0
1,196
4.1
Cash and liquid assets
834
2.8
737
2.5
Fair value of scheme assets
29,722
100.0
29,036
100.0
Notes to the financial statements
Employee benefits
Barclays Bank PLC 2019 Annual Report on Form 20-F 180
Included within the fair value of scheme assets were nil (2018 : nil) relating to shares in Barclays PLC and nil (2018: nil) relating to bonds issued by
Barclays PLC. The UKRF also invests in pooled investment vehicles which may hold shares or debt issued by Barclays PLC.
The UKRF assets above do not include the Senior Notes asset referred to in the section below on Triennial Valuation, as these are non - transferable
instrument s and not recognised under IAS19.
Approximately 44 % 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. Th e swaps are used to reduce the scheme’s inflation and duration risks against its
liabilities.
Triennial Valuation
The latest triennial actuarial valuation of the UKRF with an effective date of 30 September 2019 has been completed. This valuation showed a
funding deficit of £2.3bn and a funding level of 94%, compared to a £4.0bn funding deficit in the 30 September 2018 update, and a £7.9bn funding
deficit in the previous triennial valuation (effective date 30 September 2016). The decrease in funding deficit over the year to 30 September 2019
was mainly driven by the payment of deficit reduction contributions and changes to mortality assumptions.
The Bank and UKRF Trustee have agreed a revised statement of funding principles, schedule of contributions, and recovery plan to seek to eliminate
the funding deficit.
The main differences between the funding and accounting assumptions are a different approach to setting the discount rate and a more
conservative longevity assumption for funding.
The deficit reduc tion contributions agreed with the UKRF Trustee as part of the 30 September 2019 triennial valuation recovery plan are show n
alongside the deficit reduction contributions agreed in 2017 for the prior 30 September 2016 triennial valuation.
Deficit reduction
contributions under the
Deficit reduction
contributions under the
30 September 2016 valuation
30 September 2019 valuation
Year
£m
£m
Cash paid:
2019 - paid in two installments of £250m in April and September
500
-
2019 - paid in December
-
500
Future commitments:
2020
500
500
2021
1,000
700
2022
1,000
294
2023
1,000
286
2024 - 2026
1,000 each year
-
As part of the triennial actuarial valuation, Barclays Bank PLC agreed to pay a £500 m contribution on 11 December 2019 and at the same time the
UKRF subscribed for non - transferrable listed senior fixed rate notes for £500m, backed by UK gilts (the Senior Notes). The Senior Notes were issued
by Heron Issuer Limited (Heron), an entity that is consolidated within the Barclays Group under IFRS10. The Senior Notes entitle the UKRF to semi-
annual coupon payments for five years, and full repayment of the subscription in cash at maturity in 2024. Heron acquired the gilts from BBPLC for
cash of £60 0m to support these payments. BBPLC also subscrib ed for Junior notes issued by Heron for £100m. The contribution forms part of the
recovery plan agreed as part of the 2019 valuation of the UKRF.
No liability is rec o gnised under IAS19 for the obligation to make deficit reduction
contributions, for the obligation of Heron to repay the Senior Notes, or for the cash received by BBPLC from Heron for the transfer of the gilts, as
settlement in 2024 gives rise to both a reduction in cash and a corresponding increa se in net defined benefit assets.
The deficit reduction contributions are in addition to the regular contributions to meet the Barclays Bank Group’s share of the cost of benefits
accruing over each year. The next funding valuation of the UKRF is due to be completed in 202 3 with an effective date of 30 September 20 22 .
Other support measures agreed which remain in place
Collateral – The UKRF Trustee and Barclays Bank PLC have entered into an arrangement whereby a collateral pool has been put in place to provide
security for the UKRF funding deficit as it increases or decreases over time. The collateral pool is currently made up of government securities, and
agreement was made with the Trustee to cover 100% of the funding deficit with an overall cap of £9b n. The arrangement provides the UKRF
Trustee with dedicated access to the pool of assets in the event of Barclays Bank PLC not paying a deficit reduction contribution to the UKRF or in
the event of B arclays Bank PLC’s insolvency. These assets are included within Note 37 Assets pledged, collateral received and assets transferred.
Support from Barclays PLC – In the event of Barclays Bank PLC not paying a deficit reduction contribution payment required by a specified pre-
payment date, Barclays PLC has entered into an arrangement whereby it will be required to use, in first priority, dividends received from Barclays
Bank UK PLC (if any) to invest the proceeds in Barclays Bank PLC (up to the maximum amount of the deficit reduction contribution unpaid by
Barclays Bank PLC). The proceeds of the investment will be used to discharge Barclays Bank PLC’s unpaid deficit reduction contribution.
Notes to the financial statements
Employee benefits
Barclays Bank PLC 2019 Annual Report on Form 20-F 181
Participation – As permitted under the Financial Services and Markets Act 2000 (Banking Reform) (Pensions) Regulations 2015, Barclays Bank UK
PLC is a participating employer in the UKRF and will remain so during a transitional phase until September 2025 as set out in a deed of
participation. Barclays Bank UK PLC will make contributions for the future service of its employees who are currently Afterwork members and, in
the event of Barclays Bank PLC’s insolvency during this period provision has been made to require Barclays Bank UK PLC to become the principal
employer of the UKRF. Barclays Bank PLC’s Section 75 debt would be trigg ered by the insolvency (the debt would be calculated after allowing for
the payment to the UKRF of the collateral above) .
Defined benefit c ontributions paid with respect to the UKRF were as follows:
Contributions paid
£m
2019
1,231
2018
741
2017
1,124
There were nil (2018: nil; 2017: £153 m) Section 75 contributions included within the Barclays Bank Group’s contributions paid as no participating
employ ers left the UKRF scheme in 2019 .
The Barclays Bank Group’s expected contribution to the UKRF in respect of defined benefits in 2020 is £ 560m (2019 : £ 562 m). In addition, the
expected contributions to UK defined con tribution schemes in 2020 is £7 m (2019: £7m) to the UKRF and £41m (2019: £37 m) to the BPSP.
Notes to the financial statements
Scope of consolidation
Barclays Bank PLC 2019 Annual Report on Form 20-F 182
The section presents information on the Barclays Bank Group ’s investments in subsidiaries, joint ventures and associates and its interests in
structured entities. Detail is also given on securitisation transactions the Barclays Bank Group has entered into and arrangements that are held off-
balance sheet.
33 Principal subsidiaries
Barclays Bank Group applies IFRS 10
Consolidated Financial Statements
. The consolidated financial statements combine the financial statements of
Barclays Bank PLC and all of its subsidiaries. Subsidiaries are entities over which Barclays Bank Group has con trol. Under IFRS 10, this is when
Barclays Bank 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.
Barclays Bank 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 Barclays Bank
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 Bank PLC, investments in subsidiaries are stated at cost less impairment.
Investment s in subsidiaries, the majority of which are engaged in banking related activities, are recorded on the balance sheet at historical cost less
any impairment. At 31 December 201 9 the historical cost of inve stments in subsidiaries was £16,606m (2018: £15,452 m), and impairment
allowances recognised against these inve stments totalled £501m (2018: £494m). The increase in historical cost is predominantly due to capital
injections into Barclays Bank Ireland PLC, partially offset by intra - group transfers.
At the end of each reporting period an impairment review is undertaken in respect of investment in subsidiaries. Impairment is required where the
investment exceeds the recoverable amou nt. The recoverable amount is calculated using a value in use (VIU) methodology to arrive at the present
value of future cash flows expected to be derived from the investment. The VIU calculation uses forecast attributable profit, based on financial
budget s approved by management, covering a five- year period, as an approximation of future cash flows. Terminal growth rates ranging from
0.5% to 1.5% have been applied to arrive at cash flows thereafter, which are based on long term expected growth rates publis hed by the
International Monetary Fund. The forecasted cash flows have been discounted at pre - tax rate s ranging from 13.7% to 15.3% . There has been no
material change to the carrying value of investments in subsidiaries as a result of the impairment review .
Principal subsidiaries for the Barclays Bank Group are set out below. This includes those subsidiaries that are most significant in the context of the
Barclays Bank Group’s business, results or financial position.
Principal place of
business or
incorporation
Percentage of
voting rights held
Non -controlling
interests -
proportion of
ownership
interests
Non -controlling
interests -
proportion of
voting interests
Company Name
Nature of business
%
%
%
Barclays Bank Ireland PLC
Ireland
Banking, holding company
100
-
-
Barclays Capital Inc.
United States
Securities dealing
100
-
-
Barclays Capital Securities Limited
United Kingdom
Securities dealing
100
-
-
Barclays Securities Japan Limited
Japan
Securities dealing
100
-
-
Barclays US LLC
United States
Holding company
100
-
-
Barclays Bank Delaware
United States
Credit card issuer
100
-
-
The country of registration or incorporation is also the principal area of operation of each of the above subsidiaries.
Ownership interests are in some cases different to voting interests due to the existence of non - voting equity interests, such as preference shares.
See Note 29 for more information.
Significant judgements and assumptions used to determine the scope of the consolidation
Determining whether the Barclays Bank 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 will involve assessing the purpose and
design of the entity. It will also often be necessary to consider whether the B arclays Bank 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.
Notes to the financial statements
Scope of consolidation
Barclays Bank PLC 2019 Annual Report on Form 20-F 183
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
Barclays Bank 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 Barclays Bank Group has control of an entity. However, the entity
set out below is excluded from consolidation because the Barclays Bank Group does not have exposure to its variable returns.
Country of registration or incorporation
Company name
Percentage of voting
rights held (%)
Equity shareholders' funds
(£m)
Retained profit for the
year (£m)
Cayman Islands
Palomino Limited
100
-
-
This entity is managed by an external counterparty and consequently is not controlled by the Barclays Bank Group. Interests relating to this entity
are included in Note 34.
Significant restrictions
As is typical for a g roup of its size and international scope, there are restrictions on the ability of the Barclays Bank Group 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 of non - controlling interests. These are considered below.
Regulatory requirements
The Barclays Bank Group’s principal subsidiary companies have assets and liabilities before intercompany eliminations of £307bn (2018: £265bn)
and £285bn (2018 : £2 46bn) respectively. The assets and liabilities are subject to prudential regulation and regulatory capital requirements in the
countries in which they are regulat ed. These require entities to maintain minimum capital levels which cannot be returned to the p arent company,
Barclays Bank PLC on a going concern basis.
In order to meet capital requirements, subsidiaries may issue certain equity accounted and debt accounted financial instruments such as Tier 1 and
Tier 2 capital instruments and other forms of subordinated liabilities. Refer to Note 26 and Note 27 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 Barclays Bank Group are required to meet PRA or local regulatory requirements pertaining to liquidity. Some of the
regulated subsidiaries include Barclays Capital Securities Limited (which is regulated on a combined basis with Barclays Bank PLC under a Domestic
Liquidity Sub - Group (DoLSub) arrangement ) , Barclays Bank Ireland PLC, Barclays Capital Inc. and Barc lays Bank Delaware. See pages 72 to 76 for
further details of liquidity requirements, including those of the Barclays Ba nk Group’s significant subsidiaries.
Statutory requirements
The Barclays Bank 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 Bank PLC, the
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 Barclays Bank Group uses its financial assets to raise finance in the form of securitisations and through the liquidity schemes of central banks ,
as well as to provide security for the UK Retirement Fund . Once encumbered, the assets are not available for transfer around the Barclays Bank
Group. The assets typically affected are disclosed in Note 37.
Other restrictions
The Barclays Bank Group is required to maintain balances with central banks and other regulatory authorit ies and these amounted to £4,505m
(2018: £4,717 m).
34 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 Barclays Bank 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 consolida te it.
Consolidated structured entities
The Barclays Bank Group has contractual arrangements which may require it to provide financial support to the following types of consolidated
structured entities:
Notes to the financial statements
Scope of consolidation
Barclays Bank PLC 2019 Annual Report on Form 20-F 184
Securitisation vehicles
The Barclays Bank Group uses securitisation as a source of financing and a means of risk transfer. Refer to Note 36 for further detail.
Commercial paper (CP) and medium - term note conduits
The Barclays Bank Group provided £8.3 bn (2018: £1 1.7 bn) in undrawn contractual backstop liquidity facilities to CP conduits.
Fund management entities
In previous periods, Barclays Bank Group had contractually guaranteed the performance of certain cash investments in a number of managed
investment funds which resulted in their consolidation. As at 31 December 2019, the notional value of the guarantees were £ nil (2018: £nil) as the
European Wealth Funds associated with these guarantees were either closed or ownership has been transferred outside the Barclays Bank Group
and they are no longer conso lidated.
Employee benefit and other trusts
The Barclays Bank Group provides capital contributions to employee benefit trusts to enable them to meet obligations to employees in relation to
share - based remuneration arrangements. During 2019, the Barclays Bank Group provided undrawn liquidity facilities of £2.5 bn (2018: £2 .6 bn) to
certain trusts.
Unconsolidated structured entities in which the Barclays Bank Group has an interest
An interest in a structured entity is any form of contractual or non - contractual involvement which creates variability in returns arising from the
performance of the entity for the Barclays Bank Group. Such interests include holdings of debt or equity securities, derivatives that transfer financial
risks from the entity to the Barclays Bank Group, lending, loan commitments, financial guarantees and investment management agreements.
Interest rate swaps, foreign exchange derivatives that are not complex and which expose the Barclays Bank 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.
The nature and extent of the Barclays Bank Group’s interests in structured entities is summarised below:
Notes to the financial statements
Scope of consolidation
Barclays Bank PLC 2019 Annual Report on Form 20-F 185
Summary of interests in unconsolidated structured entities
Secured
financing
Short -term
traded interests
Traded
derivatives
Other interests
Total
£m
£m
£m
£m
£m
As at 31 December 2019
Assets
Trading portfolio assets
-
9,585
-
76
9,661
Financial assets at fair value through the income statement
32,859
-
-
2,500
35,359
Derivative financial instruments
-
-
2,369
-
2,369
Financial assets at fair value through other comprehensive income
-
-
-
391
391
Loans and advances at amortised cost
-
-
-
17,092
17,092
Reverse repurchase agreements and other similar secured lending
77
-
-
-
77
Other assets
-
-
-
22
22
Total assets
32,936
9,585
2,369
20,081
64,971
Liabilities
Derivative financial instruments
-
-
3,171
2,437
5,608
As at 31 December 2018
Assets
Trading portfolio assets
-
12,206
-
-
12,206
Financial assets at fair value through the income statement
32,359
-
-
2,595
34,954
Derivative financial instruments
-
-
5,236
-
5,236
Financial assets at fair value through other comprehensive income
-
-
-
-
-
Loans and advances at amortised cost
-
-
-
15,019
15,019
Reverse repurchase agreements and other similar secured lending
-
-
-
-
-
Other assets
-
-
-
13
13
Total assets
32,359
12,206
5,236
17,627
67,428
Liabilities
Derivative financial instruments
-
-
6,438
2,586
9,024
Secured financing arrangements, short - term traded interests and traded derivatives are typically managed under market risk manageme nt policies
described on page 39 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
conduits and lending where the interest is driven by normal customer demand .
Secured financing
The Barclays Bank Group routinely enters into reverse repurchase contracts, stock borrow ing 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 Barclays Bank Group has minimal exposure to the performance of the structured entity counterparty. This
includes margin lending which is presented under financial assets at fair value through the income statement to align to the balance sheet
presentation.
Short- term traded interests
The Barclays Bank Group buys and sells interests in structured entities as part of its trading activities, for example, retail mortgage - backed
securities, collateralised debt obligations and similar interests. Such interests are typically held individually or as part of a larger portfoli o for no
more than 90 days. In such cases, the Barclays Bank 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 2019, £ 8 ,903 m (2018: £ 8 ,436 m) of the Barclays Bank Group’s £ 9,585 m (2018: £12,206m) short-term traded interests were
comprised of debt securities issued by asset securitisation vehicles.
Traded derivatives
The Barclays Bank 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 among other things. The main derivative types which are consi dered interests in structured entities
include index - 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 practi ces are detailed in Note 13. 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
Notes to the financial statements
Scope of consolidation
Barclays Bank PLC 2019 Annual Report on Form 20-F 186
margining requirements are consistent with mar ket practice for many derivative arrangements and in line with the Barclays Bank Group’s normal
credit policies.
Derivative transactions require the counterparty to provide cash or other collateral under margining agreements to mitigate counterparty credit
risk. The Barclays Bank Group is mainly exposed to settlement risk on these derivatives which is mitigated through daily margining . Total notionals
amounted to £ 314 ,170 m (2018: £246,774 m).
Except for credit 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 der ivative 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 Barclays Bank 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 in most cases.
Other interests in unconsolidated structured entities
The Barclays Bank 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.
Nature of interest
Multi -seller
conduit
programmes
Lending
Investment funds
and trusts
Others
Total
£m
£m
£m
£m
£m
As at 31 December 2019
Trading portfolio assets
-
-
-
76
76
Financial assets at fair value through the income statement
– Debt securities
-
-
-
80
80
– Loans and advances
-
-
-
2,417
2,417
– Equity securities
-
-
-
3
3
Financial assets at fair value through other comprehensive
income
-
-
-
391
391
Loans and advances at amortised cost
5,930
7,874
-
3,288
17,092
Other assets
17
4
1
-
22
Total on -balance sheet exposures
5,947
7,878
1
6,255
20,081
Total off - balance sheet notional amounts
8,649
3,732
-
1,621
14,002
Maximum exposure to loss
14,596
11,610
1
7,876
34,083
Total assets of the entity
78,716
139,210
501
15,638
234,065
As at 31 December 2018
Trading portfolio assets
-
-
-
-
-
Financial assets at fair value through the income statement
– Debt securities
444
-
-
114
558
– Loans and advances
-
-
-
2,037
2,037
– Equity securities
-
-
-
-
-
Financial assets at fair value through other comprehensive
income
-
-
-
-
-
Loans and advances at amortised cost
6,100
8,269
-
650
15,019
Other assets
9
3
1
-
13
Total on -balance sheet exposures
6,553
8,272
1
2,801
17,627
Total off - balance sheet notional amounts
11,671
4,172
-
431
16,274
Maximum exposure to loss
18,224
12,444
1
3,232
33,901
Total assets of the entity
73,109
187,176
455
21,255
281,995
Maximum exposure to loss
Unless specified otherwise below, the Barclays Bank Group’s maximum exposure to loss is the total of its on - balance sheet positions and its off-
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.
Multi-seller conduit programme
Notes to the financial statements
Scope of consolidation
Barclays Bank PLC 2019 Annual Report on Form 20-F 187
The multi-seller conduit engages in providing financing to various clients and holds 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 conduit. The Barclays Bank Group’s off - balance sheet exposure included in the table above represents liquidity facilities that are provided to the
conduit for the benefit of the holders of the commercial paper issued by the conduit and will only be drawn where the conduit is unable to access
the commercial paper market. If these liquidity facilities are drawn, the Barclays Bank Group is protected from loss through over - collateralisation,
seller guarantees, or other credit enhanc ements provided to the conduit.
Lending
The portfolio includes lending provided by the Barclays Bank 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 Barclays Bank 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 Barclays Bank Gr oup incurred an impairment of £7m (2018: £66 m) against such facilities.
Investment funds and trusts
In the course of its fund management activities, the Barclays Bank Group establishes pooled investment funds that comprise investments of various
kinds, tailored to meet certain investors’ requirements. The Barclays Bank Group’s interest in funds is generally restricted to a fund management
fee, the value of which is typ ically based on the performance of the fund.
The Barclays Bank 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 Barclays Bank 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 Bank PLC has no other risk exposure to
the trusts.
Other
This includes fair value loans with structured entities where the market risk is materially hedged with corresponding derivative contracts, interests
in debt securities issued by securitisation vehicles and drawn and undrawn loan facilities to these entities.
Assets transferred to sponsored unconsolidated structured entities
Assets transferred to sponsored unconsolidated structured entities were £471m (2 018: £516m).
35 Investments in associates and joint ventures
Accounting for associates and joint ventures
The Barclays Bank Group applies IAS 28
Investments in Associates
Joint Arrangements
. Associates are entities in which the Barclays
Bank Group has significant influence, but not control, over the operating and financial policies. Generally the Barclays Bank Group holds more than
20%, but less than 50%, of their voting shares. Joint ventures are arrangements where the Barclays Bank Group has joint control and rights to the
net assets of the entity.
The Barclays Bank Group’s investments in associates and joint ventures are initially recorded at cost and increased (or decreased) each year by the
Barclays Bank Group’s share of the post acquisition profit/(loss). The Barclays Bank 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
constructi ve 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 Bank Group.
2019
2018
Associates
Joint ventures
Total
Associates
Joint ventures
Total
£m
£m
£m
£m
£m
£m
Equity accounted
30
265
295
481
281
762
Held at fair value through profit or loss
-
516
516
-
509
509
Total
30
781
811
481
790
1,271
Summarised financial information for the Barclays Bank 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 Barclays Bank Group’s share , for the year ended 31 December 2019, 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.
Notes to the financial statements
Scope of consolidation
Barclays Bank PLC 2019 Annual Report on Form 20-F 188
Associates
Joint ventures
2019
2018
2019
2018
£m
£m
£m
£m
Profit from continuing operations
83
173
86
54
Other comprehensive income / (expenses)
-
28
3
32
Total comprehensive income from continuing operations
83
201
89
86
Unrecognised shares of the losses of individually immaterial associates and joint ventures were £nil (2018: £nil).
The Barclays Bank commitments and contingencies to its associates and joint ventures comprised unutilised credit facilities provided to customers
of £1,726 m (2018: £1,71 5m). In addition, the Barclays B ank Group has made commitments to finance or otherwise provide resources to its joint
ventures and associates of £nil (2018: £318m).
36 Securitisations
Accounting for securitisations
The Barclays Bank 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, dependin g 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 Barclays Bank 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 Barclays Bank 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 reinves tment, 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, Barclays Bank Group makes transfers of financial assets, either where legal rights to the cash flows
from the asset are passed to the counterparty or beneficially, where Barclays Bank 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.
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
Barclays Bank Group was party to securitisation transactions involving its 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 Barclays Bank Group’s cont inuing 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.
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:
2019
2018
Assets
Liabilties
Assets
Liabilties
Carrying
amount
Fair value
Carrying
amount
Fair value
Carrying
amount
Fair value
Carrying
amount
Fair value
£m
£m
£m
£m
£m
£m
£m
£m
Barclays Bank Group
Loans and advances at amortised cost
Credit cards, unsecured loans and other
retail lending
3,035
3,183
(2,426)
(2,429)
3,042
3,094
(2,975)
(2,962)
Balances included within loans and advances at amortised cost represent securitisations where substantially all the risks and rewards of the asset
have been retained by Barclays Bank Group.
Notes to the financial statements
Scope of consolidation
Barclays Bank PLC 2019 Annual Report on Form 20-F 189
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 no tes
may be different to the maturity and interest of the transferred assets.
For transfers of assets in relation to r epurchase agreements, see Note 37
Continuing involvement in fin ancial assets that have been derecognised
In some cases, the Barclays Bank Group may have transferred a financial asset in its entirety but may hav e continuing involvement in it. This arises
in asset securitisations where loans and asset backed securities were derecognised as a result of the Barcl ays Bank Gr oup’s involvement with
commercial mortgage backed securities. 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 potent ial financial implications of such continuing involvement:
Continuing involvement
a
Gain/(loss) from continuing
involvement
Carrying amount
Fair value
Maximum
exposure to loss
For the year
ended
Cumulative to 31
December
Type of transfer
£m
£m
£m
£m
£m
2019
Commercial mortgage backed securities
189
188
189
1
4
2018
Commercial mortgage backed securities
135
135
135
2
3
Note
a Assets which represent the Barclays Bank Group’s continuing involvement in derecognised assets are recorded in Loans and advances at amortised cost.
37 Assets pledge d, collateral received and assets transferred
Assets are pledged or transferred as collateral to secure liabilities under repurchase agreements, securitisations and stock lending agreements or as
security deposits relating to derivatives. Assets transferred are non - cash assets transferred to a third party that do not qualify for derecognition
from the Barclays Bank Group balance sheet, for example because Barclays retains substantially all the exposure to those assets under an
agreement to repurchase them in the future for a fixed price.
Where non - cash assets are pledged or transferred as collateral for cash received, the asset continues to be recognised in full, and a related liability
is also recognised on the balance sheet. Liabilities are shown on a net basis in acc ordance with IAS 32. Where non - cash assets are pledged or
transferred as collateral in an exchange for non - cash assets, the transferred asset continues to be recognised in full, and there is no associated
liability as the non - cash collateral received is not recognised on the balance sheet. The Barclays Bank Group is unable to use, sell or pledge the
transferred assets for the duration of the transaction and re mains exposed to interest rate risk and credit risk on these pledged assets. Unless
stated, the counterparty's recourse is not limited to the transferred assets.
The following table summarises the nature and carrying amount of the assets pledged as secur ity against these liabilities:
Barclays Bank Group
2019
2018
£m
£m
Cash collateral and settlements
61,158
53,540
Loans and advances at amortised cost
18,726
12,597
Trading portfolio assets
65,341
63,373
Financial assets at fair value through the income statement
8,107
7,450
Financial assets at fair value through other comprehensive income
8,011
9,179
Assets pledged
161,343
146,139
Notes to the financial statements
Scope of consolidation
Barclays Bank PLC 2019 Annual Report on Form 20-F 190
The following table summarises the transferred financial assets and the associated liabilities:
Barclays Bank Group
Transferred assets
Associated liabilities
£m
£m
At 31 December 2019
Derivatives
64,061
(64,061)
Repurchase agreements
35,562
(22,981)
Securities lending arrangements
53,099
-
Other
8,621
(4,430)
161,343
(91,472)
At 31 December 2018
Derivatives
55,082
(55,082)
Repurchase agreements
38,811
(25,721)
Securities lending arrangements
41,766
-
Other
10,480
(7,840)
146,139
(88,643)
Included within other are agreements where a counterparty's recourse is limited to the transferred assets. 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.
Carrying value
Fair value
Transferred
assets
Associated
liabilities
Transferred
assets
Associated
liabilities
Net position
£m
£m
£m
£m
£m
Barclays Bank Group
2019
Recourse to transferred assets only
3,035
(2,426)
3,183
(2,429)
754
2018
Recourse to transferred assets only
3,042
(2,975)
3,094
(2,962)
132
Barclays Bank Group has an additional £ 2.5bn (2018: £4.0bn) 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 issuances.
Total assets pledged includes a collateral pool put in place to provide security for the UKRF funding deficit. Refer to Note 32 for further details.
Collateral held as security for assets
Under certain transactions, including reverse repurchase agreements and stock borrowing transactions, Barclays Bank Group is allowed to resell or
re - pledge the collateral held. The fair value at the balance sheet date of collateral accepted and re - pledged to others was as follows:
Barclays Bank Group
2019
2018
£m
£m
Fair value of securities accepted as collateral
660,999
597,100
Of which fair value of securities re - pledged/transferred to others
554,111
530,364
Additional disclosure has been included in collateral and other credit enhancements on pages 47 to 48.
Notes to the financial statements
Other disclosure matters
Barclays Bank PLC 2019 Annual Report on Form 20-F 191
The notes included in this section focus on related party transactions, Auditors’ remuneration, Directors’ remuneration and Transition disclosures.
Related parties include any subsidiaries, associates, joint ventures and Key Management Personnel.
38 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 transfer of European operations to Barclays Bank Ireland PLC has materially affected the financial statements of Barclays Bank PLC during the
year with regards to its related party transactions. There was no impact on the consolidated financial statements of the Barclays Bank Group. Refer
to Note 39 for further details, including intra - group bal ances.
Parent company
The parent company, which is also the ultimate parent company, is Barclays PLC, which holds 100% of the issued ordinary shares of Barclays Bank
PLC.
Subsidiaries
Transactions between Barclays Bank PLC and its subsidiaries also meet the definition of related party transactions. Where these are eliminated on
consolidation, they are not disclosed in the Barclays Bank Group’s financial statements. A list of the Barclays Bank Group’s principal subsidiaries is
shown in Note 33.
Fellow su bsidiaries
Transactions between the Barclays Bank Group and other subsidiaries of the parent company also meet the definition of related party transactions.
Associates, jo int ventures and other entities
The Barclays Bank Group provides banking services to its associates, joint ventures and the Barclays Bank Group pension funds (principally the UK
Retirement Fund), providing loans, overdrafts, interest and non - interest bearing deposits and current accounts to these entities as well as other
services. Barc lays Bank Group companies also provide investment management and custodian services to the Barclays Bank Group pension
schemes. All of these transactions are conducted on the same terms as third party transactions. Summarised financial information for the Barclays
Bank Group’s investments in associates and joint ventures is set out in Note 35.
Amounts included in the Barclays Bank Group’s financial statements, in aggregate, by category of related party entity are as follows:
Parent
Fellow
subsidiaries
Associates
Joint ventures
Pension funds
£m
£m
£m
£m
£m
For the year ended and as at 31 December 2019
Total income
(717)
53
-
12
3
Credit impairment charges
-
-
-
-
-
Operating expenses
(90)
(3,023)
(5)
-
-
Total assets
2,097
2,165
-
1,303
3
Total liabilities
24,876
1,600
-
-
75
For the year ended and as at 31 December 2018
Total income
(416)
(3)
-
7
3
Credit impairment charges
-
-
-
-
-
Operating expenses
(122)
(3,630)
(1)
(7)
-
Total assets
727
1,091
12
1,288
3
Total liabilities
21,405
2,058
85
2
139
An entity that is consolidated within the Group under IFRS 10 has issued Senior No tes to the UKRF with a nominal value of £500m. This is not
included within the table above. Refer to Note 32 for further details. Total liabilities includes total liabilities are d erivatives transacted on behalf of
the pensions funds of £6 m ( 2018: £3 m).
Key Management Personnel
Key Management Personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of
Barclays Bank PLC (directly or indirectly) and comprise the Directors and Officers of Barclays Bank PLC, certain direct reports of the Chief Executive
Officer and the heads of major business units and functions.
Notes to the financial statements
Other disclosure matters
Barclays Bank PLC 2019 Annual Report on Form 20-F 192
The Barclays B ank Group provides banking services to Key Management Personnel and persons connected to them. Transactions during the year
and the balances outstanding were as follows:
Loans outstanding
2019
2018
£m
£m
As at 1 January
14.6
4.8
Loans issued during the year
a
0.1
12.6
Loan repayments during the year
b
(14.7)
(2.8)
As at 31 December
-
14.6
Notes
a Includes loans issued to existing Key Management Personnel and new or existing loans issued to newly appointed Key Management Personnel.
b Includes loan repayments by existing Key Management Personnel and loans to former Key Management Personnel.
No allowances for impairment were recognised in respect of loans to Key Management Personnel (or any connected person).
Deposits outstanding
2019
2018
£m
£m
As at 1 January
2.9
6.9
Deposits received during the year
a
11.5
17.4
Deposits repaid during the year
b
(10.2)
(21.4)
As at 31 December
4.2
2.9
Notes
a Includes deposits received from existing Key Management Personnel and new or existing deposits received from newly appointed Key Management Personnel.
b Includes deposits repaid by existing Key Management Personnel and deposits of former Key Management Personnel.
Total commitments outstanding
Total commitments outstanding refer to the total of any undrawn amounts on credit card and/or overdraft facilities provided to Key Management
Personnel. Total commitments outstanding as at 31 December 2019 were £0.1m (2018: £0.5 m).
Loans to Key Management Personnel (and persons connected to them) were made in the ordinary course of business; 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 did
not involve more than a normal risk of collectability or present other unfavourable features.
Notes to the financial statements
Other disclosure matters
Barclays Bank PLC 2019 Annual Report on Form 20-F 193
Remuneration of Key Management Personnel
Total remuneration awarded to 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. Costs recognised in the income statement reflect the accounting
charge for the year included within operating expenses. The difference between the values awarde d 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
Key Management Personnel.
2019
2018
£m
£m
Salaries and other short - term benefits
37.6
50.7
Pension costs
0.2
0.3
Other long - term benefits
9.1
12.6
Share - based payments
14.2
24.8
Employer social security charges on emoluments
6.0
8.5
Costs recognised for accounting purposes
67.1
96.9
Employer social security charges on emoluments
(6.0)
(8.5)
Other long - term benefits – difference between awards granted and costs recognised
(1.0)
4.5
Share - based payments – difference between awards granted and costs recognised
(0.7)
(2.1)
Total remuneration awarded
59.4
90.8
Disclosure required by the Companies Act 2006
The following information regarding Barclays Bank PLC Board of Directors is presented in accordance with the Companies Act 2006:
2019
2018
£m
£m
Aggregate emoluments
a
7.6
10.5
Amounts paid under LTIPs
b
0.2
0.6
7.8
11.1
Notes
a The aggregate emoluments include amounts paid for the 2019 year . In addition, deferr ed cash and share awards for 2019 with a total value at grant of £ 1.9m will be made to
Directors which will only vest subjec t to meeting certain conditions .
b The figure above for ‘Amounts paid under LTIPs’ for 2019 re lates to an LTIP award released to a Director in 2019. Dividend shares released on the award are excluded.
Pen sion contributions totalling £11, 932 were paid to defined contribution schemes on behalf of Directors (2018: £11,848 ). There were no notional
pension contributions to defined contribution schemes.
As at 31 December 2019, there were no Directors accruing benefits under a defined benefit scheme (2018: nil).
The aggregate amou nt of compensation payable to departing officer s in respect of loss of office was £3,929,875.
Of the figures in the table above, the amounts attributable to the highest paid Director in respect of qualifying services are as follows:
2019
2018
£m
£m
Aggregate emoluments
a
3.2
3.6
Amounts paid under LTIPs
-
-
3.2
3.6
Note
a The aggregate emoluments include amounts paid for the 2019 year. In addition, a deferred share award for 2019 with a value at grant of £1.2m will be made to the highest paid
Director which will only vest subject to meeting certain conditions.
There were no actual pension contributions to defined contribution schemes on behalf of the highest paid Director (2 018: £nil). There were no
notional pension contributions to defined contribution schemes.
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 2019 to persons who
served as Directors during the year was £nil (2018: £nil). The total value of guarantees entered into on behalf of Directors during 2019 was £nil
(2018: £nil).
Notes to the financial statements
Other disclosure matters
Barclays Bank PLC 2019 Annual Report on Form 20-F 194
39 Discontinued operations and assets included in disposal groups classified as held for sale and associated liabilities
Accounting for non -current assets held for sale and associated liabilities
The Barclays Bank Group applies IFRS 5
Non - 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.
A component of the Barclays Bank Group that has either been disposed of or is classified as held for sale is presented as a discontinued operation if
it represents a separate major line of business or g eographical area of operations, is part of a single coordinated plan to dispose of the separate
major line or geographical area of operations, or if it is a subsidiary acquired exclusively with a view to re - sale.
Barclays Bank Group
On 21 November 2019 Barclays Bank PLC sold its investment in The Logic Group Holdings Limited to Barclays Principal Investments Limited at its
fair value of £112m. On 26 December 2019 Barclays Bank PLC sold its investment in Barclays Funds Investments Limited to Barclays Equity
Holdings Limited at its fair value of £505m. Barclays Bank PLC recorded profit on disposal of £56m and £23m respectively.
UK banking business
Following the court approval of the ring - fencing transfer scheme on 9 March 2018, the UK banking business largely comprising Personal Banking,
Barclaycard Consumer UK and Business Banking customers, and related assets and liabilities was transferred to Barclays Bank UK PLC on 1 April
2018, to meet the regulatory ring - fencing requirement under the Financial Services (Banking Reform) Act 2013 and related legislation. Following
the transfer of the UK banking business, Barclays Bank PLC transferred the equity ownership in Barclays Bank UK PLC to Barclays PLC through a
dividend in specie on the same day. Accordingly, Barclays Bank UK PLC ceased to be a subsidiary of Barclays Bank PLC and became a direct
subsidiary of the ultimate parent, Barclays PLC.
The results of Barclays Bank UK PLC and its subsidiaries for the three months ended 31 March 2018 , the date prior to the transfer of ownership to
Barclays PLC, are included in the consolidated financial statements of Barclays Bank Group.
The transfer of the ownership of Barclays Bank UK PLC to Barclays PLC resulted in a material change to the consoli dated financial position and
results of Barclays Bank Group in 2018, in comparison to prior periods. It had no impact on the share capital and share premium of Barclays Bank
Group. Other equity instruments reduced by £2,070m relating to additional tier 1 ( AT1) securities transferred to Barclays Bank UK PLC. The fair
value through other comprehensive income reserve increased by £16m and retained earnings reduced by £14,187m.
Upon disposal of the equity ownership of Barclays Bank UK PLC on 1 April 2018, the UK banking business met the requirements for presentation as
a discontinued operation. As such, the results, which have been presented as the profit after tax in respect of discontinued operations on the face
of the Barclays Bank Group income statement, are analysed in the income statement below. In 2018, discontinued operations relating to the UK
banking business incurred a loss after tax of £47m and in 2017 discontinued op erations related to the UK banking business generated a profit of
£809m (discontinued operations in total incurred a loss after tax of £1,386m, which includes a loss of £2,195m loss relating to BAGL). The income
statement and cash flow statement below rep resent three months of results as a discontinued operation to 31 March 2018, compared to the full
year ended 31 December 2017.
Notes to the financial statements
Other disclosure matters
Barclays Bank PLC 2019 Annual Report on Form 20-F 195
UK banking business disposal group income statement
2019
2018
2017
For the year ended 31 December
£m
£m
£m
Net interest income
-
1,449
5,872
Net fee and commission income
-
296
1,176
Net trading income
-
(5)
(9)
Net investment income
-
6
160
Other income
-
2
8
Total income
-
1,748
7,207
Credit impairment charges and other provisions
-
(201)
(783)
Net operating income
-
1,547
6,424
Staff costs
-
(321)
(2,052)
Administration and general expenses
-
(1,135)
(2,959)
Operating expenses
-
(1,456)
(5,011)
Share of post- tax results of associates and joint ventures
-
-
(5)
Profit before tax
-
91
1,408
Taxation
-
(138)
(599)
(Loss)/profit after tax
-
(47)
809
Attributable to:
Equity holders of the parent
-
(47)
809
Non - controlling interests
-
-
-
(Loss)/profit after tax
-
(47)
809
The cash flows attributed to the UK banking business discontinued operation are as follows:
2019
2018
2017
For the year ended 31 December
£m
£m
£m
Net cash flows from operating activities
-
(522)
(355)
Net cash flows from investing activities
-
54
470
Net cash flows from financing activities
-
-
(128)
Net (decrease)/increase in cash and cash equivalents
-
(468)
(13)
Barclays Africa Group Holdings Limited and Barclays Africa Group Limited
On 1 August 2018 Barclays Bank PLC transferred the equity ownership of its subsidiary Barclays Africa Group Holdings Limited (BAGHL) to Barclays
PLC through a dividend in specie. Accordingly, BAGHL ceased to be a subsidiary of Barclays Bank PLC and became a direct subsidiary of the
ultimate parent, Barclays PLC. The value of this dividend, representing the historic cost of investment of Barclays Bank PLC in BAGHL was £269m.
BAGHL was subsequently renamed Barclays Principal Investments Limited.
Notes to the financial statements
Other disclosure matters
Barclays Bank PLC 2019 Annual Report on Form 20-F 196
Following the reduction of the Barclays Bank Group’s interest in BAGL in 2017, Barclays Bank Group’s remaining interest in BAGL was reported as a
financial asset at fair value through other comprehensive income. Prior to the disposal of shares on 1 June 2017, BAGL met the requirements for
presentation as a discontinued operation. As such, the results, which have been presented as the profit after tax and non - controlling interest in
respect of the discontinued operation on the face of the Barclays Bank Group income statement, are analysed in the income statement below,
which represents five months of results as a discontinued operation to 31 May 2017.
Barclays Africa disposal group income statement
2019
2018
2017
For the year ended 31 December
£m
£m
£m
Net interest income
-
-
1,024
Net fee and commission income
-
-
522
Net trading income
-
-
149
Net investment income
-
-
30
Other income
-
-
61
Total income
-
-
1,786
Credit impairment charges and other provisions
-
-
(177)
Net operating income
-
-
1,609
Staff costs
-
-
(586)
Administration and general expenses
a
-
-
(1,634)
Operating expenses
-
-
(2,220)
Share of post- tax results of associates and joint ventures
-
-
5
Loss before tax
-
-
(606)
Taxation
-
-
(154)
Loss after tax
b
-
-
(760)
Attributable to:
Equity holders of the parent
-
-
(900)
Non - controlling interests
-
-
140
Loss after tax
b
-
-
(760)
Notes
a
Includes impairment of £1,090 in 2017.
b
Total loss in respect of the discontinued operation in 2017 was £2,195m, which included the £60m loss on sale and £1,375m loss on recycling of other comprehensive loss on
reserves.
40 Auditor ’s remuneration
Auditor ’s remuneration is included within consultancy, legal and professional fees in administration and general expenses and comprises:
2019
2018
2017
£m
£m
£m
Audit of the Barclays Bank Group's annual accounts
16
14
11
Other services:
Audit of the Company's subsidiaries
a
12
10
27
Other audit related fees
b
6
6
8
Other services
1
1
2
Total Auditor's remuneration
35
31
48
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 KPMG in respect of the consolidated
financial statements of the 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.
The figures shown in the above table relate to fees paid to KPMG as principal auditor, of which the fees paid in relation to discontinued operations
were £ nil (2018: £nil, 2017 : £4 m).
Under SEC regulations, the remuneration of our auditors is required to be presented as follows: audit fees £31m (2018: £27m, 2017: £42m), audit-
related fees £3m (2018: £3m, 2017: £4m), tax fees £nil (2018: £nil, 2017: £nil), and all other fees £1m (2018: £ 1m, 2017: £2m).
Additional information
Barclays Bank PLC 2019 Annual Report on Form 20-F 197
Shareholder information
Additional shareholder information
Articles of Association
Barclays Bank PLC (the “Company”) is a public limited company registered in England and Wales under company number 01026167 (formerly
called Barclays Bank International Limited, a company incorporated under the name The Colonial Bank by the Colonial Bank Act 1925 and which
changed its name on 15 September 1925 to Barclays Bank (Dominion, Colonial and Overseas) and further changed its name on 22 September 1954
to Barclays Bank D.C.O. and on 1 October 1971 to Barclays Bank International Limited) was incorporated under the Companies Acts 1948 to 1967
as a limited company on 4 October 1971 and changed its name on 1 January 1985 to Barclays Bank 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 contain ed 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 by Special Resolution on 30 April 2010.
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. A
director shall not be required to hold any shares in the Company by way of qualification.
(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) A Director may hold any other office of the Company on such terms as the Board shall determine.
(iv) No director shall be required to retire from office at any annual general meeting by rotational retirement.
(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.
(vi) The Board may appoint any Director to any executive position o r 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 ma y 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
Boar d 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 Compa ny 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 Co mpany) 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/he r 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;
Additional information
Barclays Bank PLC 2019 Annual Report on Form 20-F 198
(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) concerning any other company in which the Director is interested as an officer or creditor or Shareholder but, broadly, only if he/she (together
with his/her connected persons) is directly or indirectly interested in less than 1% of either any class of the issued equity share capital or of the
voting rights of that company; and
(f) concerning any other arrangement for the benefit of employees of the Co mpany (or any other member of the Group) under which the Director
benefits or stands to benefit in a similar manner to the employees concerned and which does not give the Director any advantage which the
employees to whom the arrangement relates would not receive.
(g) to obtain insurance for the benefit of Directors.
Classes of Shares
The Company authorized capital comprise of Ordinary Shares, Euro, US Dollar and Sterling Preference Shares (collectively, the “Preference Shares”)
and Series 1 Sterling Preference Shares. A list and description the outstanding Ordinary Shares and Preference Shares of the Company is included in
Note 27 to the Financial Statements (Ordinary shares, share premium, and other equity).
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 exc eed 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”) pay able 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 Boar d, 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 discretio n, determine that any Preference Dividend which would otherwise be payable
may either not be payable at all or only payable in part.
If any Preference Dividend on a series of Preference Shares is not paid, or is only paid in part, for the reasons described above, holders of Preference
Shares will not have a claim in respect of such non -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
dividen d 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 fo rfeited and reverts to the Company.
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.
Calls on capital
Additional information
Barclays Bank PLC 2019 Annual Report on Form 20-F 199
The Directors may make calls upon the members in respect of any monies unpaid on their shares. A p erson 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 b ecome 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 accounting reference date. 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 accid ental failure to give notice of a general meeting or the non - receipt of such notice will not
invalidate the proceedings at such meeting.
Subject as noted above, all Shareholders are entitled to attend and vote at general meetings. The Articles do, however , provide that arrangements
may be made for simultaneous attendance at a 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 per sons 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 resu lt of holding
Preference Shares.
Notices
Save where the articles expressly require otherwise, 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 de emed 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 n ot 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 am ounts from the share premium account, capital redemption reserve or any profits not
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
com pany 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.
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 shar es 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.
Additional information
Barclays Bank PLC 2019 Annual Report on Form 20-F 200
Limitations on foreign shareholders
Ther e 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 to non - residents of the UK and which limit the rights of such non - residents to hold or (when entitled
to do so) vote the ordinary shares.
Special rights
There are no persons holding securities that carry special rights with regard to the control of the company.
Additional information
Barclays Bank PLC 2019 Annual Report on Form 20-F 201
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 Preference Shares of Barclays
Bank PLC or ADSs representing such Preference Shares (the ‘Shares’).
It is based on the current laws of England and Wales, UK tax law and the practice of Her Majesty’s Revenue and Customs (‘HMRC’), each of 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 divide nds paid on them.
The statements are not addressed to: (i) shareholders who own (or are deemed to own) 10% or more of the voting power of Barclays Bank PLC; (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 UK 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 Bank PLC pays dividends on the Shares without any deduction or withholding for or on account of any taxes
imposed by the UK government or any UK taxing authority.
The total dividends (including any dividends paid by Barclays Bank PLC) paid to a UK resident 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, and will be subject to UK income tax at
the rates discussed below.
For dividends paid on or after 6 April 2016, 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 for that tax year.
For the tax year from 6 April 2019 to 5 April 2020 (inclusive), a nil rate of UK income tax applies to the first £2,00 0 of Total Dividend Income
received by an individual shareholder in that tax year (the ‘Nil Rate Amount’). For the 2018 - 2019 tax year, the Nil Rate Amount was £2,000. For the
2016 - 2017 and 2017 - 2018 tax years, the Nil Rate Amount was £5,000.
Where the Tot al Dividend Income received by an individual shareholder in a tax year exceeds the relevant Nil Rate Amount for that tax year, 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 for a tax year, the individual shareholder’s Total Dividend Income 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
income tax purposes.
Subject to special rules for small companies, UK resident shareholders within the charge to U K corporation tax will not generally be subject to UK
corporation tax on the dividends paid on the Shares, provided the dividend falls within an exempt class and certain conditions are met.
(ii) Taxation of capital gains
The disposal of Shares may, depending on the shareholder’s circumstances, give rise to a liability to UK tax on chargeable capital gains.
Where Shares are sold, a liability to UK tax may result if the proceeds from that sale exceed the sum of the base cost of the Shares sold an d any
other allowable deductions such as share dealing costs and, in certain circumstances, indexation relief (discussed further below). 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,
subject to certain exceptions for shareholders within the charge to UK corporation tax. 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. Following the Finance Act 2018,
shareholders within the charge to UK corporation tax may be eligible for indexation allowance for the period of ownership of their Shares up to
December 2017, but no indexation allowance will be available in respect of the period of ownership starting on or after 1 January 2018.
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 tru sts.
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 req uired.
Additional information
Barclays Bank PLC 2019 Annual Report on Form 20-F 202
(iii) 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 – UK stamp duty and stamp duty reserve tax’). The transfer on sale of Shares will generally be liable to stamp duty
at 0.5% of the consideration paid for that transfer (rounded up to the next £ 5). An unconditional agreement to transfer 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 Shares within CREST ar e 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.
(iv) 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 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 Hol ders
The following is a summary of certain US federal income tax considerations and certain UK tax considerations to the purchase, ownership, and
disposition of Preference Shares of Barclays Bank PLC or ADSs representing such Preference Shares (the "
Shares
") that are likely to be relevant for
US Holders (as defined below) who own the Shares as capital assets for tax purposes. This discussion is not a comprehensive analysis of all the
potential US or UK tax consequences that may be relevant to US Holders and does not discuss particular tax consequences that may be applicable
to US Holders who may be subject to special tax rules such as banks, brokers or dealers in securities or currencies, traders in securities that elect to
use a mark - to- market method of acc ounting for securities holdings, financial institutions, tax-exempt organisations, regulated investment
companies, life insurance companies, entities or arrangements that are treated as partnerships for US federal income tax purposes (or partners
therein), holders that own or are treated as owning 10% or more of the stock of Barclays Bank PLC measured either by voting power or value,
holders that hold Shares as part of a straddle or a hedging or conversion transaction, holders that purchase or sell Shares as part of a wash sale,
holders whose functional currency is not the US Dollar, or holders who are resident, or who are carrying on a trade, in the UK. The summary also
does not address state or local taxes or any aspect of US federal taxation other than US federal income taxation (such as the estate and gift tax, the
alternative minimum 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 discussion is based on the Internal Revenue Code of 1986, as amended (the ‘Code’), its legislative history, existing and proposed regulations,
published rulings and court decisions, 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 Conven tion 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 discussion 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” is a beneficial owner of Shares that is a citizen or resident of the United States or a US domestic corporation or that otherwise is
subject to US federal income taxation on a net income basis in respect of such Shares and that is fully eligible for benefits under the Treaty.
In general, the holders o f ADRs evidencing ADSs will be treated as owners of the underlying Preference Shares for the purposes of the Treaty, the
Estate and Gift Tax Convention, and the Code. Generally, exchanges of shares for ADRs and ADRs for shares will not be subject to US fed eral
income tax or to UK capital gains tax.
Taxation of dividends
Subject to the PFIC rules discussed below, the gross amount of any distribution of cash or property with respect to the Shares (including any
amount withheld in respect of UK taxes) that is paid out of Barclays Bank PLC’s current or accumulated earnings and profits (as determined for US
federal income tax purposes) will be includible in a US Holder’s taxable income as ordinary dividend income on the day such US Holder receives the
dividend, in the case of Preference Shares, or the date the Depositary receives the dividends, in the case of ADRs, and will not be eligible for the
dividends - received deduction allowed to corporations under the Code.
Subject to certain exceptions for short - term positions, dividends paid by Barclays Bank PLC to an individual with respect to the Shares will generally
be subject to taxation at a preferential rate if the dividends are “qualified dividend income.” Dividends paid on the Shares will be treated as qualified
dividend income if (i) the Shares are readily tradable on an established securities market in the United States or Barclays Bank PLC is eligible for the
benefits of a comprehensive tax treaty with the United States that the US Treasury determines is satisfactory for purposes of this provision and that
includes an exchange of information program, and (ii) Barclays Bank PLC was not a PFIC (as defined below) in the year of the distribution or the
immediately preceding taxable year. The US Treasury ha s determined that the Treaty meets the requirements for reduced rates of taxation, and
Barclays Bank PLC believes that it is eligible for the benefits of the Treaty. Based on its audited financial statements and relevant market and
shareholder date, Barcla ys Bank PLC believes that it was not treated as a PFIC for US federal income tax purposes with respect to its 2019 or 2018
Additional information
Barclays Bank PLC 2019 Annual Report on Form 20-F 203
taxable years. In addition, based on its audited financial statements and current expectations regarding the value and nature of its assets, the
sources and nature of its income, and relevant market and shareholder data, Barclays Bank PLC does not anticipate becoming a PFIC for its current
taxable year or in the foreseeable future.
Dividends paid by Barclays Bank PLC to a US Holder with respect to the Shares will not be subject to UK withholding tax. For foreign tax credit
purposes, dividends will generally be income from sources outside the US and will generally be “passive” income for purposes of computing the
foreign tax credit allow able to a US Holder.
The amount of the dividend distribution includable in income will be the US Dollar value of the distribution, determined at the spot Pound
Sterling/US Dollar rate on the date the dividend distribution is includable in income, regardle ss 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 curr ent 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 and thereafter as capital gain. Because Barclays Bank PLC does not curren tly maintain
calculations of earnings and profits for US federal income tax purposes, US Holders should expect that distributions with respect to the Shares will
generally be treated as dividends.
US Holders that receive a distribution of additional share s or rights to subscribe for additional shares as part of a pro rata distribution to all our
shareholders generally will not be subject to US federal income tax in respect of the distribution, unless the US Holder has the right to receive cash
or property, in which case the US Holder will be treated as if it received cash equal to the fair market value of the distribution.
Taxable sale or other disposition of Shares
Subject to the PFIC rules discussed below, upon a sale or other taxable disposition of the Shares, US Holders generally will not be subject to UK tax,
but will realise gain or loss for US federal income tax purposes in an amount equal to the difference between the US Dollar value of the amount
realised on the disposition and the US Holder’s adju sted tax basis in the Shares, as determined in US Dollars. Such gain or loss will be capital gain or
loss, and will generally be long - term capital gain or loss if the Shares have been held for more than one year. Long - term capital gain of a
noncorporate US Holder is generally taxed at preferential rates. The gain or loss will generally be income or loss from sources within the United
States for foreign tax credit limitation purposes. The deductibility of capital losses is subject to limitations.
Taxation of passive foreign investment companies (PFICs)
Barclays Bank PLC believes that its Shares should not be treated as stock of a passive foreign investment company (“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. In general, Barclays Bank PLC
will be a PFIC with respect to a US Holder if, for any taxable year in which a US Holder holds the Shares, either (i) at least 75% of the gross income
of Barclays Bank PLC for the taxable year is passive income, or (ii) at least 50% of the value, determined on the basis of a quarterly average, of
Barclays Bank PLC’s assets is attributable to assets that produce or are held for the production of passive income (including cash). With certain
exceptions, a US Holder’s Shares will be treated as stock of a PFIC if Barclays Bank PLC was a PFIC at any time during such holder’s holding period
in its Shares.
If Barclays Bank PLC were to be treated as a PFIC with respect to a US Hold er, unless such US Holder elected to be taxed annually on a mark - to-
market basis with respect to its Shares, such gain and certain ‘excess distributions’ would be treated as having been realised ratably over a US
Holder’s holding period for the Shares 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.
UK 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 Preference Shares, see the section “Taxation of UK holders – (iii) Stamp duty and stamp duty
reserve tax” above.
UK estate and gift tax
Under the Estate and Gift Tax Convention, Shares held by an individual a US holder who is US domiciled for the purposes of the Estate and Gift Tax
Convention and who is not for such purposes a UK national generally will not, provided any US federal estate or gift tax chargeable has been paid,
be subject to UK inheritance tax on the individual’s death or on a lifetime transfer of Shares, except in certain cases where the Shares are comprised
in a settlement (unless the settlor was US domiciled and not a UK national at the time of the settlement), ar e part of the business property of a UK
permanent establishment of an enterprise, or pertain to a UK fixed base of an individual used for the performance of independent personal services.
In cases where the Shares are subject to both UK inheritance tax and US federal estate or gift tax, the Estate and Gift Tax Convention generally
provides a credit against US federal tax liability for the amount of any inheritance tax paid in the UK.
Foreign Financial Asset Reporting
Certain US Holders that own “specified foreign financial assets” with an aggregate value in excess of US$50,000 on the last day of the taxable year
or US$75,000 at any time during the taxable year are generally required to file an information statement along with their tax returns, currently on
Form 8938, with respect to such assets. “Specified foreign financial assets” include any financial accounts held at a non - US financial institution, as
well as securities issued by a non - US issuer that are not held in accounts maintained by financial institutions. The understatement of income
Additional information
Barclays Bank PLC 2019 Annual Report on Form 20-F 204
attributable to “specified foreign financial assets” in excess of US$5,000 extends the statute of limitations with respect to the tax return to six years
after the return was filed. US Holders who fail to report the req uired information could be subject to substantial penalties. Prospective investors are
encouraged to consult with their own tax advisors regarding the possible application of these rules, including the application of the rules to their
particular circumsta nces.
Backup Withholding and Information Reporting
Dividends paid on, and proceeds from the sale or other disposition of, the Shares to a US Holder generally may be subject to the information
reporting requirements of the Code and may be subject to backup withholding unless the US Holder provides an accurate taxpayer identification
number and makes any other required certification or otherwise establishes an exemption. Backup withholding is not an additional tax. The
amount of any backup withholding from a payment to a US Holder will be allowed as a refund or credit against the US Holder’s US federal income
tax liability, provided the required information is furnished to the US Internal Revenue Service (“IRS”) in a timely manner.
A holder that is not a US Ho lder may be required to comply with certification and identification procedures in order to establish its exemption from
information reporting and backup withholding.
FATCA Risk Factor
In certain circumstances, payments on shares or ADSs may be subject to US withholding taxes on “passthru payments,” starting on the date that is
two years after the date on which final regulations defining this concept are adopted in the United States. Under the “Foreign Account Tax
Compliance Act” (or “FATCA”), as well as intergovernmental agreements between the United States and other countries and implementing laws in
respect of the foregoing, certain US- source payments (including dividends and interest) and certain payments mad e by, and financial accounts held
with, entities that are classified as financial institutions under FATCA are subject to a special information reporting and withholding tax regime.
Regulations implementing withholding in respect of “passthru payments” und er FATCA have not yet been adopted or proposed. The United States
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 Barclays Ban k PLC 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 ADSs 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
Barclays Bank PLC 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 on the IRS website.
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 Barclays Bank PLC , or (subject to the effect of any such economic
sanctions) under current UK laws, which relate only to non - residents of the UK, and which limit the right of such non - residents to hold Barclays
securities or, when entitled to vote, to do so.
Documents on display
It is possible to read and copy documents that have been filed by Barclays Bank PLC with the US Securities and Exchange Commission via
commercial document retrieval services, and from the website maintained by the US Securities and Exchange Commission at
www.sec.gov
.
Additional information
Barclays Bank PLC 2019 Annual Report on Form 20-F 205
External auditor objectivity and independence: non -audit services
Our policy on the provision of services by the Barclays Bank Group ’s statutory Auditor (the ‘Policy’) sets out the circumstances in which the auditor
may be permitted to undertake non - audit work for the Barclays Bank Group.
The Board Audit Committee overs ees compliance with the Policy and considers and, if appropriate, approves requests to use the Auditor for non-
audit work. Allowable services are pre - approved up to but not including £100,000 . 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:
◾
b ookkeeping;
◾
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 or contribution - in- kind reports;
◾
*actuarial services;
◾
internal audit;
◾
management and Human Resources functions;
◾
broker or dealer, investment advisor or investment banking services;
◾
legal, expert and certain *tax services or personal services to persons in a financial reporting 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 audit related services and regulatory non - audit services;
◾
other attest and assurance services;
◾
training, surveys and software;
◾
risk management and controls advice;
◾
transaction support;
◾
tax compliance services;
◾
business support and recoveries; and
◾
translation services.
Disclosure controls and procedures
The Chief Executive Officer, Jes Staley, and the Chief Financial Officer, Steven Ewart , conducted with Barclays Bank Group Management an
evaluation of the effectiveness of the design and operation of the Barclays Bank Group’s disclosure co ntrols and procedures of Barclays Bank PLC
as at 31 December 2019, 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 Officer and Chief
Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective.
Additional information
Barclays Bank PLC 2019 Annual Report on Form 20-F 206
Section 13(r) to the US Securities Exchange Act of 1934 (Iran sanctions and related disclosure)
Section 13(r) of the U.S. 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 o r 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 requirement includes disclosure of activities not prohibi ted by U.S. or other law
even if conducted outside the U.S. by non - U.S. 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 2019, the period covered by this annual report, or in relation to activity we became aware
of in 2019 relating to disclosable activity prior to the reporting period. Except as noted below, Barclays intends to continue the activities described.
Barclays does not allocate profits at the level of these activities, which in any event would not be significant, and we therefore report only gross
revenue where measurable. Barclays attributed revenue of approximately GBP 665 in 2019 in relation to the activities disclosed below.
Legacy Guarantees
Between 1993 and 2006, Barclays entered into several guarantees for the benefit of Iranian banks in connection with the supply of goods and
services by Barclays customers to Iranian buyers. These were counter guarantees issued to the Iranian ban ks to support guarantees issued by these
banks to the Iranian buyers. The Iranian banks and a number of the Iranian buyers were subsequently designated as Specially Designated Nationals
and Blocked Persons (“SDN”) by the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”). In addition, between 1993 and
2005, Barclays entered into similar guarantees for the benefit of a Syrian bank that was subsequently designated pursuant to the Weapons of Mass
Destruction Proliferators Sanctions Regu lations in August 2011.
The guarantees were issued either on:
(i) an “extend or pay” basis which means that, although the guarantee is of limited duration on its face, until there is full performance under the
contract to provide goods and services, the terms of the guarantee require Barclays to either maintain the guarantee or pay the beneficiary
bank the full amount of the guarantee; or
(ii) the basis that Barclays obligations can only be discharged with the consent of the beneficiary counterparty.
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. Barclays intends to terminate the
guarantees where an agreement can be reached with the counterparty, in accordance with applicable laws and regulations.
Barclays attributed no revenue in 2019 in relation to this activity.
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 for a Barclays bank branch. The lease is for 60 years, contains no early termination clause, and has 20 years remaining.
Barclays makes quarterly lease payments in GBP to an entity that is owned by the Government of Iran. The payments are made in accordance with
applicable laws and regulations. Barclays attributed no revenue in 2019 in relation to this activity.
Local Clearing Systems
Banks in the United Arab Emirates (“UAE”), including certain Iranian banks that are SDNs, participate in the various banking payment and
settlement systems used in the UAE (the “UAE Clearing Systems”). Barclays, by v irtue of its banking activities in the UAE, participates in the UAE
Clearing Systems, in accordance with applicable laws and regulations. However, in order to help mitigate the risk of engaging in transactions in
which participant Iranian SDN banks may be involved, Barclays has implemented restrictions relating to its involvement in the UAE Image Cheque
Clearance System and the UAE Funds Transfer System activity, as well as restricting activity via the Wages Protection Scheme. Barclays attributed
no revenue in 2019 in relation to this activity.
Payments Notified
A Barclays customer was designated pursuant to the Global Terrorism Sanctions Regulations (“GTSR”) in March 2016. Barclays continues to
receive credit card repayments from this customer in accordanc e with applicable laws and regulations. A block continues to be applied to the card
to prevent any further spending. Barclays attributed revenue of approximately GBP 480 in 2019 in relation to this activity.
In 2019, Barclays processed three euro payments relating to overflight charges, a portion of which were for the overflight of Iranian airspace. It is
presumed that the ultimate beneficiary of the outbound payments was a Government of Iran owned entity. The payments were made in
accordance with applicable laws and regulations. No payments were made directly to Iran or any entity owned or controlled by the Government of
Iran. Although OFAC has issued a general license relating to payments for overflights of Iranian airspace, it does not technically apply to aircraft
owned by non - U.S. persons, or registered outside of the U.S. Barclays attributed revenue of approximately GBP 30 in 2019 in relation to this activity.
Barclays maintains customer relationships with UK - incorporated medical manufacturing companies. In 2018 and 2019, Barclays processed several
payments, for the benefit of our customer, relating to the export of medical devices to privately - owned Iranian entities. The end users of these
medical devices include hospitals or clinics that may be owned or controlled by the Government of Iran. The payments were made in accordance
with applicable laws and regulations. All payments were received from the privately - owned Iranian entities; no payments were received directly
from any entity owned or controlled by the Government of Iran. Although OFAC has issued general licenses relating to the sale of medical devices,
they do not technically apply to sales of non - U.S. origin items by non - U.S. persons. Barclays attributed revenue of approximately GBP 60 in 2019 in
relation to this activity.
Barclays maintains customer relationships with several individuals who work for UK - based entities that are ultimately owned by the Government of
Iran and are OFAC SDNs. Payments are received, in GBP, from a UK - based payment services company, in cash, or from the customer’s account at
Additional information
Barclays Bank PLC 2019 Annual Report on Form 20-F 207
another UK - based financial institution, and are credited to the customers’ accounts with Barclays. The payments are processed in accordance with
applicable laws and regulations. No paymen ts are received directly from any entity owned by the Government of Iran or any OFAC SDN. Barclays
attributed no revenue in 2019 in relation to this activity.
Barclays maintains a relationship with HM Revenue & Customs (“HMRC”), a UK government agency, wh ich receives funds from an Iranian SDN
financial institution in relation to the settlement of tax liabilities with the UK Government. The payments are received by Barclays and credited to
the HMRC account. The payment activity is covered by a license issued by UK HM Treasury. Barclays attributed revenue of approximately GBP 40 in
2019 in relation to this activity.
Barclays processed three transactions to embassies of the Government of Iran in the European Union in relation to fees for renewing Iranian
passports or replacing Iranian passports that had been lost or stolen. The payments were processed in accordance with applicable laws and
regulations. Barclays attributed revenue of approximately GBP 55 in 2019 in relation to this activity.
In April 2019, a Barclays customer was designated by OFAC as an SDN pursuant to the GTSR. Barclays exited the relationship with the customer
and their account was closed. Barclays attributed no revenue in 2019 in relation to this activity.
Barclays remitted one transac tion to the Embassy of the Government of Iran in the UK in relation to redress owed to the Embassy following the
application of an incorrect foreign exchange rate being applied to a payment the Embassy remitted from Barclays in 2012, which was identified
d uring a remediation project. The one - time payment was processed in accordance with applicable laws and regulations. Barclays attributed no
revenue in 2019 in relation to this activity.
Additional information
Barclays Bank PLC 2019 Annual Report on Form 20-F 208
Related Undertakings
The Barclays Bank PLC 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 2019.
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 PLC’s
2019 Country Snapshot provides details of where the
Barclays PLC 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 Bank PLC
and the share capital disclosed comprises ordinary
and/or common shares, 100% of the nominal value of
which is held by Barclays Bank PLC Group subsidiaries.
Notes
A
Directly held by Barclays Bank PLC
Ordinary Shares, Class C Preference Shares,
B
Partnership Interest
Class D Ordinary Shares, Class D Preference
C
Membership Interest
Shares, Class E Ordinary Shares, Class E
D
Trust Interest
Preference Shares, Class F Ordinary Shares,
E
Guarantor
Class F Preference Shares, Class H 2012
F
Preference Shares
Ordinary Shares, Class H 2012 Preference
G
A Preference Shares
Shares, Class H Ordinary Shares, Class H
H
B Preference Shares
Preference Shares, Class I Preference Shares,
I
Ordinary/Common Shares in addition to other
Class J Ordinary Shares, Class J Preference Shares
shares
W
First Class Common Shares, Second Class
J
A Ordinary Shares
Common Shares
K
B Ordinary Shares
X
Class B Redeemable Preference Shares
L
C Ordinary Shares
Y
EUR Tracker 1 Shares, GBP Tracker 1
N
W Ordinary Shares
Shares, USD Tracker 3 Shares,
M
F Ordinary Shares
USD Tracker 1 Shares, USD Tracker 2 Shares
O
First Preference Shares, Second Preference
Z
Not Consolidated (see Note34 Structured
Shares
entities)
P
Registered Address not in country of
AA
USD Linked Ordinary Shares
incorporation
BB
Redeemable Class B Shares
Q
Core Shares, Insurance (Classified) Shares
CC
Class A Redeemable Preference Shares
R
Capital Contribution Shares
DD
Nominal Shares
S
A Unit Shares, B Unit Shares
Shares, Class E Ordinary Shares, Class E
T
Non-Redeemable Ordinary Shares
Preference Shares, Class F Ordinary Shares,
U
C Preference Shares, D Preference Shares
V
Class A Ordinary Shares, Class A Preference
Shares, Class B Ordinary Shares, Class C
Wholly owned subsidiaries
Note
Wholly owned subsidiaries
Note
Wholly owned subsidiaries
Note
United Kingdom
Dorset Home Loans Limited
A
Gerrard Management Services Limited (In
A
- 1 Churchill Place, London, E14 5HP
Durlacher Nominees Limited
A
Liquidation)
Aequor Investments Limited
Eagle Financial and Leasing Services (UK)
A
Lombard Street Nominees Limited (In
A
Ardencroft Investments Limited
A
Limited
Liquidation)
B D & B Investments Limited
Equity Value Investments No.1 Limited
A
Ruthenium Investments Limited (In
A
B.P.B. (Holdings) Limited
A
Equity Value Investments No.2 Limited
Liquidation)
Barafor Limited
Finpart Nominees Limited
A
Woolwich Plan Managers Limited (In
A
Barclay Leasing Limited
Foltus Investments Limited
Liquidation)
Barclays (Barley) Limited
J, K
Hawkins Funding Limited
A
Woolwich Surveying Services Limited (In
A
Barclays Aldersgate Investments Limited
A
Heraldglen Limited
I, O
Liquidation)
Barclays Capital Asia Holdings Limited
A
J.V. Estates Limited
- 1 More London Place, London SE1 2AF
Barclays Capital Finance Limited
A
Isle of Wight Home Loans Limited
A
CP Propco 1 Limited (In Liquidation)
Barclays Capital Japan Securities Holdings
Kirsche Investments Limited
A
CP Propco 2 Limited (In Liquidation)
Limited
Long Island Assets Limited
CP Topco Limited (In Liquidation)
J, K
Barclays Capital Nominees (No.2) Limited
Maloney Investments Limited
A
- 5 The North Colonnade, London, E14 4BB
Barclays Capital Nominees (No.3) Limited
A
Menlo Investments Limited
A
Leonis Investments LLP
A, B
Barclays Capital Nominees Limited
A
Mercantile Credit Company Limited
A
- 9, allée Scheffer, L-2520, Luxembourg
Barclays Capital Principal Investments Limited
A
Mercantile Leasing Company (No.132)
A
Barclays Claudas Investments Partnership
B, P
Barclays Capital Securities Client Nominee
A
Limited
Barclays Pelleas Investments Limited
B, P
Limited
MK Opportunities LP
B
Partnership
Barclays Capital Securities Limited
A, F, I
Murray House Investment Management
A
Blossom Finance General Partnership
B, P
Barclays CCP Funding LLP
A, B
Limited
Barclays Directors Limited
A
Naxos Investments Limited
A
Argentina
Barclays Executive Schemes Trustees Limited
A
Northwharf Nominees Limited
A
- 855 Leandro N.Alem Avenue, 8th Floor,
Barclays Group Holdings Limited
A
Real Estate Participation Management
Buenos Aires
Barclays Investment Management Limited
A
Limited
Compañía Sudamerica S.A.
A
Barclays Leasing (No.9) Limited
Real Estate Participation Services Limited
- Marval, O’Farrell & Mairal, Av. Leandro N.
Barclays Long Island Limited
A
Relative Value Investments UK Limited
B
Alem 882, Buenos Aires, C1001AAQ
Barclays Marlist Limited
A
Liability Partnership
Compañia Regional del Sur S.A.
A
Barclays Mercantile Business Finance Limited
A
Relative Value Trading Limited
Barclays Nominees (George Yard) Limited
A
Roder Investments No. 1 Limited
A, I, Y
Brazil
Barclays Pension Funds Trustees Limited
A
Roder Investments No. 2 Limited
A, I, Y
- Av. Brigadeiro Faria Lima, No. 4.440, 12th
Barclays Private Bank
RVT CLO Investments LLP
B
Floor, Bairro Itaim Bibi, Sao Paulo, CEP,
Barclays Services (Japan) Limited
A
Surety Trust Limited
A
04538 -132
Barclays Shea Limited
A
Swan Lane Investments Limited
Barclays Brasil Assessoria Financeira Ltda.
A
Barclays Term Funding Limited Liability
B
US Real Estate Holdings No.1 Limited
BNC Brazil Consultoria Empresarial Ltda
A
Partnership
US Real Estate Holdings No.2 Limited
Barclays Wealth Nominees Limited
A
US Real Estate Holdings No.3 Limited
Canada
Barcosec Limited
A
Wedd Jefferson (Nominees) Limited
A
- 333 Bay Street, Suite 4910, Toronto ON M5H
Barsec Nominees Limited
A
Westferry Investments Limited
A
2R2
BB Client Nominees Limited
A
Woolwich Qualifying Employee Share
A
Barclays Capital Canada Inc.
BMBF (No.24) Limited
Ownership Trustee Limited
- Stikeman Elliot LLP, 199 Bay Street, 5300
BMI (No.9) Limited
Zeban Nominees Limited
A
Commerce Court West, Toronto ON M5L 1B9
Carnegie Holdings Limited
A, I, J, K
- Hill House, 1 Little New Street, London,
Barclays Corporation Limited
A
Chapelcrest Investments Limited
EC4A 3TR
Clydesdale Financial Services Limited
Barclays Nominees (Branches) Limited (In
A
Cayman Islands
Cobalt Investments Limited
A
Liquidation)
- Maples Corporate Services Limited, PO Box
Cornwall Homes Loans Limited
A
Barclays Nominees (K.W.S.) Limited (In
A
CP Flower Guaranteeco (UK) Limited
A, E
Liquidation) (Dissolved on 22 January
Cayman, KY1-1104
DMW Realty Limited
A
2020)
Alymere Investments Limited
G, H, I
Additional information
Barclays Bank PLC 2019 Annual Report on Form 20-F 209
Wholly owned subsidiaries
Note
Wholly owned subsidiaries
Note
Wholly owned subsidiaries
Note
Analytical Trade UK Limited
A
Isle of Man
Servicios Barclays, S.A. de C.V.
Barclays Capital (Cayman) Limited
A
- P O Box 9, Victoria Street,
Barclays Securities Financing Limited
F, I
Douglas, IM99 1AJ
Monaco
Braven Investments No.1 Limited
Barclays Nominees (Manx) Limited
A
- 31 Avenue de la Costa, Monte Carlo
Calthorpe Investments Limited
Barclays Private Clients International
A, J, K
BP 339
Capton Investments Limited
A
Limited
Barclays Private Asset Management
Claudas Investments Limited
A, I, CC, X
(Monaco) S.A.M
Claudas Investments Two Limited
Japan
CPIA Investments No.1 Limited
V
- 10 -1, Roppongi 6-chome, Minato-ku,
Netherlands
CPIA Investments No.2 Limited
F, I
Tokyo
- Prins Bernhardplein 200, 1097 JB
Gallen Investments Limited
Barclays Funds and Advisory Japan Limited
Amsterdam
Hurley Investments No.1 Limited
Barclays Securities Japan Limited
Chewdef BidCo BV. (In Liquidation)
A
JV Assets Limited
L
Barclays Wealth Services Limited
Mintaka Investments No. 4 Limited
Philippines
OGP Leasing Limited
Jersey
- 21/F, Philamlife Tower, 8767 Paseo de
Palomino Limited
A, Z
- 2
nd
Roxas, Makati City, 1226
Pelleas Investments Limited
A
Esplanade, St. Helier, JE1 1GH
Meridian (SPV-AMC) Corporation
Pippin Island Investments Limited
A
CP Newco 1 Limited (In liquidation)
A
Razzoli Investments Limited
A, F, I
CP Newco2 Limited (In liquidation)
J, K
Saudi Arabia
RVH Limited
A, F, I
CP Newco3 Limited (In liquidation)
- 3
rd
Wessex Investments Limited
Barclays Services Jersey Limited
A
Street, PO Box 1454, Riyadh 11431
- Walkers Corporate Limited, Cayman
- 39 - 41 Broad Street, St Helier, JE2 3RR
Barclays Saudi Arabia (In Liquidation)
A
Corporate Centre, 27 Hospital Road, George
Barclays Wealth Management Jersey
A
Town, KY1- 9008
Limited
Singapore
Long Island Holding B Limited
A
BIFML PTC Limited
A
- 10 Marina Boulevard, #24-01 Marina Bay
- 13 Castle Street, St. Helier, JE4 5UT
Germany
Barclays Index Finance Trust
S
Barclays Capital Futures (Singapore) Private
- TaunusTurm, Taunustor 1, 60310,
- Lime Grove House, Green Street,
Limited
St Helier, JE1 2ST
Barclays Capital Holdings (Singapore)
A
Barclays Capital Effekten GmbH
A
Barbridge Limited (In Liquidation)
A, I, DD
Private Limited
- Stuttgarter Straße 55-57, 73033
- 13 Library Place, St Helier, JE4 8NE
Barclays Merchant Bank (Singapore) Ltd.
Göppingen
Barclays Nominees (Jersey) Limited
A
Holding Stuttgarter Straße GmbH
Barclaytrust Channel Islands Limited
A
Spain
- Estera Trust (Jersey) Limited, 13-14
- Calle Jose, Abascal 51, 28003, Madrid
Guernsey
Esplanade, St Helier, JE1 1EE
Barclays Tenedora De Inmuebles SL.
A
- P.O. Box 33, Dorey Court, Admiral Park, St.
MK Opportunities GP Ltd
A
BVP Galvani Global, S.A.U.
A
Barclays Insurance Guernsey PCC Limited
A, Q
Luxembourg
Switzerland
- PO BOX 41, Floor 2, Le Marchant House, Le
- 9, allée Scheffer, L-2520
- Chemin de Grange Canal 18-20, PO Box
Barclays Alzin Investments S.à r.l.
3941, 1211, Geneva
Barclays Nominees (Guernsey) Limited
A
Barclays Bayard Investments S.à r.l.
J, K
Barclays Bank (Suisse) SA
Barclays Bedivere Investments S.à r.l.
BPB Holdings SA
Hong Kong
Barclays Bordang Investments S.à r.l.
- 42nd floor Citibank Tower, Citibank Plaza,
Barclays BR Investments S.à r.l.
United States
3 Garden Road
Barclays Cantal Investments S.à r.l.
Barclays Bank (Hong Kong Nominees) Limited
A
Barclays Capital Luxembourg S.à r.l.
Trust Center, 1209 Orange Street,
(in Liquidation)
Barclays Capital Trading Luxembourg S.à r.l.
J, K
Wilmington , DE 19801
Barclays Capital Asia Nominees Limited (In
Barclays Claudas Investments S.à r.l.
Archstone Equity Holdings Inc
Liquidation)
Barclays Equity Index Investments S.à r.l.
Barclays Capital Derivatives Funding LLC
C
- Level 41, Cheung Kong Center, 2 Queen's
Barclays International Luxembourg Dollar
Barclays Capital Energy Inc.
Road, Central
Holdings S.à r.l.
Barclays Capital Holdings Inc.
G, H, I
Barclays Asia Limited (In Liquidation)
A
Barclays Lamorak Investments S.à r.l.
T
Barclays Capital Real Estate Finance Inc.
Barclays Capital Asia Limited
A
Barclays Leto Investments S.à r.l.
Barclays Capital Real Estate Holdings Inc.
Barclays Luxembourg EUR Holdings S.à r.l
T
Barclays Capital Real Estate Inc.
India
Barclays Luxembourg Finance S.à r.l.
Barclays Commercial Mortgage Securities
C
- 208 Ceejay House, Shivsagar Estate, Dr A
Barclays Luxembourg GBP Holdings S.à r.l.
T
LLC
Beasant Road, Worli, Mumbai, 400 018
Barclays Luxembourg Global Funding S.à r.l.
Barclays Electronic Commerce Holdings Inc.
Barclays Securities (India) Private Limited
Barclays Luxembourg Holdings S.à r.l.
I, AA
Barclays Financial LLC
C
Barclays Wealth Trustees (India) Private
Barclays Luxembourg Holdings SSC
B
Barclays Group US Inc.
G, I
Limited
Barclays Pelleas Investments S.à r.l.
Barclays Oversight Management Inc.
- Level 10, Block B6, Nirlon Knowledge
- 68 -70 Boulevard de la Petrusse, L-2320
Barclays Receivables LLC
C
Park, Off Western Express Highway
Adler Toy Holding Sarl
Barclays Services Corporation
Barclays US CCP Funding LLC
C
Barclays Investments & Loans (India)
A, F, I
Mauritius
Barclays US Funding LLC
C
Private Limited
- C/O Rogers Capital Corporate Services
Barclays US Investments Inc.
J, K
Limited, 3
rd
Barclays US LLC
G,H,I, U
Ireland
President John Kennedy Street, Port Louis
BCAP LLC
C
- One Molesworth Street, Dublin 2,
Barclays Capital Mauritius Limited
A
Crescent Real Estate Member LLC
C
D02RF29
Barclays Capital Securities Mauritius
A
Gracechurch Services Corporation
Barclaycard International Payments Limited
A
Limited
Long Island Holding A LLC
C
Barclays Bank Ireland Public Limited
A
- Fifth Floor, Ebene Esplanade, 24
LTDL Holdings LLC
C
Company
Cybercity, Ebene
Marbury Holdings LLC
Barclays Europe Client Nominees
Barclays Mauritius Overseas Holdings
A
Protium Finance I LLC
C
Designated Activity Company
Limited
Protium Master Mortgage LP
B
Barclays Europe Firm Nominees Designated
Protium REO I LP
B
Activity Company
Mexico
Sutton Funding LLC
C
Barclays Europe Nominees Designated
- Paseo de la Reforma 505, 41 Floor, Torre
TPProperty LLC
C
Mayor, Col. Cuauhtemoc, CP 06500
US Secured Investments LLC
R
- 25 -28 North Wall Quay, Dublin 1,
Barclays Bank Mexico, S.A.
- 1201 North Market Street, P.O. Box 1347
D01H104
Barclays Capital Casa de Bolsa, S.A. de C.V.
Wilmington, DE19801
Erimon Home Loans Ireland Limited
A
Grupo Financiero Barclays Mexico,
A, K, M
Barclays Bank Delaware
F, I
S.A. de C.V.
Procella Investments No.2 LLC
C
Additional information
Barclays Bank PLC 2019 Annual Report on Form 20-F 210
Wholly owned subsidiaries
Note
Other Related Undertakings
Unless otherwise stated, the undertakings below
are consolidated and the share capital disclosed
comprises ordinary and/or common shares which
are held by subsidiaries of the Barclays Bank PLC
Group. The Barclays Bank PLC Group’s overall
ownership percentage is provided for each
undertaking.
Other Related Undertakings
%
Note
Procella Investments No.3 LLC
C
Portugal
Verain Investments LLC
Av. Manuel Júlio Carvalho e
- 2711 Centerville Road, Suite 400,
Costa no. 15 -A, 2750 -423
Wilmington, DE 19808
Cascais
Protium Master Grantor Trust
D
Projepolska, S.A.
24.50
Z
- 251 Little Falls Drive, New Castle County,
Sweden
Wilmington DE 19808
- c/o ForeningsSparbanken
Barclays Capital Equities Trading GP
B
Other Related Undertakings
%
Note
AB, 105 34 Stockholm
Lagalla Investments LLC
United Kingdom
EnterCard Group AB
40.00
Relative Value Holdings, LLC
- 1 Churchill Place, London, E14 5HP
Surrey Funding Corporation
PSA Credit Company Limited
50.00
A, J, L
United States of America
Sussex Purchasing Corporation
(In Liquidation)
- Corporation Trust Company,
- 745 Seventh Avenue, New York NY 10019
- 3 - 5 London Road, Rainham, Kent,
Corporation Trust Center,
Alynore Investments Limited Partnership
B
ME8 7RG
1209 Orange Street,
Barclays Payment Solutions Inc.
Trade Ideas Limited
20.00
A, Z
Wilmington, DE 19801
Curve Investments GP
B
- 50 Lothian Road, Festival Square,
DG Solar Lessee II, LLC
75.00
C, Z
Preferred Liquidity, LLC
J
Edinburgh, EH3 9WJ
DG Solar Lessee, LLC
75.00
C, Z
- CT Corporation System, One Corporate
Equistone Founder Partner II L.P.
20.00
A, B, Z
VS BC Solar Lessee I LLC
50.00
C, Z
Center, Floor 11, Hartford CT 06103 -3220
Equistone Founder Partner III L.P.
35.00
A, B, Z
-1415 Louisiana Street Suite
Barclays Capital Inc.
- Enigma, Wavendon Business Park
1600 Houston, Texas, 77002
- c/o RL&F Service Corp, One Rodney
Milton Keynes, MK17 8LX
Sabine Oil & Gas Holdings, Inc.
23.25
Z
Square, 10th Floor, Tenth and King Streets,
Intelligent Processing Solutions Limited
19.50
A, Z
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.
Wilmington, DE 19801
- 65A Basinghall Street, London,
Analytical Trade Holdings LLC
EC2V 5DZ
Analytical Trade Investments LLC
BB
Cyber Defence Alliance Limited
25.00
A, E, Z
- 100 South West Street, Wilmington DE
- 15 Canada Square, London, E14 5GL
19801
Woolwich Countryside Limited
50.00
A, N, Z
Barclays Dryrock Funding LLC
C
In Liquidation)
Wilmington Riverfront Receivables LLC
J, K
Korea, Republic of
Subsidiaries by virtue of control
%
Note
- 15 East North Street, Dover DE 19801
- 18
th
United Kingdom
Barclays Services LLC
C
343, Samil-daero, Jung -go, Seoul
- 1 Churchill Place, London,
- CT Corporation System, 225 Hillsborough
Woori BC Pegasus
70.00
A, W
E14 5HP
Street, Raleigh, NC 27603
Securitization Specialty Co.,
Oak Pension Asset
0.00
Z
Barclays US GPF Inc.
Limited
Management Limited
- 500 Forest Point Circle, Charlotte, North
Water Street Investments
0.00
Z
Carolina 28273
Luxembourg
Limited
Equifirst Corporation (In Liquidation)
- 9, allée Scheffer, L-2520
33.33
X
- Aon Insurance Managers, 76 Paul Street,
Preferred Funding S.à r.l.
33.33
I, X
Cayman Islands
Suite 500, Burlington, VT05401
Preferred Investments S.à r.l.
- PO Box 309GT, Ugland
Barclays Insurance U.S. Inc.
House South Church Street,
Malta
Grand Cayman, KY1 -1104
Zimbabwe
- RS2 Buildings, Fort Road,
18.25
A, Z
Hornbeam Limited
0.00
Z
- 2 Premium Close, Mount Pleasant Business
Mosta MST 1859
Barclays US Holdings Limited
10.00
A, J
Park, Mount Pleasant, Harare
RS2 Software PLC
Branchcall Computers (Pvt) Limited
Monaco
75.00
A
- 31 Avenue de la Costa, Monte
Carlo
Societe Civile Immobiliere 31
Additional information
Income statement commentary
Barclays Bank PLC 2019 Annual Report on Form 20-F 211
Income Statement commentary
2019 Compared to 2018
Profit before tax increased 142% to £ 3,112m driven by reduced losses in Head Office of £598m (2018: £2,245m), primarily due to a non-
recurrence of the £1.4bn settlement with US Department of Justice relating to Residential Mortgage - Backed Securities (RMBS), and an 8% increase
in CIB to £2,590m (2018: 2,394m). This was partially offset by a decrease in CC&P to £1,120m (2018: £1,137m).
The 4% appreciation of average USD against GBP positively impacted income and profits, and adversely impacted credit impairment charges and
operating expenses.
Total Income increased 4% to £14,151m. CIB income increased 3% to £10,009m. Within CIB, Markets income increased 3%, reflecting further
gains in market share in a declining revenue pool
a
. FICC income increased reflecting a strong performance in rates and growth in securitised
products. Equities income decreased driven by equity derivatives, which were impacted by reduced client activity. Banking fees income increas ed
1%. The Banking business also continued to gain market share in a declining fee pool
b
. CC&P income increased 5% to £4,462m reflecting growth in
US co - branded cards and payments partnerships.
Head Office income expense improved 22% to £320m (2018: £408m) driven by lower hedge accounting losses and legacy capital funding costs,
partially offset by non - recurrence of a prior year gain of £155m from the settlement of receivables relating to the Lehman Brothers acquisition and
the Absa Group Limited (for merly known as BAGL) dividend income.
Credit impairment charges increased 87% to £1,202m. CIB credit impairment charges increased to £157m (2018: release of £152m) due to the
non - recurrence of favourable macroeconomic scenario updates and single name reco veries in 2018. CC&P credit impairment charges increased to
£1,016m (2018: £808m) due to cards balance growth and the non - recurrence of favourable US macroeconomic scenario updates in 2018, as well
as higher unsecured gross exposures due to balance growth in cards. Credit metrics remained stable, with US cards 30 and 90 day arrears of 2.7%
(Q418: 2.7%) and 1.4% (Q418: 1.4%) respectively .
Total operating expenses decreased 15% to £ 9,982m . Head Office total operating expenses decreased to £241m (2018: £1,849 m) due to the non-
recurrence of a settlement relating to RMBS with the US DoJ of £1.4bn and the £140m charge for the GMP in relation to the equalisation of
obligations for members of the Barclays Bank UKRF.
CIB total operating expenses decreased 2% to £7 ,375m as cost efficiencies were partially offset by continued investment. CC&P total operating
expenses were stable at £2,366m (2018: £2,363m) reflecting continued investment and efficiencies.
Other net income increased to £145m (2018: £68m) reflecting ga ins on disposals following the sale of number of subsidiaries to Barclays Principal
Investment Limited in Q4 2019.
Please refer to the Financial review section in the Annual Report on form 20 - F 2018 for a comparative discussion of 2018 financial results
compared to 2017.
Notes
a
Data Source: Coalition, FY19 Preliminary Competitor Analysis. Market share represents Barclays share of the total industry Revenue Pool. Analysis is based on Barclays internal business structure
and internal revenues.
b
Data Source: Dealogic, for the period covering 1 January to 31 December 2019.
2019
2018
For the year ended 31 December
£m
£m
Return on average total assets
0.21 %
0.04 %
Dividend payout ratio
11 %
80 %
Average total equity to average total assets
5.0 %
5. 0 %
Guide 3 ratios
Additional information
Balance sheet commentary
Barclays Bank PLC 2019 Annual Report on Form 20-F 212
Total assets
Total assets decreased by £1bn to £877bn.
Cash and balances at central banks decreased £10bn to £126bn mainly due to a reduction in cash at central banks held as part of the liquidity pool.
Cash collateral and settlement balances increased £5bn to £79bn as a result of £7bn increase in cash collateral predominantly held in relation to
derivatives, partially offset by a £2bn decrease in settlement balances.
Loans and advances increased £5bn to £142bn mainly due to an increase in debt securities.
Reverse repurchase agreements and other similar secured lending remained flat at £2bn.
Trading portfolio assets increased £9bn to £113bn due to increased trading activity, principally relating to the Equities business.
Financial assets at fair value through the income statement decreased £16bn to £129bn d riven by a focus on capital-efficient secured financing.
Derivative financial instruments increased £7bn to £230bn,
driven by a decrease in major interest rate curves, partially offset by a decrease in
foreign exchange volumes.
Financial assets at fair value through other comprehensive income remained flat at £45bn.
Total liabilities
Total liabilities decreased £4bn to £826bn.
Deposits at amortised cost increased £15bn to £214bn due to increased deposits within CIB including the broadening of the business across
Europe.
Cash collateral and settlement balances remained flat at £68bn.
Repurchase agreements and other similar secured borrowing decreased £5bn to £2bn reflecting a reduct ion in funding requirements.
Debt securities in issue and subordinated liabilities had a net decrease of £7bn due to the maturity of a number of issuances which were not
refinanced.
Trading portfolio liabilities remained broadly flat at £35bn
Financial liabilities designated at fair value decreased £13bn to £204bn primarily due to capital-efficient secured lending partially offset by
increased issuances of equity linked notes.
Derivative financial instruments increased £9bn to £229bn, driven by a decre ase in major interest rate curves, partially offset by a decrease in
foreign exchange volumes. This is consistent with the movement in derivative financial instrument assets.
Total shareholders’ equity
Total shareholders’ equity increased £3bn to £51bn.
Other equity instruments increased £0.7bn to £8.3bn driven by AT1 instrument issuances of £2.3bn, partially offset by AT1 redemptions during the
year with principal amounts of £1.6bn. AT1 securities are perpetual subordinated contingent convertible securities structured to qualify as AT1
instruments under prevailing capital rules applicable as at the relevant issue date.
The fair value through other comprehensive income reserve decreased £0.2bn to £0.1bn
The cash flow hedging reserve increased £0.5bn as a result of the fair value movements of interest rate swaps held for hedging purposes due to a
decrease in major interest rate curves
The currency translation reserve decreased £0.5bn to £3.3bn reflecting the increase in value of period end GBP against USD and EUR of 3% and 5%
respectively .
The own credit reserve decreased £0.3bn to £0.4bn debit due to a tightening of Barclays’ credit spreads increasing the fair value of liabilities on
balance sheet.
Retained earnings increased £2.3bn driven by £2.1bn profit after tax and a £1.0bn capital contribution received from Barclays PLC, partially offset
by £0.4bn foreign exchange impact on redemption of AT1 instruments and dividends paid on ordinary and preference shares totalling £0.3bn
Additional information
Additional financial disclosure
Barclays Bank PLC 2019 Annual Report on Form 20-F 213
Deposits and short-term borrowings
Deposits
Deposits include deposits from banks and customer accounts.
2019
2018
Average for the year ended 31 December
£m
£m
Deposits at amortised cost
UK
130,726
211,002
Europe
39,496
25,560
Americas
31,815
24,073
Asia
9,268
5,089
Africa
7,802
5,007
Total deposits at amortised cost
219,107
270,731
2019
2018
For the year ended 31 December
a
£m
£m
Deposits at amortised cost
213,881
199,337
In offices in the United Kingdom:
Current and demand accounts
- interest free
31,865
31,624
- interest bearing
25,040
22,695
Savings accounts
14,059
13,801
Other time deposits - retail
4,846
3,353
Other time deposits - wholesale
62,949
61,523
Total repayable in offices in the United Kingdom
138,759
132,996
In offices outside the United Kingdom:
Current and demand accounts
- interest free
10,613
10,747
- interest bearing
12,932
12,198
Savings accounts
14,110
13,179
Other time deposits
37,467
30,217
Total repayable in offices outside the United Kingdom
75,122
66,341
Deposits at amortised cost amounts in offices in the United Kingdom received from non - residents amounted to £32,499 m ( 2018 : £31,089m).
b
Note
a The UK/Non UK Deposit analysis has been updated for comparative periods reflecting a geographical analysis based on location of office which is consistent with Group disclosures. UK balances
received from non-residents have been updated accordingly.
b T he changes were £25bn in 2018 and £23bn in 2017 moving from UK to Non UK. UK non-resident balances were reduced by £25bn in 2018 and £7bn in 2017 as a result.
Additional information
Additional financial disclosure
Barclays Bank PLC 2019 Annual Report on Form 20-F 214
Short -term borrowings
Short - term borrowings include deposits from banks, commercial paper, negotiable certificates of deposit and repurchase agreements.
Deposits from banks
Deposits from banks are taken from a wide range of counterparties and generally have maturities of less than one year.
2019
2018
£m
£m
Year - end balance
18,144
15,569
Average balance
a,b
24,812
21,105
Maximum balance
a
29,754
27,810
Average interest rate during year
1.5%
2.0%
Year - end interest rate
2.2%
2.7%
Notes
a Calculated based on month -end balances.
Commercial paper
Commercial paper is issued by the Group, mainly in the United States, generally in denominations of not less than $100,000, with maturities of up
to 270 days.
2019
2018
£m
£m
Year - end balance
13,874
13,381
Average balance
a
17,475
11,279
Maximum balance
a
20,381
14,108
Average interest rate during year
1.0%
1.2%
Year - end interest rate
1.2%
1.0%
Note
a Calculated based on month -end balances.
Negotiable certificates of deposit
Negotiable certificates of deposits are issued mainly in the United Kingdom and United States, generally in denominations of not less than
$100,000.
2019
2018
£m
£m
Year - end balance
7,716
10,585
Average balance
a
10,619
18,406
Maximum balance
a
13,315
24,098
Average interest rate during year
3.0%
1.2%
Year - end interest rate
4.1%
2.0%
Note
a Calculated based on month -end balances.
Repurchase agreements
Repurchase agreements are entered into with both customers and banks and generally have maturities of not more than three months.
2019
2018
£m
£m
Year - end balance
2,032
7,378
Average balance
a
4,542
11,719
Maximum balance
a
9,739
17,705
Average interest rate during year
0.7%
0.2%
Year - end interest rate
1.5%
0.3%
Note
a Calculated based on month -end balances.
Additional information
Additional financial disclosure
Barclays Bank PLC 2019 Annual Report on Form 20-F 215
Commitments and contractual obligations
Commercial commitments include guarantees, contingent liabilities and standby facilities.
Commercial commitments
Amount of commitment expiration per period
Less than one
year
Between one to
three years
Between three to
five years
After five years
Total amounts
committed
£m
£m
£m
£m
£m
As at 31 December 2019
Guarantees and letters of credit pledged as collateral security
-
Performance guarantees, acceptances and endorsements
Documentary credits and other short - term trade related transactions
-
-
-
Standby facilities, credit lines and other commitments
As at 31 December 2018
Guarantees and letters of credit pledged as collateral security
Performance guarantees, acceptances and endorsements
Documentary credits and other short - term trade related transactions
-
-
Standby facilities, credit lines and other commitments
Contractual obligations include debt securities.
Contractual obligations
Less than one
year
Between one to
three years
Between three to
five years
After five years
Total
£m
£m
£m
£m
£m
As at 31 December 2019
Long -term debt
a
25,786
21,979
13,457
18,779
80,001
As at 31 December 2018
Long -term debt
a
28,620
15,931
13,615
22,008
80,174
Operating lease obligations
b
115
167
91
698
1,071
Total
28,735
16,098
13,706
22,706
81,245
Note
a Long-term debt has been prepared to reflect cash flows on an undiscounted basis , which includes interest payments.
b Following the adoption of accounting standard IFRS 16 on 1 January 2019, operating lease obligations are recorded On balance sheet
Net cash flows from derivatives used to hedge long - term debt amount to £1.6 bn (201 8 : £ 1 .4 bn).
Further information on the contractual maturity of the Group ’s assets and liabilities is given in the Liquidity section of the Risk Review.
Additional information
Additional financial disclosure
Barclays Bank PLC 2019 Annual Report on Form 20-F 216
Securities
Analysis of securities
2019
2018
2017
As at 31 December
£m
£m
£m
Investment securities
a
US government, other public bodies and agencies
11,628
9,078
13,284
United Kingdom government
12,880
7,516
15,096
Other government
11,685
15,483
17,077
Mortgage and asset backed securities
1,019
617
546
Corporate and other issuers
18,476
13,466
11,126
Debt securities
55,688
46,160
57,129
Equity securities
1
11
1,834
Investment securities
55,689
46,171
58,963
Other securities
b
US government, other public bodies and agencies
19,410
23,890
16,168
United Kingdom government
10,380
10,005
4,379
Other government
11,622
9,825
11,839
Mortgage and asset backed securities
2,354
2,023
1,974
Corporate and other issuers
13,334
15,906
16,850
Debt securities
57,100
61,649
51,210
Equity securities
62,549
44,737
64,009
Other securities
119,649
106,386
115,219
Notes
a
Investment securities for 2019 & 2018 includes securities reported within loans and advances at amortised cost and financial assets at fair value through other
comprehensive income. Investment securities for 2017 includes securities reported within financial investments.
b
Other securities include securities reported within trading portfolio and financial assets at fair value through the income statement.
Investment debt securities include government securities held as part of the Group’s treasury management portfolio for asset and liability, liquidity
and regulatory purposes and are for use on a continuing basis in the activities of the Group. In addition, the Group holds as investments listed and
unlisted corporate securities.
Maturities and yield of investment debt securities
Maturing within one year
Maturing after one but
within five years
Maturing after five but
within ten years
Maturing after ten years
Total
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
Amount
Yield
As at 31 December 2019
£m
%
£m
%
£m
%
£m
%
£m
%
US government, other public
bodies and agencies
1,131
0.6%
5,341
0.9%
3,961
1.2%
1,195
2.4%
11,628
1.2%
United Kingdom government
3,522
2.1%
3,075
1.6%
3,871
1.7%
2,412
1.3%
12,880
1.7%
Other government
1,258
0.8%
2,959
2.7%
5,831
1.5%
1,637
2.6%
11,685
1.9%
Other issuers
3,079
1.6%
9,449
2.1%
4,820
1.8%
2,148
1.3%
19,496
1.9%
Total book value
8,990
1.6%
20,824
1.8%
18,483
1.6%
7,392
1.8%
55,689
1.7%
The yield for each range of maturities is calculated by dividing the annualised interest income prevailing at reporting date by the book value of
securities held at that date.
Additional information
Additional financial disclosure
Barclays Bank PLC 2019 Annual Report on Form 20-F 217
Average balance sheet
Average balances are based upon monthly averages.
Assets
2019
Average
balance
Interest
presented
within net
interest
income
Interest
presented
elsewhere
Total interest
Rate
£m
£m
£m
£m
%
Cash and balances at central banks
UK
38,450
293
-
293
0.8
Cash and balances at central banks
Non - UK
101,371
626
(153)
473
0.5
Cash and balances at central banks
Total
139,821
919
(153)
766
0.5
Loans and advances at amortised cost
UK
74,894
1,746
(13)
1,733
2.3
Loans and advances at amortised cost
Non - UK
71,925
3,768
-
3,768
5.2
Loans and advances at amortised cost
a
Total
146,819
5,514
(13)
5,501
3.7
Cash collateral
UK
56,091
394
-
394
0.7
Cash collateral
Non - UK
7,400
49
-
49
0.7
Cash collateral
c
Total
63,491
443
-
443
0.7
Reverse repurchase agreements
UK
1,284
46
-
46
3.6
Reverse repurchase agreements
Non - UK
2,041
11
-
11
0.5
Reverse repurchase agreements
Total
3,325
57
-
57
1.7
Interest earning assets at fair value through other
comprehensive income
UK
49,399
756
-
756
1.5
Interest earning assets at fair value through other
comprehensive income
Non - UK
2,961
75
-
75
2.5
Interest earning assets at fair value through other
comprehensive income
Total
52,360
831
-
831
1.6
Other interest income
b
321
-
321
-
Total interest earning assets not at fair value through P&L
405,816
8,085
(166)
7,919
2.0
Less interest expense
(4,178)
166
(4,012)
-
Net interest
405,816
3,907
-
3,907
1.0
Interest earning assets at fair value through P&L
UK
188,811
Interest earning assets at fair value through P&L
Non - UK
68,031
Interest earning assets at fair value through P&L
Total
256,842
Total interest earning assets
662,658
Impairments
(3,776)
Non - interest earning assets
348,215
Total
1,007,097
Percentage of total average interest earning assets in
offices outside the UK
38%
Notes
a Loans and advances at amortised cost include all doubtful lendings, including non -accrual lendings. Interest receivable on such lendings has been included to the extent to which
either cash payments have been received or interest has been accrued in accordance with the income recognition policy of the Barclays Bank Group
b Other interest income principally relates to hedging activity.
Additional information
Additional financial disclosure
Barclays Bank PLC 2019 Annual Report on Form 20-F 218
Assets
2018
Average
balance
Interest
presented
within net
interest
income
Interest
presented
elsewhere
c
Total interest
Rate
£m
£m
£m
£m
%
Cash and balances at central banks
UK
42,611
93
127
220
0.5
Cash and balances at central banks
Non - UK
106,344
826
-
826
0.8
Cash and balances at central banks
Total
148,955
919
127
1,046
0.7
Loans and advances at amortised cost
UK
133,590
2,225
1,518
3,743
2.8
Loans and advances at amortised cost
Non - UK
65,851
3,329
-
3,329
5.1
Loans and advances at amortised cost
a
Total
199,441
5,554
1,518
7,072
3.5
Cash collateral
UK
50,437
324
-
324
0.6
Cash collateral
Non - UK
5,343
47
-
47
0.9
Cash collateral
b
Total
55,780
371
-
371
0.7
Reverse repurchase agreements
UK
580
2
-
2
0.3
Reverse repurchase agreements
Non - UK
855
10
-
10
1.2
Reverse repurchase agreements
Total
1,435
12
-
12
0.8
Interest earning assests at fair value through other
comprehensive income
UK
49,733
589
132
721
1.4
Interest earning assests at fair value through other
comprehensive income
Non - UK
2,857
73
-
73
2.6
Interest earning assets at fair value through other
comprehensive income
Total
52,590
662
132
794
1.5
Other interest income
d
-
(59)
(11)
(70)
-
Total interest earning assets not at fair value through P&L
458,201
7,459
1,766
-
9,225
2.3
Less interest expense
(4,329)
(316)
(4,646)
Net interest
458,201
3,130
1,449
4,579
1.0
Interest earning assests at fair value through P&L
UK
170,459
Interest earning assests at fair value through P&L
Non - UK
77,129
Interest earning assests at fair value through P&L
Total
247,588
Total interest earning assets
705,789
Impairments
(4,851)
Non - interest earning assets
335,903
Total
1,036,841
Percentage of total average interest earning assets in
offices outside the UK
37%
Notes
a Loans and advances at amortised cost include all doubtful lendings, including non -accrual lendings. Interest receivable on such lendings has been included to the extent to which
either cash payments have been received or interest has been accrued in accordance with the income recognition policy of the Barclays Bank Group.
b Prior year balances have been restated to provide additi onal detail on cash collateral and repurchase agreements.
c Net Interest Income from discontinued operations is included within Interest presented elsewhere.
d Other interest income principally relates to hedging activity.
Additional information
Additional financial disclosure
Barclays Bank PLC 2019 Annual Report on Form 20-F 219
Liabilities
2019
Average
balance
Interest
presented
within net
interest
income
Interest
presented
elsewhere
Total interest
Rate
£m
£m
£m
£m
%
Deposits at amortised cost
UK
110,455
636
-
636
0.6
Deposits at amortised cost
Non - UK
67,628
1,142
(153)
989
1.5
Deposits at amortised cost
Total
178,083
1,778
(153)
1,625
0.9
Cash collateral
UK
50,985
214
(13)
201
0.4
Cash collateral
Non - UK
8,332
82
-
82
1.0
Cash collateral
Total
59,317
296
(13)
283
0.5
Debt securities in issue
UK
15,832
101
-
101
0.6
Debt securities in issue
Non - UK
25,730
772
-
772
3.0
Debt securities in issue
Total
41,562
873
-
873
2.1
Subordinated liabilities
UK
35,590
1,072
-
1,072
3.0
Subordinated liabilities
Non - UK
374
24
-
24
6.4
Subordinated liabilities
Total
35,964
1,096
-
1,096
3.0
Repurchase agreements
UK
2,160
11
-
11
0.5
Repurchase agreements
Non - UK
2,381
20
-
20
0.8
Repurchase agreements
Total
4,541
31
-
31
0.7
Other interest expense
a
104
-
104
-
Total interest bearing liabilities not at fair value through P&L
319,467
4,178
(166)
4,012
1.3
Interest bearing liabilities at fair value through P&L
UK
231,224
Interest bearing liabilities at fair value through P&L
Non - UK
62,304
Interest bearing liabilities at fair value through P&L
Total
293,528
Total interest bearing liabilities
612,995
Interest free customer deposits
UK
30,688
Interest free customer deposits
Non - UK
10,375
Interest free customer deposits
Total
41,063
Other non - interest bearing liabilities
303,005
Shareholders' equity
50,034
Total
1,007,097
Percentage of total average interest bearing liabilities in offices
outside the UK
27%
Note
a Other interest expense principally relates to hedging activity.
Additional information
Additional financial disclosure
Barclays Bank PLC 2019 Annual Report on Form 20-F 220
Liabilities
2018
Average
balance
Interest
presented
within net
interest income
Interest
presented
elsewhere
b
Total interest
Rate
£m
£m
£m
£m
%
Deposits at amortised cost
UK
154,191
641
218
859
0.6
Deposits at amortised cost
Non - UK
57,664
950
-
950
1.6
Deposits at amortised cost
Total
211,855
1,591
218
1,809
0.9
Cash collateral
UK
44,782
176
-
176
0.4
Cash collateral
Non - UK
5,498
70
-
70
1.3
Cash collateral
a
Total
50,280
246
-
246
0.5
Debt securities in issue
UK
22,570
75
233
308
1.4
Debt securities in issue
Non - UK
32,176
418
-
418
1.3
Debt securities in issue
Total
54,746
493
233
726
1.3
Subordinated liabilities
UK
20,753
1,382
-
1,382
6.7
Subordinated liabilities
Non - UK
143
15
-
15
10.5
Subordinated liabilities
Total
20,896
1,397
-
1,397
6.7
Repurchase agreements
UK
5,416
9
-
9
0.2
Repurchase agreements
Non - UK
6,302
12
-
12
0.2
Repurchase agreements
Total
11,718
21
-
21
0.2
Other interest expense
c
581
(134)
447
-
Total interest bearing liabilities not at fair value through P&L
349,495
4,329
317
4,646
1.3
Interest bearing liabilities at fair value through P&L
UK
250,273
Interest bearing liabilities at fair value through P&L
Non - UK
51,249
Interest bearing liabilities at fair value through P&L
Total
301,522
Total interest bearing liabilities
651,017
Interest free customer deposits
UK
49,380
Interest free customer deposits
Non - UK
9,496
Interest free customer deposits
Total
58,876
Other non - interest bearing liabilities
276,409
Shareholders' equity
50,539
Total
1,036,841
Percentage of total average interest bearing liabilities in offices
outside the UK
24%
Notes
a Prior year balances have been restated to provide additional detail on cash collateral and repurchase agreements.
b Interest Income from discontinued operations is included within Interest presented elsewhere.
c Other interest expense principally relates to hedging activity.
Additional information
Additional financial disclosure
Barclays Bank PLC 2019 Annual Report on Form 20-F 221
Changes in total interest – volume and rate analysis
The following tables allocate changes in interest between changes in volume and changes in interest rates for the last two years. Volume and rate
variances have been calculated on the movement in the average balances and the change in the interest rates o n average interest earning assets
and average interest bearing liabilities. Where variances have arisen from changes in both volumes and interest rates, these have been allocated
proportionately between the two.
Interest income
2019/2018 Change due to
increase/(decrease) in:
2018/2017 Change due to increase/(decrease)
in:
Total
change
Volume
Rate
Total
change
Volume
Rate
Other
a
£m
£m
£m
£m
£m
£m
£m
Cash and balances at central banks
UK
(23)
(40)
-
Cash and balances at central banks
Non - UK
(353)
(37)
(316)
-
Cash and balances at central banks
Total
(280)
(60)
(220)
-
Loans and advances at amortised cost
UK
(2,010)
(1,439)
(571)
(5,093)
(3,371)
(1,722)
-
Loans and advances at amortised cost
Non - UK
(211)
(915)
-
Loans and advances at amortised cost
Total
(1,571)
(1,124)
(447)
(5,304)
(2,667)
(2,637)
-
Cash collateral
UK
-
Cash collateral
Non - UK
(14)
(2)
(2)
-
-
Cash collateral
b
Total
-
Financial investments
UK
-
-
-
(651)
-
-
(651)
Financial investments
Non - UK
-
-
-
(103)
-
-
(103)
Financial investments
Total
-
-
-
(754)
-
-
(754)
Reverse repurchase agreements
UK
(69)
(33)
(36)
-
Reverse repurchase agreements
Non - UK
(8)
(394)
(244)
(150)
-
Reverse repurchase agreements
Total
(463)
(277)
(186)
-
Interest earning assets at fair value through other
comprehensive income
UK
(5)
(57)
Interest earning assets at fair value through other
comprehensive income
Non - UK
(1)
(37)
Interest earning assets at fair value through other
comprehensive income
Total
(2)
(94)
Other interest income
-
-
-
Total interest receivable
(1,306)
(1,119)
(187)
(5,111)
(3,006)
(2,105)
-
Note
a Included in Other is the movement related to the adoption of IFRS9 where financial investment assets were reclassified to assets held at fair value through other comprehensive
income, which is neither volume or rate driven.
b. Prior year balances have been restated to provide additional detail on cash collateral and repurchase agreements .
Additional information
Additional financial disclosure
Barclays Bank PLC 2019 Annual Report on Form 20-F 222
Interest expense
2019/2018 Change due to
increase/(decrease) in:
2018/2017 Change due to
increase/(decrease) in:
Total change
Volume
Rate
Total change
Volume
Rate
£m
£m
£m
£m
£m
£m
Deposits at amortised cost
UK
(223)
(251)
(417)
Deposits at amortised cost
Non - UK
(113)
(417)
(553)
Deposits at amortised cost
Total
(183)
(98)
(85)
(413)
(281)
(132)
Cash collateral liabilities
UK
Cash collateral liabilities
Non - UK
(18)
(2)
(11)
Cash collateral liabilities
a
Total
(17)
(9)
Debt securities in issue
UK
(207)
(74)
(133)
(506)
(273)
(233)
Debt securities in issue
Non - UK
(99)
(6)
Debt securities in issue
Total
(173)
(172)
(279)
Subordinated liabilities
UK
(310)
(992)
(198)
Subordinated liabilities
Non - UK
(7)
-
Subordinated liabilities
Total
(301)
(999)
(198)
Repurchase agreements
UK
(7)
(215)
(106)
(109)
Repurchase agreements
Non - UK
(11)
(326)
(128)
(198)
Repurchase agreements
a
Total
(18)
(541)
(234)
(307)
Other interest expense
(344)
-
(344)
-
Total interest payable
(634)
(1,097)
(483)
(1,001)
a. Prior year balances have been restated to provide additional detail on cash collateral and repurchase agreements.
Additional information
Additional financial disclosure
Barclays Bank PLC 2019 Annual Report on Form 20-F 223
Credit risk additional disclosure
This section of the report contains supplementary information that is more detailed or contains longer histories than the data presented in the Risk
review section.
Risk elements in loans and advances at amortised cost
There are three main higher credit risk elements identified in loans and advances:
Loans assessed as S tage 3 credit impaired
Stage 3 credit impaired loans are loans in default assessed for lifetime expected credit losses. Further details on the approach to expected credit
loss provisioning, including the classification into stages of gross exposures and approach to the measurement of lifetime expected credit losses,
can be found in Note 1
Significant Accounting Policies
.
Loans greater than 9 0 days past due not considered S tage 3 credit impaired
Under a US reporting framework, all accruing loans greater than 90 days past due are considered to be at higher risk of loss. Barclays Bank Group
classifies all loans and advances past d ue 90 days except mortgages as Stage 3 credit impaired loans and therefore these are already considered a
higher credit risk. However, in addition to Stage 3 gross loans and advances past due 90 days as at 31 December 2019, there are a further £8 m of
Stage 2 mortgages loans between 90 to 180 days past due.
Restructured loans not included above
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. Restruc tured loans not classified as Stage 3 credit impaired
and not great er than 90 days past due are £118m as at 31 December 2019 .
These risk elements in loans and advances at amortised cost may be analysed between the United Kingdom and Rest of the World as follows:
Risk elements in loans and advances at amortised cost
2019
2018
2017
a
As at 31 December
£m
£m
£m
Gross stage 3 credit impaired loans (2017: Individually impaired loans):
United Kingdom
1,037
872
2,648
Rest of the world
3,311
3,317
1,756
Total
4,348
4,189
4,404
Accruing gross loans which are not stage 3 credit impaired loans and are contractually
overdue 90 days or more as to principal or interest (2017: Accruing gross loans which are
not individually impaired loans and are contractually overdue 90 days or more as to principal
or interest)
United Kingdom
8
19
752
Rest of the world
-
-
516
Total
8
19
1,268
Other gross restructured loans (2017 Impaired and restructured loans):
United Kingdom
-
-
179
Rest of the world
118
115
143
Total
118
115
322
Total risk elements in loans and advances at amortised cost
United Kingdom
1,045
891
3,579
Rest of the world
3,429
3,432
2,415
Total
4,474
4,323
5,994
Notes
a The comparatives for 2017 ha s been presented on an IAS 39 basis .
Additional information
Additional financial disclosure
Barclays Bank PLC 2019 Annual Report on Form 20-F 224
Interest forgone on risk elements in loans and advances
2019
2018
2017
£m
£m
£m
Interest income that would have been recognised under the original contractual terms
United Kingdom
-
-
87
Rest of the World
184
180
151
Total
184
180
238
Potential Problem Loans
Potential problem loans are those loans for which serious doubt exists as to the ability of the borrower to continue to comply with repayment terms
in the near future.
Loans and advances at amortised cost by product on page 49 includes gross exposure and associated impairment allowance for assets classified as
Stage 2, but not past due i.e. assets satisfying the criteria for a Significant Increase in Credit Risk, but which are still complying with repayment
terms.
Forbearance measures consist of concessions towards a debtor that is experiencing or is about to experience difficulties in meeting their financial
commitments. Both performing and non- performing forbearance assets are classified as Stage 3 except where it is established that the concession
granted has not resulted in diminished financial obligation and that no other regulatory definition of default criteria has been triggered, in which
case the asset is classified as Stage 2. The minimum probationary period for non- performing forbearance is 12 months and for performing
forbearance, 24 months. Hence, a minimum of 36 months is required for non - performing forbearance to move out of a forborne state.
In order to assess asset credit quality, 12 - month PDs are used to map assets into strong, satisfactory, higher risk or credit impaired. A credit risk
profile by internal PD grade for gross loans and advances at amortised cost and allowance for ECL is shown in the credit risk section on page 58 ,
analysing each of these categor ies by stage.
Wholesale accounts that are deemed to contain heightened levels of risk are recorded on graded watchlists comprising four categories, graded in
line with the perceived severity of the risk attached to the lending, and its probability of defa ult. Where a counterparty’s financial health gives
grounds for concern, it is immediately placed into the appropriate category. Once an account has been placed on a watchlist, the exposure is
monitored and, where appropriate, exposure reductions are effected.
Additional information
Additional financial disclosure
Barclays Bank PLC 2019 Annual Report on Form 20-F 225
Impairment
The comparatives for 2017 are presented on an IAS 39 basis.
Movements in allowance for impairment by geography
2019
a
2018
a
2017
£m
£m
£m
Allowance for impairment as at 1 January
3,843
7,102
4,620
Exchange and other adjustments
(168)
(2,837)
(293)
Amounts written off:
United Kingdom
(146)
(514)
(1,111)
Europe
(96)
(62)
(157)
Americas
(1,036)
(862)
(1,038)
Africa and Middle East
(9)
-
(9)
Asia
(6)
(18)
(14)
New and increased/(released) impairment allowance:
United Kingdom
147
91
1,345
Europe
116
84
110
Americas
1,071
809
1,192
Africa and Middle East
(30)
32
23
Asia
10
18
(16)
Allowance for impairment as at 31 December
3,696
3,843
4,652
Average loans and advances at amortised cost for the year
210,310
199,441
296,799
Analysis of impairment charges
2019
2018
2017
As at 31 December
£m
£m
£m
Impairment charges:
United Kingdom
93
(163)
354
Europe
127
52
92
Americas
927
758
1,084
Africa and Middle East
(14)
16
22
Asia
8
25
(16)
Loans and advances at amortised cost
1,141
688
1,536
Provision for undrawn contractually committed facilities and guarantees provided
55
(48)
14
Loans impairment
1,196
640
1,550
Cash collateral and settlement balances
1
(1)
-
Financial instruments at fair value through other comprehensive income
-
4
3
Other financial assets measured at amortised cost
5
-
-
Impairment charges
1,202
643
1,553
Additional information
Additional financial disclosure
Barclays Bank PLC 2019 Annual Report on Form 20-F 226
The industry classifications in the tables below have been prepared at the level of the borrowing entity. This means that a loan to a subsidiary of a
major corporation is classified by the industry in which the subsidiary operates, even though the Parent’s predominant business may be in a
different indu stry.
Total impairment charges on loans and advances at amortised cost by industry
2019
2018
2017
As at 31 December
£m
£m
£m
United Kingdom:
Financial institutions
(4)
66
(42)
Manufacturing
(7)
(4)
(12)
Construction
(6)
(2)
4
Property
(5)
(26)
(19)
Energy and water
6
(1)
35
Wholesale and retail distribution and leisure
32
(45)
39
Business and other services
10
(116)
232
Home loans
-
(15)
9
Cards, unsecured and other personal lending
43
54
104
Other
24
(74)
4
Total United Kingdom
93
(163)
354
Overseas
1,048
851
1,182
Total Impairment charges
1,141
688
1,536
Allowance for impairment by industry
2019
a
2018
2017
As at 31 December
£m
%
£m
%
£m
%
United Kingdom:
Financial institutions
63
1.7
66
1.7
11
0.2
Manufacturing
33
0.9
30
0.8
34
0.7
Construction
25
0.7
27
0.7
37
0.8
Property
38
1.0
39
1.0
48
1.0
Government and central bank
-
-
-
-
1
-
Energy and water
20
0.5
5
0.1
108
2.3
Wholesale and retail distribution and leisure
103
2.8
93
2.4
186
4.0
Business and other services
138
3.7
135
3.5
482
10.4
Home loans
11
0.3
19
0.5
137
2.9
Cards, unsecured and other personal lending
181
4.9
193
5.0
1,671
35.9
Other
33
0.9
38
1.0
42
0.9
Total United Kingdom
645
17.4
645
16.8
2,757
59.3
Overseas
3,051
82.6
3,198
83.2
1,895
40.7
Total
3,696
100
3,843
100.0
4,652
100.0
Note
a Other financial assets subject to impairment not included in the table above include £22m impairment allowance relating to cash collateral and settlement balances, financial
assets at fair value through other comprehensive income and other assets.
Additional information
Additional financial disclosure
Barclays Bank PLC 2019 Annual Report on Form 20-F 227
Amounts written off and recov ered by industry
Amounts written off
Recoveries of amounts
previously written off
2019
2018
2017
2019
2018
2017
As at 31 December
£m
£m
£m
£m
£m
£m
United Kingdom:
Financial institutions
6
2
2
5
1
47
Manufacturing
2
11
2
4
3
-
Construction
6
7
10
1
-
-
Property
2
31
22
5
4
-
Energy and water
-
4
32
-
-
-
Wholesale and retail distribution and leisure
12
34
23
19
14
-
Business and other services
39
214
105
6
6
(5)
Home loans
4
5
13
-
-
-
Cards, unsecured and other personal lending
71
191
897
-
-
19
Other
4
15
5
4
2
-
Total United Kingdom
146
514
1,111
44
30
61
Overseas
1,147
942
1,218
29
56
127
Total
1,293
1,456
2,329
73
86
188
Impairment ratios
2019
2018
2017
%
%
%
Impairment charges as a percentage of average loans and advances at amortised cost
0.57
0.32
0.52
Amounts written off (net of recoveries) as a percentage of average loans and advances at amortised cost
0.58
0.69
0.72
Allowance for impairment balance as a percentage of loans and advances at amortised cost as at 31 December
2.54
2.73
1.41
Additional information
Additional financial disclosure
Barclays Bank PLC 2019 Annual Report on Form 20-F 228
Maturity analysis of Gross l oans and advances at amortised cost
Maturity analysis of Gross loans and advances at amortised cost
On
demand
Not more
than
three
months
Over
three
months
but not
more
than six
months
Over six
months
but not
more
than one
year
Over one
year but
not more
than
three
years
Over
three
years but
not more
than five
years
Over five
years but
not more
than ten
years
Over ten
years
Total
As at 31 December 2019
£m
£m
£m
£m
£m
£m
£m
£m
£m
United Kingdom
Corporate lending
2,150
3,063
937
2,987
13,614
10,105
3,844
8,592
45,292
Other lending to customers in the United
Kingdom
1,156
930
3,646
1,020
4,869
1,354
1,204
3,742
17,921
Total United Kingdom
3,306
3,993
4,583
4,007
18,483
11,459
5,048
12,334
63,213
Europe
2,762
1,892
961
2,405
6,833
4,303
2,573
3,514
25,243
Americas
4,450
2,454
2,473
3,907
10,748
9,732
7,285
6,978
48,027
Africa and Middle East
482
662
267
126
375
761
167
95
2,935
Asia
1,245
1,414
1,634
455
531
532
84
19
5,914
Total loans and advances at amortised
cost
12,245
10,415
9,918
10,900
36,970
26,787
15,157
22,940
145,332
As at 31 December 2018
United Kingdom
Corporate lending
447
2,185
1,236
2,697
12,864
9,914
4,619
11,144
45,106
Other lending to customers in the United
Kingdom
1,036
1,226
1,041
872
2,267
1,738
798
1,261
10,239
Total United Kingdom
1,483
3,411
2,277
3,569
15,131
11,652
5,417
12,405
55,345
Europe
2,756
1,990
1,122
2,050
8,489
3,919
3,266
4,703
28,295
Americas
4,325
2,228
1,707
3,288
13,700
9,933
6,813
7,043
49,037
Africa and Middle East
344
662
562
188
724
480
48
131
3,139
Asia
647
1,672
541
512
1,095
357
127
35
4,986
Total loans and advances at amortised
cost
9,555
9,963
6,209
9,607
39,139
26,341
15,671
24,317
140,802
Additional information
Additional financial disclosure
Barclays Bank PLC 2019 Annual Report on Form 20-F 229
Industrial and g eographical concentrations of Gross l oans and advances at amortised cost
Gross Loans and advances at amortised cost by industry
2019
2018
2017
a
As at 31 December
£m
£m
£m
Financial institutions
29,516
27,540
36,196
Manufacturing
8,000
8,444
9,193
Construction
2,574
2,486
3,284
Property
11,121
10,745
20,364
Government and central bank
11,404
3,476
9,090
Energy and water
5,373
5,508
5,644
Wholesale and retail distribution and leisure
8,363
9,831
12,605
Business and other services
14,816
17,438
20,381
Home loans
11,334
13,530
147,460
Cards, unsecured loans and other personal lending
36,109
35,498
57,245
Other
6,722
6,306
7,780
Loans and advances at amortised cost
145,332
140,802
329,242
Gross Loans and advances at amortised cost in the UK
2019
2018
2017
a
As at 31 December
£m
£m
£m
Financial institutions
7,821
5,605
6,820
Manufacturing
4,512
4,035
6,198
Construction
2,320
2,277
3,025
Property
8,373
7,892
18,168
Government and central bank
7,997
1,012
7,906
Energy and water
2,707
2,595
2,501
Wholesale and retail distribution and leisure
6,686
7,993
10,617
Business and other services
9,859
12,542
16,385
Home loans
2,502
2,521
134,820
Cards, unsecured loans and other personal lending
6,903
6,122
30,786
Other
3,533
2,751
6,220
Loans and advances at amortised cost in the UK
63,213
55,345
243,446
Loans and advances at amortised cost in Europe
2019
2018
2017
a
As at 31 December
£m
£m
£m
Financial institutions
5,668
5,937
6,130
Manufacturing
1,072
1,335
1,347
Construction
133
85
80
Property
504
708
734
Government and central bank
1,459
1,778
323
Energy and water
828
675
621
Wholesale and retail distribution and leisure
752
735
808
Business and other services
907
991
1,023
Home loans
7,985
10,157
11,578
Cards, unsecured loans and other personal lending
5,090
5,055
4,483
Other
845
839
632
Loans and advances at amortised cost in Europe
25,243
28,295
27,759
Additional information
Additional financial disclosure
Barclays Bank PLC 2019 Annual Report on Form 20-F 230
Gross Loans and advances at amortised cost in the Americas
2019
2018
2017
a
As at 31 December
£m
£m
£m
Financial institutions
12,308
12,430
18,559
Manufacturing
1,782
2,426
1,262
Construction
77
71
147
Property
2,123
2,071
1,272
Government and central bank
319
424
-
Energy and water
1,437
1,667
1,986
Wholesale and retail distribution and leisure
635
612
660
Business and other services
3,620
2,970
2,629
Home loans
380
433
567
Cards, unsecured loans and other personal lending
23,439
23,746
21,486
Other
1,907
2,187
523
Loans and advances at amortised cost in the Americas
48,027
49,037
49,091
Gross Loans and advances at amortised cost in Africa and Middle East
2019
2018
2017
a
As at 31 December
£m
£m
£m
Financial institutions
948
1,319
1,067
Manufacturing
160
51
13
Property
55
52
112
Government and central bank
269
262
860
Energy and water
116
200
252
Wholesale and retail distribution and leisure
67
123
219
Business and other services
363
221
64
Home loans
391
331
378
Cards, unsecured loans and other personal lending
530
484
406
Other
36
96
97
Loans and advances at amortised cost in Africa and Middle East
2,935
3,139
3,468
Gross Loans and advances at amortised cost in Asia
2019
2018
2017
a
As at 31 December
£m
£m
£m
Financial institutions
2,771
2,249
3,620
Manufacturing
474
597
373
Construction
44
53
32
Property
66
22
78
Government and central bank
1,360
-
1
Energy and water
285
371
284
Wholesale and retail distribution and leisure
223
368
301
Business and other services
67
714
280
Home loans
76
88
117
Cards, unsecured loans and other personal lending
147
91
84
Other
401
433
308
Loans and advances at amortised cost in Asia
5,914
4,986
5,478
Note
a The comparatives for 2017 have been presented on an IAS 39 basis.
Interest rate sensitivity of gross loans and advances at amortised cost
2019
2018
Fixed rate
Variable rate
Total
Fixed rate
a
Variable rate
a
Total
As at 31 December
£m
£m
£m
£m
£m
£m
Gross loans and advances at amortised cost
39,282
106,050
145,332
30,937
109,865
140,802
Note
a Comparatives have been restated to better reflect the interest rate classifications.
Additional information
Additional financial disclosure
Barclays Bank PLC 2019 Annual Report on Form 20-F 231
Foreign outstandings for countries where this exceeds 0.75% of total Group assets
a
As % of assets
Total
Banks and other
financial
institutions
Government
and official
institutions
Commercial
industrial and
other private
sectors
Financial
guarantees
%
£m
£m
£m
£m
£m
As at 31 December 2019
b
United States
11.5
100,677
64,463
15,053
20,378
783
Germany
1.3
11,031
9,488
-
1,447
96
France
1.2
10,314
9,158
-
1,097
59
Netherlands
1.1
9,988
7,018
686
2,084
200
As at 31 December 2018
b
United States
10.8
95,199
61,382
14,375
18,241
1,201
Germany
0.9
8,101
4,554
1,612
1,819
116
France
2.2
19,556
11,976
3,508
4,037
35
As at 31 December 2017
b
United States
7.5
84,215
46,888
13,081
23,609
637
Germany
1.6
17,642
2,818
12,554
2,206
64
France
2.3
25,599
15,156
4,067
6,248
128
Note
a Foreign outstanding includes cross border exposure in non -local currency of the Barclays branches and subsidiaries, and in country foreign currency exposure.
b Comparatives have been restated to reflect the carrying value on the balance sheet. Figures are net of short securities .
Off-balance sheet and other credit exposures
2019
2018
2017
As at 31 December
£m
£m
£m
Off-balance sheet exposures
Contingent liabilities
23,777
19,394
19,012
Commitments
270,027
257,768
315,573
On-balance sheet exposures
Trading portfolio assets
113,337
104,038
113,755
Financial assets at fair value through the income statement
129,470
145,250
116,282
Derivative financial instruments
229,641
222,683
237,987
Financial investments
a
-
-
58,963
Financial assets at fair value through other comprehensive income
45,406
44,994
-
Note
a Following the adoption of IFRS 9 in 2018, financial investments classification is no longer applicable.
Notional principal amounts of credit derivatives
2019
2018
2017
As at 31 December
£m
£m
£m
Credit derivatives held or issued for trading purposes
a
825,516
759,075
715,741
Note
a Includes credit derivatives held as economic hedges which are not designated as hedges for accounting purposes.
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 232
‘A - IRB’ / ‘Advanced - Internal Ratings Based’
‘ABS CDO Super Senior’
of super senior tranches takes priority over other obligations.
‘Acceptances and endorsements’
Group expects most acceptances to be presented, but reimbursement by the customer is normally immediate. Endorsements are residual liabilities
of the Barclays Bank Group in respect of bills of exchange which have been paid and subsequently rediscounted.
‘Additional Tier 1 (AT1) capital’
‘Additional Tier 1 (AT1) securities’
‘Advanced Measurement Approach (AMA)’
for operational risk. Banks can only use this approach subject to approval from their local regulators.
‘Agencies’
‘Agency Mortgage - Backed Securities’
‘All price risk (APR)’
An estimate of all the material market risks, including rating migration and defaul t for the correlation trading portfolio.
‘American Depository Receipts (ADR)’
A negotiable certificate that represents the ownership of shares in a non - US company (for example Barclays)
trading in US financial markets.
‘Americas’
‘Annual Earnings at Risk (AEaR)’
A measure of the potential change in Net Interest Income (NII) due to an interest rate movement over a one - year
perio d.
‘Annualised cumulative weighted average lifetime PD’
The probability of default over the remaining life of the asset, expressed as an annual rate,
reflecting a range of possible economic scenarios.
‘Application scorecards’
Algorithm based decision tools used to aid business decisions and manage credit risk based on available customer data at
the point of application for a product.
‘Arrears’
overdue. Such customers are also said to be in a state of delinquency. When a customer is in arrears, their entire outstanding balance is said to be
delinquent, meaning that delinquent balances are the total outstanding loans on which payments are overdue.
‘Asia’
‘Asset Backed Commercial Paper’
purposes.
‘Asset Backed Securities (ABS)’
any assets which attract a set of associated cash flows but are commonly pools of residential or commercial mortgages and, in the case of
Collateralised Debt Obligations (CDOs), the referenced pool may be ABS or other classes of assets.
‘Attributa ble profit’
classified as equity.
‘Average allocated tangible equity’
Calculated as the average of the previous month’s period end allocated tangible equity and the current month’s
period end allocated tangible equity. The average allocated tangible equity for the period is the average of the monthly averages within that period.
‘Average tangible shareholders’ equity’
Calculated as the average of the previous month’s period end tangible equity and the current month’s
period end tangible equity. The average tangible shareholders’ equity for the period is the average of the monthly averages within that period.
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 233
‘Average UK leverage ratio’
As per the PRA rulebook, is calculated as the average capital measure based on the last day of each month in the
quarter divided by the average exposure measure for the quarter, where the average exposure is based on each day in the quarter.
‘Back testing’
Includes a number of techniques that assess the continued statistical validity of a model by simulating how the model would have
predicted recent experience.
‘Barclays Africa’ or ‘Absa’
Barclays Africa Group Limited (now Absa Group Limited), which was previously a subsidiary of the Barclays Group.
‘Balance weighted Loan to Value (LTV) ratio’
market LTVs derived by calculating individual LTVs at account level and weighting it by the balances to arrive at the average position. Balance
weighted loan to value is calculated using the following formula: LTV = ((loan balance 1 x MTM LTV% for loan 1) + (loan balance 2 x MTM LTV%
for loan 2) + ...) / total outstandings in portfolio.
‘Barclaycard’
lending, merchant acquiring, com mercial cards and point of sale finance. Barclaycard has scaled operations in the UK, US, Germany and
Scandinavia.
‘Barclaycard Consumer UK’
‘Barclays’ or ’Barclays Group’
‘Barclays Bank Group’
‘Barclays Bank UK Group’
‘Barclays Operating businesses’
The core Barclays businesses operated by Barclays UK (which include the UK Personal banking; UK business
banking and the Barclaycard consumer UK businesses) and Barclays International (the large UK Corporate business; the international Corporate and
Private Bank businesses; the Investment Bank; the international Barclaycard business; and payments).
‘Barclays Direct’
‘Barclays Execution Services’ or ‘BX’ or ‘BSerL’ or ‘Group Service Company’
Barclays Execution Services Limited, the Group services company set up
to provide services to Barclays UK and Barclays International to deliver operational continuity.
‘Barclays International’
The segment of Barclays held by Barclays Bank PLC which has not been ring - fenced as part of regulatory ring fencing
requirements. The division includes the large UK Corporate business; the international Corporate and Private Bank businesses; the Investment
Bank; the international Barclaycard business; and payments.
‘Barclays Non - Core’
The previously reported unit comprising of a group of businesses and assets that were exited or run down by Barclays, which
was closed in 2017.
‘Barclays UK’
The segment of Barclays held by Barclays Bank UK PLC which has been ring - fenced as part of regulatory ring fencing requirements.
The division includes the UK Personal banking; UK business banking and the Barclaycard consumer UK businesses.
‘Basel 3’
measures developed by the Basel Committee on Banking Supervision aiming to strengthen the regulation, supervision and risk management of
banks.
‘Basel Committee of Banking Supervision (BCBS or The Basel Committee)’
develops global supervisory standards for the banking industry. Its 45 members are officials from central banks or prudential supervisors from 28
jurisdictions.
‘Basic Indicator Approach (BIA)’
Under the BIA, banks are required to hold regulatory capital for operational risk equal to 15% of the annual
average, calculated over a rolling three - year period, of the relevant income indicator for the bank as whole.
‘Basis point(s)’ / ‘bp(s)’
yields on securities and for other purposes.
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 234
‘Basis risk’
especially under stressed market conditions.
‘Behavioural scorecards’
Algorithm based decision tools used to aid business decisions and manage credit risk based on existing customer data
derived from account usage.
‘Book quality’
In the context of the Capital Risk section, changes in RWAs caused by factors such as underlying customer behaviour or
demographics leading to changes in risk profile.
‘Book size’
In the context of the Capital Risk section
,
‘Business Banking’
Offers specialist advice, products and services to small and medium enterprises in the UK.
‘Business Lending’
Business Lending in Barclays UK that primarily relates to small and medium enterprises typically with exposures up to £3m or
with a turnover up to £5m.
‘Business scenario stresses’
Investment Bank.
‘Buy to let mortgage’
A mortgage where the intention of the customer (investor) was to let the property at origination.
‘Capital Conservation Buffer (CCB)’
A capital buffer of 2.5% of a bank’s total exposures that needs to be met with an additional amount of Common
Equity Tier 1 capital above the 4.5% minimum requirement for Common Equity Tier 1 set out in CRR. Its objective is to conserve a bank’s capital by
ensuring that banks build up surplus capital outside periods of stress which can be drawn down if losses are incurred.
‘Capital ratios’
‘Capital Requirements Directive (CRD)’
Directive 2013/36/EU, a component of the CRD IV package which accompanies the Capital Requirements
Regulation and sets out macroprudential standards including the countercyclical capital buffer and capital buffers for systemically important
institutions. Directive (EU) 2019/878, published as part of the EU Risk Reduction Measure package amends CRD. These amendments enter into
force from 27 June 2019, with EU member states required to adopt the measures within the Directive by 28 December 2020.
‘Capital Requ irements Regulation (CRR)’
Regulation (EU) No 575/2013, a component of the CRD IV package which accompanies the Capital
Requirements Directive and sets out detailed rules for capital eligibility, the calculation of RWAs, the measurement of leverage, the ma nagement of
large exposures and minimum standards for liquidity. Between 27 June 2019 and 28 June 2023, this regulation will be amended in line with the
requirements of amending Regulation (EU) 2019/876 (CRR II).
‘Capital Requirements Regulation II (CRR II )’
Regulation (EU) 2019/876, amending Regulation (EU) No 575/2013 (CRR). This is a component of the
EU Risk Reduction Measure package. The requirements set out in CRR II will be introduced between 27 June 2019 and 28 June 2023.
‘Capital requirements on the underlying exposures (KIRB)’
An approach available to banks when calculating RWAs for securitisation exposures. This
is based upon the RWA amounts that would be calculated under the IRB approach for the underlying pool of securitised exposures in the program,
had such exposures not been securitised.
‘Capital resources’
as ‘own funds’ within EU regulatory texts.
‘Capital risk’
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 Barclays Bank Group’s pension plans.
‘Central Counterparty’ / ‘Central Clearing Counterparties (CCPs)’
transaction, such as a derivative contract or repurchase agreement (repo). Where a central counterparty is used, a single bi- lateral contract
between the buyer and seller is replaced with two contracts, one between the buyer and the CCP and one between the CCP and the seller. The use
of CCPs allows for greater oversight and improved credit risk mitigation in over - the- counter (OTC) markets.
‘Charge -off’
the full balance. This is normally when six payments are in arrears.
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 235
‘Client Assets’
Assets managed or administered by Barclays Bank Group on behalf of clients including assets under management (A UM), custody
assets, assets under administration and client deposits.
‘CLOs and Other insured assets’
with Credit Support Annex (CSA) protection.
‘Collateralised Debt Obligation (CDO)’
certain other related assets purchased by the issuer. CDOs may feature exposure to sub - prime mortgage assets thr ough the underlying assets.
‘Collateralised Loan Obligation (CLO)’
different classes of owners (in tranches).
‘Collateralised Mortgage Obligation (CMO)’
and passes them on to investors of the security.
‘Combined Buffer Requirement’
In the context of the CRD capital obligations, the combined requirements of the Capital Conservation Buffer, the
GSII Buffer, the OSII buffer, the Systemic Risk buffer and an institution specific counter - cyclical buffer.
‘Commercial paper (CP)’
‘Commercia l real estate (CRE)’
Commercial real estate includes office buildings, industrial property, medical centres, hotels, retail stores, shopping
centres, farm land, multifamily housing buildings, warehouses, garages, and industrial properties and other similar properties. Commercial real
estate loans are loans backed by a package of commercial real estate. Note: for the purposes of the Credit Risk section, the UK CRE portfolio
includes property investment, development, trading and housebuilders but excludes soc ial housing contractors.
‘Committee of Sponsoring Organisations of the Treadway Commission Framework (COSO)’
A joint initiative of five private sector organisations
dedicated to the development of frameworks and providing guidance on enterprise risk manage ment, internal control and fraud deterrence.
‘Commodity derivatives’
oil and oil related, power and natural gas).
‘Commodity risk’
vs. WTI crude prices).
‘Common Equity Tier 1 (CET1) capital’
share premium, retained earnings and other reserves, less specified regulatory adjustments.
‘Common Equity Tier 1 (CET1) ratio’
‘Compensation: income ratio’
The ratio of compensation expense over total income. Compensation represents total staff costs less non-
compensation items consisting of outsourcing, staff training, redundancy costs and retirement costs.
‘
Comprehensive Capital Analysis and Review (CCAR)’
An annual exercise, required by and evaluated by the Federal Reserve, through which the
largest bank holding companies operating in the US assess whether they have sufficient capital to continue operations through periods of
ec onomic and financial stress and have robust capital-planning processes that account for their unique risks.
‘Comprehensive Risk Measure (CRM)’
An estimate of all the material market risks, including rating migration and default for the correlation trading
portfolio. Also referred to as All Price Risk (APR) and Comprehensive Risk Capital Charge (CRCC).
‘Conduct risk’
services, inc luding instances of wilful or negligent misconduct.
‘Constant Currency Basis’
Excluding the impact of foreign currency conversion to GBP when comparing financial results in two different financial
periods.
‘Consumer, Cards and Payments’
Barclays US Consume r Bank, Barclaycard Germany, Barclays Partner Finance, Barclaycard Commercial Payments,
Barclaycard Payment Solutions (including merchant acquiring) and the international Wealth business.
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 236
‘Contingent capital notes (CCNs)’
written off or converted into an equity instrument from the issuer's perspective in the event of the Common Equity Tier 1 (CET1) ratio of the
re levant Barclays Bank Group entity falling below a specific level, or at the direction of regulators.
‘Conversion Trigger’
Used in the context of Contingent Capital Notes and AT1 securities. A capital adequacy trigger event occurs when the CET1
ratio of the bank falls below a certain level (the trigger) as defined in the Terms & Conditions of the instruments issued. See ‘Contingent capital
notes’.
‘Core deposit intangibles’
‘Correlation risk’
time.
‘Corporate and Investment Bank (CIB)’
Barclays Corporate and Investment Bank businesses which form part of Barclays Internation al.
‘Cost: income ratio’
‘Cost of Equity’
‘Cost: net operating income ratio’
‘Count ercyclical Capital Buffer (CCyB)’
An additional buffer introduced as part of the CRD IV package that requires banks to have an additional
cushion of CET 1 capital with which to absorb potential losses, enhancing their resilience and contributing to a stable financial system.
‘Countercyclical leverage ratio buffer (CCLB)’
A macroprudential buffer that has applied to specific PRA regulated institutions since 2018 and is
calculated at 35% of any risk weighted countercyclical capital buffer set by the Financial Policy Committee (FPC). The CCLB applies in addition to
the minimum of 3.25% and any G - SII additional Leverage Ratio Buffer that applies.
‘Counterparty credit risk’
RWAs, a component of RWAs that represents the risk of loss in derivatives, repurchase agreements and similar transactions resulting from the
default of the counterparty.
‘Coverage ratio’
‘Covered bonds’
holders of the covered bonds.
‘CRD IV’
The Fourth Capital Requirements Directive, an EU Directive and an accompanying Regulation (CRR) that together prescribe EU capital
adequacy and liquidity requirements and implements Basel 3 in the European Union.
‘CRD V’
The Fifth Capital Requirements Directive, comprising an EU amending Directive and an accompanying amending Regulation (CRR II) that
together prescribe EU capital adequacy and liquidity requirements and implements enhanced Basel 3 proposals in the European Union.
‘Credit conversion factor (CCF)’
Factor used to estimate the risk from off - balance sheet commitments for the purpose of calculating the total
Exposure at Default (EAD) used to calculate RWAs.
‘Credit default swaps (CDS)’
to make payments to the protection buyer in the event of a defined credit event. Credit events normally include bankruptcy, payment default on a
reference asset or assets, or downgrades by a rating agency.
‘Credit derivatives (CDs)’
protection.
‘Credit impairment charges’
impairment charges on fair value through other comprehensive income assets and reverse repurchase agreements.
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 237
‘Credit market exposures’
significantly impacted by the deterioration in the global credit markets. The exposures include positions subject to fair value movements in the
Income Statement, positions that are classified as loans and advances and available for sale and other assets.
‘Credit quality step’
assessments of a recognised credit rating agency or export credit agency to credit quality steps that determine the risk weight to be applied to an
exposure.
‘Credit Rating’
An evaluation of the creditworthiness of an entity seeking to enter into a credit agreement.
‘Credit risk’
obligations to Barclays, including the whole and timely payment of principal, interest, collateral and other receivables. In the context of RWAs, it is
the component of RWAs that represents the risk of loss in loans and advances and similar transactions resulting from the default of the
counterparty.
‘Credit risk mitigation’
divided into three types; collateral, netting and set-off, and risk transfer.
‘Credit spread’
‘Credit Valuation Adjustment (CVA)’
account the counterparty’s risk of default. The CVA therefore represents an estimate of the adjustment to fair value that a market participant would
make to incorporate the credit risk of the counterparty due to any failure to perform on contractual agreements.
‘CRR leverage exposure’
‘CRR leverage ratio’
Is calculated using the CRR definition of Tier 1 capital for the numerator and the CRR definition of leverage exposure as the
denominator.
‘Customer assets’
date divided by number of days in the year to date.
‘Customer deposits’
Such funds are recorded as liabilities in the Barclays Bank Group’s balance sheet under deposits at amortised cost.
‘Customer liabilities’
‘Customer net interest income’
related to customer assets and liabilities only and does not include any interest on securities or other non - customer assets and liabilities.
‘CVA volatility charge’
counterparty. This is to reflect the current market value of the credit risk associated with the counterparty to the Barclays Bank Group. The charge
is prescribed by the CRR.
‘DBRS’
‘Debit Valuation Adjustment (DVA)’
portfolio of trades and the market value which takes into account the Barclays Bank Grou p’s risk of default. The DVA, therefore, represents an
estimate of the adjustment to fair value that a market participant would make to incorporate the credit risk of the Barclays Bank Group due to any
failure to perform on contractual obligations. The DVA decreases the value of a liability to take into account a reduction in the remaining balance
that would be settled should the Barclays Bank Group default or not perform any contractual obligations.
‘Debt buybacks’
recognition from the balance sheet.
‘Debt securities in issue’
Group and include certificates of deposit and commercial paper.
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 238
‘Default grades’
differences in the probabilit y of default risk.
‘Default fund contributions’
to this fund in advance of using a CCP. The default fund can be used by the CCP to cover losses incurred by the CCP where losses are greater than
the margins provided by that member.
‘Derivatives netting’
netting agreements and eligible cash collateral received in derivative transactions that meet the requirements of BCBS 270.
‘Diversification effect’
the sum of the individual asset class DVaR estimates less the total DVaR.
‘Dodd - Frank Act (DFA)’
‘Early warning lists (EWL)’
difficulties may develop, allowing timely corrective action to be taken. There are three categories of EWL, with risk increasing from EWL 1 (caution)
to EWL 2 (medium) and EWL 3 (high). It is expected that most cases would be categorised EWL 1 before moving to 2 or 3, but it is recognised that
some cases may be categorised to EWL 2 or 3 directly.
‘Early Warning List (EWL) Managed accounts’
EWL Managed accounts are Business Len ding customers that exceed the Arrears Managed Accounts
limits and are monitored with standard processes that record heightened levels of risk through an EWL grading.
‘Earnings per Share contribution’
The attributable profit or loss generated by a particul ar business or segment divided by the weighted average
number of Barclays shares in issue to illustrate on a per share basis how that business or segment contributes total earnings per share.
‘Economic Value of Equity (EVE)’
movement, based on existing balance sheet run - off profile.
'Effective Expected Positive Exposure (EEPE)'
The weighted average over time of effective exp ected exposure. The weights are the proportion that
an individual exposure represents of the entire exposure horizon time interval.
‘Eligible liabilities’
Liabilities and capital instruments that are eligible to meet MREL that do not already qualify as own funds.
‘Encumbrance’
The use of assets to secure liabilities, such as by way of a lien or charge.
‘Enterprise Risk Management Framework (ERMF)’
Management Framework , which describes how Barclays identifies and manages risk. The framework identifies the principal risks faced by the
Barclays Bank Group; sets out risk appetite requirements; sets out roles and responsibilities for risk management; and sets out risk commi ttee
structure.
‘Equities’
‘Equity and stock index derivatives’
and options (including warrants, which are equity options listed on an exchange). The Barclays Bank Group also enters into fund - linked derivatives,
being swaps and options whose underlyings include mutual funds, hedge funds, indices and multi-asset portfolios. An equity swap is an agreement
between two parties to exchange periodic payments, based upon a notional principal amount, with one side paying fixed or floating interest and
the other side paying based on the actual return of the stock or stock index. An equity option provides the buyer with the right, but not the
obligation, either to purchase or sell a specified stock, basket of stocks or stock index at a specified price or level on or before a specified date.
‘Equity risk’
‘Equity structural hedge’
smoothen the income over a medium/long term.
‘EU Risk Reduction Measure package’
A collection of amending Regulations and Directives that update core EU regulatory texts and which came
into force on 27 June 2019.
‘Euro Interbank Offered Rate (EURIBOR)’
market.
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 239
‘Europe’
Europe.
‘European Banking Authority (EBA)’
The European Banking Authority (EBA) is an independent EU Authority which works to ensure effective and
consistent prudential regulation and supervision across the European banking sector. Its overall objectives are to maintain financial stability in the
EU and to safeguard the integrity, efficiency and orderly functioning of the banking sector.
‘European Securities and Markets Authority (ESMA)’
An independent European Supervisory Authority with the rem it of enhancing the protection of
investors and reinforcing stable and well-functioning financial markets in the European Union.
‘Eurozone’
Represents the 19 European Union countries that have adopted the euro as their common currency. The 19 countries are Austria,
Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovakia,
Slovenia and Spain.
‘Expected Credit Losses (ECL)’
period of time. ECLs must reflect the present value of cash shortfalls, and must reflect the unbiased and probability weighted assessment of a range
of outcomes.
‘Expected Losses’
capital adequacy calculations. It is measured as the Barclays Bank Group's modelled view of anticipated losses based on Probability o f Default (PD),
Loss Given Default (LGD) and Exposure at Default (EAD), with a one - year time horizon.
’Expert lender models’
counterparty, but where there is insufficient data to support the construction of a statistical model. These models utilise the knowledge of credit
experts that have in depth experience of the specific customer type being modelled.
‘Exposure’
Generally refers to positions or actions taken by the bank, or consequences thereof, that may put a certain amount of a bank’s resources
at risk.
‘Exposure at Default (EAD)’
of, and at the time of, that counterparty’s default. At default, the customer may not have drawn the loan fully or may already have repaid some of
the principal, so that exposure may be less than the approved loan limit.
‘External Credit Assessment Institutions (ECAI)’
Institutions whose credit assessments may be used by credit institutions for the determination of
risk weight exposures according to CRR.
‘Federal Reserve Board (FRB)’
Is the governing board of the Federal Reserve System of the US, in charge of making the country's monetary policy.
'FICC'
Represents Macro (including rates and currency), Credit and Securitised products.
'Financial Policy Committee (FPC)'
reduce systemic risks with a view to protecting and enhancing the resilience of the UK financial system. The FPC also has a secondary objective to
support the economic policy of the UK Government.
‘F-IRB / Foundation - Internal Ratings Based’
‘Financial Conduct Authority (FCA)’
FCA also has responsibility for the prudential regulation of firms that do not fall within the PRA’s scope.
‘Financial Services Compensation Scheme (FSCS)’
claims.
‘Financial collateral comprehensive method (FCCM)’
A counterparty credit risk exposure calculation approach which applies volatility adjustments
to the market value of exposure and collateral when calculating RWA values.
‘Financial Stability Board (FSB)’
An international body that monitors and makes recommendations about the global financial system. It promotes
international financial stability by coordinating national financial authorities and international standard - setting bodies as they work toward
developing strong regulatory, supervisory and other financial sector policies. It fosters a level playing field by encouraging coherent implementation
of these policies across sectors and jurisdictions.
‘Fitch’
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 240
‘Forbearance Programmes’
amounts due where financial distress would otherwise prevent satisfactory repayment within the original terms and conditions of the contr act.
These agreements may be initiated by the customer, Barclays or a third party and include approved debt counselling plans, minimum due
reductions, interest rate concessions and switches from capital and interest repayments to interest-only payments.
‘Forbearance Programmes for Credit Cards’
Can be split into 2 main types: Repayment plans- A temporary reduction in the minimum payment due,
for a maximum of 60 months. This may involve a reduction in interest rates to prevent negative amortization; Fully amortising - A permanent
conversion of the outstanding balance into a fully amortising loan, over a maximum period of 60 months.
‘Forbearance Programmes for Home Loans’
Can be split into 4 main types: Interest - only conversions - A temporary change from a cap ital and
interest repayment to an interest-only repayment, for a maximum of 24 months; Interest rate reductions - A temporary reduction in interest rate,
for a maximum of 12 months; Payment concessions - An agreement to temporarily accept reduced loan repaym ents, for a maximum of 24 months;
Term extensions- A permanent extension to the loan maturity date which may involve a reduction in interest rates, and usually involves the
capitalisation of arrears.
‘Forbearance Programmes for Unsecured Loans’
Can be split into 3 main types: Payment concessions - An agreement to temporarily accept
reduced loan repayments, for a maximum of 12 months; Term extensions- A permanent extension to the loan maturity date, usually involving the
capitalisation of arrears; Fully amort ising- A permanent conversion of the outstanding balance into a fully amortising loan, over a maximum period
of 120 months for loans.
‘Foreclosures in Progress’
The process by which the bank initiates legal action against a customer with the intention of terminating a loan
agreement whereby the bank may repossess the property subject to local law and recover amounts it is owed.
‘Foreign exchange derivatives’
currency swaps and currency options. Forward foreign exchange contracts are agreements to buy or sell a specified quantity of foreign currency,
usually on a specified future date at an agreed rate. Currency swaps generally involves the exchange, or notional exchange, of equivalent amounts
of two currencies and a commitment to exchange interest periodically until the principal amounts are re - exchanged on a future date. Currency
options provide the buyer with the right, but not the obligat ion, either to purchase or sell a fixed amount of a currency at a specified exchange rate
on or before a future date. As compensation for assuming the option risk, the option writer generally receives a premium at the start of the option
period.
‘Foreign exchange risk’
‘Front Arena’
A deal solution that helps to trade and manage positions and risk in the global capital markets.
‘Full time equivalent’
Full time equivalent units are the on - job hours paid for employee services divided by the number of ordinary- time hours
normally paid for a full-time staff member when on the job (or contract employees where applicable).
‘Fully loaded’
When a measure is presented or described as being on a fully loaded basis, it is calculated without applying the transitional provisions
set out in Part Ten of CRR.
‘Funded credit protection’
from the right of that institution, in the event of the default of the counterparty or on the occurrence of other specified credit events relating to the
counterparty, to liquidate, or to obtain transfer or appropriation of, or to retain certain assets or amounts, or to reduce the amount of the exposure
to, or to replace it with, the amount of the difference between the amount of the exposure and the amount of a claim on the institution.
‘Funding for Lending Scheme (FLS)’
households and non - financial companies through reduced funding costs, the benefits of which are passed on to UK borrowers in the form of
cheaper and more easily available loans.
‘Funding mismatch’
customer loans, over local euro denominated liabilities, such as customer deposits.
‘Gains o n acquisitions’
recognised in a business combination, exceeds the cost of the combination.
‘General Data Protection Regulation (GDPR)’
GDPR (Regulation (EU) 2016/679) is a regulation by which the European Parliament, the Council of
the European Union and the European Commission intend to strengthen and unify data protection for all individuals w ithin the European Union.
‘General market risk’
movement unrelated to any specific attributes of individual securities.
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 241
‘Global - Systemically Important Banks (G - SIBs or G -SIIs)’
mean that their distress or failure would cause significant disruption to the wider financial system and economic activity. The Financial Stability
Board and the Basel Committee on Banking Supervision publish a list of globally systemically important banks.
‘G-SII additional leverage ratio buffer (G - SII ALRB)’
A macroprudential buffer that applies to globally systemically important banks (G - SIBs) and
other major domestic UK banks and building societies, including banks that are subject to ring - fencing requirements. The G - SII ALRB will be
calibrated as 35% (on a phased basis) of the combined systemic risk buffers that applies to the bank.
‘GSII Buffer’
Common Equity Tier 1 capital required to be held under CRD to ensure that G - SIBs build up surplus capital to compensate for the
systemic risk that such institutions represent to the financial system.
’Grandfathering’
non - compliant capital instruments to be included in regulatory capital subject to certain thresholds which decrease over the tra nsitional period.
‘Gross charge - off rates’
outstanding balances excluding balances in recoveries. Charge - off to recoveries generally occurs when the collections focus switches from the
collection of arrears to the recovery of the entire outstanding balance, and represents a fundamental change in the relationship between the bank
and the customer. This is a measure of the proportion of customers that have gone into default during the period.
‘Gross write- off rates’
held at amortised cost at the balance sheet date.
‘Gross new lending’
‘Guarantee’
substitution.
‘Head Office’
and Tax and other operations.
‘High - Net-Worth’
‘High Risk’
In retail banking, ‘High Risk’ is defined as the subset of up - to- date customers who, either through an event or observed behaviour
exhibit potential financial difficulty. Where appropriate, these customers are pro actively contacted to assess whether assistance is required.
‘Home loan’
gives the lender a lien against the property and the lender can foreclose on the property if the borrower does not repay the loan per the agreed
terms. Also known as a residential mortgage.
‘IHC’ or ‘US IHC’
Barclays US LLC, the intermediate holding company established by Barclays in July 2016, which holds most of Barclays’ subsidiaries
and assets in the US.
‘IMA / Internal Model Approach’
In the context of RWAs, RWAs for which the exposure amount has been derived via the use of a PRA approved
internal market risk model.
‘IMM / Internal Model Method’
In the context of RWAs, RWAs for which the exposure amount has been derived via the use of a PRA approved
internal counterparty credit risk model.
‘Identified Impairment (II)’
‘IFRS 9 transitional arrangements’
Following the application of IFRS 9 as of 1 January 2018, Article 473a of CRR permits institutions to phase - in the
impact on capital and leverage ratios of the impairment requirements under the new accounting standard.
‘Impairment Allowances’
book. An impairment allowance may either be identified or unidentified and individual or collective.
‘Income’
‘Incremental Risk Charge (IRC)’
An estimate of the incremental risk arising from rating migrations and defaults for traded debt instruments beyond
what is already captured in specific market risk VaR for the non - correlation trading portfolio.
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 242
‘Independent Commission on Banking (ICB)’
banking system and promote competition.
‘Independent Validation Unit (IVU)’
The function within the bank responsible for independent review, challenge and approval of all models.
‘Individual liquidity guidance (ILG)’
asked the bank to maintain.
‘Inflation risk’
‘Insurance Risk’
The risk of the Barclays Bank Group’s aggregate insurance premiums received from policyholders under a portfolio of insurance
contracts being inadequate to cover the claims arising from those policies.
‘Interchange’
‘Interest- only home loans’
Under the terms of these loans, the customer makes payments of interest only for the entire term of the mortgage,
although customers may make early repayments of the principal within the terms of their agreement. The customer is responsible fo r repaying the
entire outstanding principal on maturity, which may require the sale of the mortgaged property.
‘Interest rate derivatives’
interest rate swap is an agreement between two parties to exchange fixed rate and floating rate interest by means of periodic payments based
upon a notional principal amount and the interest rates defined in the contract. Certain agreements combine interest rate and foreign currency
swap transactions, which may or may not include the exchange of principal amounts. A basis swap is a form of interest rate swap, in which both
parties exchange interest payments based on floating rates, where the floating rates are based upon different underlying reference indices. In a
forward rate agreement, two parties agree a future settlement of the difference between an agreed rate and a future interest rate, applied to a
notional principal amount. The settlement, wh ich generally occurs at the start of the contract period, is the discounted present value of the
payment that would otherwise be made at the end of that period.
‘Interest rate risk’
calculation of market risk DVaR, measures the impact of changes in interest (swap) rates and volatilities on cash instruments and derivatives.
‘Interest rate risk in the banking book (IRRBB)’
The risk that the Barclays Bank Group is exposed to capital or income volatility because of a
mismatch between the interest rate exposures of its (non - traded) assets and liabilities.
‘Internal Assessment Approach (IAA)’
One of three types of calculation that a bank with permission to use the Internal Ratings Based (IRB)
approach may apply to securitisation exposures. It consists of mapping a bank's internal rating methodology for credit exposures to those of an
External Credit Assessment Institution (ECAI) to determ ine the appropriate risk weight based on the ratings based approach. Its applicability is
limited to ABCP programmes related to liquidity facilities and credit enhancement.
‘Internal Capital Adequacy Assessment Process (ICAAP)’
Companies are required to perform a formal Internal Capital Adequacy Assessment
Process (ICAAP) as part of the Pillar 2 requirements (BIPRU) and to provide this document to the PRA on a yearly basis. The ICAAP document
summarises the Barclays Bank Group’s risk management framework, including approach to managing all risks (i.e. Pillar 1 and non - Pillar 1 risks);
and, the Barclays Bank Group’s risk appetite, economic capital and stress testing frameworks.
‘Internal model method (IMM)’
internal counterparty credit risk model.
‘Internal Ratings Based (IRB)’
approach is d ivided into two alternative applications, Advanced and Foundation:
–
Advanced IRB (A - IRB): the bank uses its own estimates of probability of default (PD), loss given default (LGD) and credit conversion
factor to model a given risk exposure.
–
Foundation IRB: the bank applies its own PD as for Advanced, but it uses standard parameters for the LGD and the credit conversion
factor. The Foundation IRB approach is specifically designed for wholesale credit exposures. Hence retail, equity, securitisation positions
and non - credit obligations asset exposures are treated under standardised or A - IRB.
‘Investment Bank’
The Barclays Bank Group’s investment bank which
consists of origination led and returns focused markets and banking business
which forms part of the Corp orate and Investment Bank segment of Barclays International .
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 243
‘Investment Banking Fees’
including financial advisory, debt and equity underwriting.
‘Investment grade’
agencies.
‘ISDA Master Agreement’
documents, designed to enable OTC deriv atives to be documented fully and flexibly. The framework consists of a master agreement, a schedule,
confirmations, definition booklets, and a credit support annex. The ISDA master agreement is published by the International Swaps and Derivatives
Association (ISDA).
‘Key Risk Scenarios (KRS)’
Key Risk Scenarios are a summary of the extreme potential risk exposure for each Key Risk in each business and function,
including an assessment of the potential frequency of risk events, the average size of losses and three extreme scenarios. The Key Risk Scenario
assessments are a key input to the Advanced Measurement Approach calculation of regulatory and economic capital requirements.
‘Large exposure’
A large exposure is defined as the total exposure of a bank to a counterparty or group of connected clients, whether in the banking
book or trading book or both, which in aggregate equals or exceeds 10% of the bank's eligible capital.
‘Legal risk’
including regulatory or contractual requirements.
‘Lender Option Borrower Option (LOBO)’
interest rate on the loan, upon which the borrower had the option to either continue with the loan at the higher rate, or re - pay the loan at par.
‘Lending’
In the context of Investment Bank Analysis of Total Income, lending income includes net interest income, gains or losses on loan sale
activity, and risk management activity relating to the loan portfolio.
‘Letters of credit’
time and in full. In the event that the debtor is unable to make payment, the bank will be required to cover the full or rem aining amount of the
purchase.
‘Level 1 assets’
High quality liquid assets under the Basel Committee’s Liquidity Coverage Ratio (LCR), including cash, central bank reserves and
higher quality government securities.
‘Level 2 assets’
with the latter comprised of Level 2A and Level 2B assets. Level 2A assets include, for example, lower quality government securities, covered bonds
and corporate debt securities. Level 2B assets include, for example, lower rated corporate bonds, residential mortgage backed securities and
equities that meet certain conditions.
‘Lifetime expected credit losses’
reflecting the present value of cash shortfalls over the remaining expected life of the asset.
‘Lifetime Probability’
‘Liquidity Coverage Ratio (LCR)’
liquid assets should be unencumbered, liquid in markets during a time of stress and, ideally, be central bank eligible. These include, for example,
cash and claims on central governments and central banks.
‘Liquidity Pool’
Bank Group as a contingency to ena ble the bank to meet cash outflows in the event of stressed market conditions.
‘Liquidity Risk’
The risk that the Barclays Bank Group is unable to meet its contractual or contingent obligations or that is does not have the
appropriate amount, tenor and composition of funding and liquidity to support its assets.
‘Liquidity risk appetite (LRA)’
meeting its regulatory obligations.
‘Liquidity Risk Management Framework (the Liquidity Framework)’
The Liquidity Risk Management Framework (the Liquidity Framework), which is
sanctioned by the Board Risk Committee (BRC) and which incorporates liquidity policies, systems and controls that the Barclays Bank Group has
implemented to manage liquidity risk within tolerances approved by the Board and regulatory agencies.
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 244
‘Litigation and conduct charges’ or ‘Litigation and conduct’
Litigation and conduct charges include regulatory fines, litigation settlements and
conduct related customer redress.
‘Loan loss rate’
balance sheet date.
‘Loan to deposit ratio’
‘Loan to value (LTV) ratio’
The ratios are used in determini ng the appropriate level of risk for the loan and are generally reported as an average for new mortgages or an entire
portfolio. Also see ‘Marked to market (MTM) LTV ratio.’
‘London Interbank Offered Rate (LIBOR)’
market.
‘Long - term refinancing operation (LTRO)’
‘Loss Given Default (LGD)’
comprises the actual loss (the part that is not expected to be recovered), together with the economic costs associated with the recovery process.
‘Management VaR’
positions were to be held unchanged for predefined period. Corporate and Investment Bank uses Management VaR with a two - year equally
weighted historical period, at a 95% confidence level, with a one day holding period.
‘Mandatory break clause’
In the context of counterparty credit risk, a contract clause that means a trade will be ended on a particular date.
‘Marked to market approach’
positions as well as a potential future exposure add - on to calculate an exposure to which a risk weight can be applied. Thi s is also known as the
Current Exposure Method.
‘Marked to market (MTM) LTV ratio’
weighted Loan to Value (LTV) ratio’ and ‘Valuation weighted Loan to Value (LTV) ratio.’
‘Market risk’
in market variables including, but not limited to, interest rates, foreign excha nge, equity prices, commodity prices, credit spreads, implied volatilities
and asset correlations.
‘Master netting agreements’
agreement in the event of the counterparty’s default or bankruptcy or insolvency, resulting in a reduced exposure.
‘Master trust securitisation programmes’
trust issues multiple series of securities backed by these receivables.
‘Matchbook (or matched book)’
maturity.
‘Material Risk Takers (MRTs)’
Categories o f staff whose professional activities have or are deemed to have a material impact on Barclays’ risk
profile, as determined in accordance with the European Banking Authority regulatory technical standard on the identification of such staff.
‘Medium - Term Notes’
from differing maturities, ranging from nine months to 30 years. They can be issued on a fixed or floating coupon basis or with an exotic coupon;
with a fixed maturity date (non - callable) or with embedded call or put options or early repayment triggers. MTNs are most generally issued as
senior, unsecured debt.
‘Methodology and policy’
In the context of the Capital Risk section, the effect on RWAs of methodology changes driven by regulatory policy
changes .
‘MiFId II’
The Markets in Financial Instruments Directive 2004/39/EC (known as "MiFID" I) as subsequently amended to MiFID II is a European
Union law that provides harmonised regulation for investment services across the 31 member states of the European Economic Area.
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 245
‘Minimum requirement for own funds and eligible liabilities (MREL)’
A European Union wide requirement under the Bank Recovery and Resolution
Directive for all European banks and investment banks to hold a minimum level of equity and/or loss absorbing eligible liabilities to ensure the
operation of the bail- in tool to absorb losses and recapitalise an institution in resolution. An institution’s MREL requirement is set by its resolution
authority. Amendments in the EU Risk Reduction Measure package are designed to align MREL and TLAC for EU G - SIBs.
The risk of the potential adverse consequences from financial assessments or decisions based on incorrec t or misused model outputs
and reports.
‘Model updates’
In the context of the Capital Risk section, changes in RWAs caused by model implementation, changes in model scope or any
changes required to address model malfunctions.
‘Model validation’
Process through which models are independently challenged, tested and verified to prove that they have been built, implemented
and used correctly, and that they continue to be fit-for -purpose.
‘Modelled —VaR’
‘Money market funds’
‘Monoline derivatives’
‘Moody’s’
‘Mortgage Current Accounts (MCA) Reserves’
A secured overdraft facility available to home loan customers which allows them to borrow against
the equity in their home. It allows 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.
‘Multilateral development banks’
��
theboundaries.
‘National discretion’
in its jurisdiction.
‘Net asset value per share’
number of issued ordinary shares.
‘Net interest income (NII)’
‘Net interest margin (NIM)’
‘Net investment income’
of available for sale assets.
‘Net Stable Funding Ratio (NSFR)’
scenario. The ratio is required to be over 100%. Available stable funding would include such items as equity capital, preferred stock with a maturity
of over 1 year, or liabilities with a m aturity of over 1 year. The required amount of stable funding is calculated as the sum of the value of the assets
held and funded by the institution, multiplied by a specific required stable funding (RSF) factor assigned to each particular asset type, adde d to the
amount of potential liquidity exposure multiplied by its associated RSF factor.
‘Net trading income’
business, together with interest, dividends and funding costs relating to trading activities.
‘Net write- off rate’
by gross loans and advances held at amortised cost at the balance sheet date.
‘Net written credit protection’
protection bought.
‘New bookings’
The total of the original balance on accounts opened in the reporting period, including any applicable fees and charges included in
the loan amount.
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 246
‘Non - asset backed debt instruments’
commercial paper; certificates of deposit; convertible bonds; corporate bonds and issued notes.
‘Non - customer net interest income’ / ‘Non - customer interest income’
well as certain other net interest income received on government bonds and other debt securities held for the pu rposes of interest rate hedging and
liquidity for local banking activities.
‘Non - model method (NMM)’
of CRR norms, as opposed to an internal model.
‘Non - performance costs’
‘Non - performing proportion of outstanding balances’
than 90 days and accounts charged off to recoveries), expressed as a percentage of outstanding balances.
‘Non - performing balances impairment coverage ratio’
non performing balances.
‘Non - Traded Market Risk’
The risk that the current or future exposure in the banking book (i.e. non - traded book) will impact bank's capital and/or
earnings due to adverse movements in Intere st or foreign exchange rates.
‘Non - Traded VaR’
Reflects the volatility in the value of the fair value through other comprehensive income (FVOCI) investments in the liquidity pool
which flow directly through capital via the FVOCI reserve. The underlying methodology to calculate non - traded VaR is similar to Traded
Management VaR, but the two measures are not directly comparable. The Non - Traded VaR represents the volatility to capital driven by the FVOCI
exposures. These exposures are in the banking book and d o not meet the criteria for trading book treatment.
‘Notch’
‘Notional amount’
The nominal or face amount of a financial instrument, such as a loan or a derivative, that is used to calculate payments m ade on
that instrument.
‘Open Banking’
The Payment Services Directive (PSD2) and the Open API standards and data sharing remedy imposed by the UK Competition and
Markets Authority following its Retail Banking Market Investigation Order.
‘Operational risk’
fraud) where the root cause is not due to credit or market risks.
‘Operational Riskdata eXchange (ORX)’
advancing the measurement and management of operational risk in the global financial services industry. Barclays is a member of ORX.
‘Origination led’
‘Origination exposure model’
options and other derivatives contracts in the event the counterparty to the contract should default.
‘OSII’
Other systemically important institutions are institutions that are deemed to create risk to financial stability due to their systemic importance.
‘Over - the- counter (OTC) derivatives’
flexibility because, unlike standardised exchange - traded products, they can be tailored to fit specific needs.
‘Overall capital requirement’
The overall capital requirement is the sum of capital required to meet the total of a Pillar 1 requirement, a Pillar 2A
requirement, a Global Systemically Important Institution (G - SII) buffer, a Capital Conservation Buffer (CCB) and a Countercyclical Capital Buffer
(CCyB).
‘Own credit’
‘Owner occupied mortgage’
A mortgage where the intention of the customer was to occupy the property at origination.
‘Own funds’
The sum of Tier 1 and Tier 2 capital.
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 247
‘Past due items’
Refers to loans where the borrower has failed to make a payment when due under the terms of the loan contract.
‘Payment Protection Insurance (PPI) redress’
‘Pension Risk’
The risk of the Barclays Bank Group’s earnings and capital being adversely impacted by the Barclays Bank Group’s defined benefit
obligations increa sing or the value of the assets backing these defined benefit obligations decreasing due to changes in both the level and volatility
of prices.
‘Performance costs’
accounting charge is spread over the relevant periods in which the employee delivers service.
‘Personal Banking’
Offers retail ad vice, products and services to community and premier customers in the UK.
‘Period end allocated tangible equity’
deductions, excluding goodwill and intangible assets, reflecting assumptions the Barclays Bank Group uses for capital planning purposes. Head
Office allocated tangible equity represents the difference between the Barclays Bank Group’s tangible shareholders’ equity and the amounts
allocated to businesses.
‘Pillar 1 requirements’
The minimum regulatory capital requirements to meet the sum of credit (including counterparty credit), market and
operational risk.
‘Pillar 2A requirements’
The additional regulatory capital requirement to meet risks not captured under Pillar 1 requirements. This requirement is
the outcome of the bank’s Internal Capital Adequacy Assessment Process (ICAAP) and the complementary supervisory review and evaluation
carried out by the PRA.
‘Post - model adjustment (PMA)’
account for model input data deficiencies, inadequate model performance or changes to regulatory definitions (e.g. definition of defau lt) to ensure
the model output is accurate, complete and appropriate.
‘Potential Future Exposure (PFE) on Derivatives’
both exchange traded and OTC derivat ive contracts, calculated by assigning a standardised percentage (based on the underlying risk category and
residual trade maturity) to the gross notional value of each contract.
‘PRA waivers’
organisation and require applications being submitted to and approved by the PRA.
‘Primary securitisations’
The issuance of securities (bonds and commercial papers) for fund -raising.
‘Primary Stress Tests’
arise from extreme market moves or scenarios. Primary Stress Tests apply stress moves to key liquid risk factors for each of the major trading asset
classes.
‘Prime Services’
provides brokerage facilitation services for hedge fund clients offering execution and clearance facilities for a variety of asset classes.
‘Principal’
‘Principal Investments’
‘Principal Risks’
‘Private equity investments’
often involves the investment of capital in private companies or the acquisition of a public company that results in the delisting of public equity.
Capital for private equity investment is raised b y retail or institutional investors and used to fund investment strategies such as leveraged buyouts,
venture capital, growth capital, distressed investments and mezzanine capital.
‘Private - label securitisation’
the government.
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 248
‘Probability of Default (PD)’
The likelihood that a loan will not be repaid and will fall into default. PD may be calculated for each client who has a
loan (normally applicable to wholesale customers/clients) or for a portfolio of clients with similar attributes (normally applicable to retail
customers). To calculate PD, Barclays assesses the credit quality of borrowers and other counterparties and assigns them an internal risk rating.
Multiple rating methodologies may be used to inform the rating decision on individual large credits, such as internal and external models, rating
agency ratings, and for wholesale assets market information such as credit spreads. For smaller credits, a single source may suffice such as the
result from an internal rating model.
‘Product structural hedge’
interest bearing current accounts and managed rate deposits) and to smoothen the income over a medium/long term.
‘Properties in Possession held as ’Loans and Advances to Customers’’
Properties in the UK and Italy where the customer continues to retain legal
title but where the bank has enforced the possession order as part of the foreclosure process to allow for the disposal of the asset or the court has
ordered the auction of the property.
‘Properties in Possession held as ‘Other Real Estate Owned’’
Properties in South Africa, where the bank has taken legal ownership of the title as a
result of purchase at an auction or similar and treated as ‘Other Real Estate Owned’ within other assets on the bank’s balance sheet.
‘Proprietary trading’
customers, so as to make a profit for itself.
‘Prudential Regulation Authority (PRA)’
small number of significant investment banks in the UK. The PRA is a subsidiary of the Bank of England.
‘Prudential valuation adjustment (PVA)’
with regulatory valuation standards, which place greater emphasis on the inherent uncertainty around the value at which a trading book position
could be exited.
‘Public benchmark’
‘Qualifying central bank claims’
An amount calculated in line with the PRA policy statement allowing banks to exclude claims on the central bank
from the calculation of the leverage exposure measure, as long as these are matched by deposits denominated in the same currency and of
identical or longer maturity.
‘Qualifying Revolving Retail Exposure (QRRE)’
In the context of the IRB approach to credit risk RWA calculations, an exposure meeting the criter ia
set out in BIPRU 4.6.42 R (2). It includes most types of credit card exposure.
‘Rates’
‘Re- aging’
The returning of a de linquent account to up - to- date status without collecting the full arrears (principal, interest and fees).
‘Real Estate Mortgage Investment Conduits (REMICs)’
An entity that holds a fixed pool of mortgages and that is
separated into multiple classes of
interests for issuance to investors.
‘Recoveries Impairment Coverage Ratio’
‘Recoveries proportion of outstanding balances’
have charged - off) as at the period end compared to total outstanding balances. The size of the recoveries book would ultimately have an impact on
the overall impairment requirement on the p ortfolio. Balances in recoveries will decrease if: assets are written - off; amounts are collected; or assets
are sold to a third party (i.e. debt sale).
‘Recovery book’
recover the Group’s exposure.
‘Regulatory capital’
‘Renegotiated loans’
circumstances of the borrower. In the latter case renegotiation can result in an extension of the due date of payment or repayment plans under
which the Barclays Bank Group offers a concessionary rate of interest to genuinely distressed borrowers. This will result in the asset continuing to
be overdue and will be individually impaired where the renegotiated payments of interest and principal will not recover the original carrying amount
of the asset. In other cases, renegotiation will lead to a new agreement, which is treated as a new loan.
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 249
‘Repurchase agreement (Repo)’ / ‘Reverse repurchase agreement (Reverse repo)’
securities as collateral for an interest bearing cash loan. The borrower agrees to sell a security to the lender subject to a commitment to repurchase
the asset at a specified price on a given date. For the party selling the security (and agreeing to repurchase it in the future) it is a Repurchase
agreement or Repo; for the counterparty to the transaction (buying the security and agreeing to sell in the future) it is a Reverse repurchase
agreement or Reverse repo.
‘Reputation risk’
clients, counterparties, investors, regulators, employees or the public.
‘Re-securitisations’
underlying assets are also predominantly securitisation positions.
‘Reserve Capital Instruments (RCIs)’
‘Residential Mortgage - Backed Securities (RMBS)’
have the right to cash received from future mortgage payments (interest and/or principal).
‘Residual maturity’
The remaining contractual term of a credit obligation associated with a credit exposure.
‘Restructured loans’
granted to the d ebtor that would not otherwise be considered. Where the concession results in the expected cash flows discounted at the original
effective interest rate being less than the loan’s carrying value, an impairment allowance will be raised.
‘Retail Loans’
secured and unsecured loans such as mortgages and credit card balances, as well as loans to certain smaller business custom ers, typically with
exposures up to £3m or with a turnover up to £5m.
‘Return on average Risk Weighted Assets’
‘Return on average tangible shareholders’ equity’ (RoTE)
Profit after tax attributa ble to ordinary equity holders of the parent, as a proportion of
average shareholders’ equity excluding non - controlling interests and other equity instruments adjusted for the deduction of intangible assets and
goodwill.
‘Return on average allocated tangible equity’
Profit after tax attributable to ordinary equity holders of the parent, as a proportion of average
allocated tangible equity.
‘Risk appetite’
business plans are implemented.
‘Risk weighted assets (RWAs)’
the Basel rules as implemented by CRR and local regulators.
‘Roll rate analysis’
The measurement of the rate at which retail accounts deteriorate through delinquency phases.
‘Sales commissions, commitments and other incentives’
Incentive Plan awards.
‘Sarbanes - Oxley requirements’
governance scandals such as Enron, WorldCom and Tyco. All US- listed companies must comply with SOX.
‘Second Lien’
this debt will only be received after the first lien has been repaid and thus represents a riskier investment than the first lien.
‘Secondary Stress Tests’
reduced within the time period covered in Primary Stress Tests.
‘Secured Overnight Financing Rate (SOFR)’
A broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities in the
repurchase agreement (repo) market.
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 250
‘Securities Financing Transactions (SFT)’
commodities lending or borrowing transaction, or a margin lending transaction whereby cash collateral is received or paid in respect of the transfer
of a related asset.
‘Securities financing transactions adjustments’
into account master netting agreements.
‘Securities lending arrangements’
at a future date. The counterparty generally provides collateral against non performance in the form of cash or other assets.
‘Securitisation’
used to back new securities. A company sells assets to a special purpose vehicle (SPV) which then issues securities backed b y the assets. This
allows the credit quality of the assets to be separated from the credit rating of the original borrower and transfers risk to external investors.
‘Set-off clauses’
In the context of Counterparty credit risk, contract clauses that allow Barclays to set off amounts owed to us by a counterparty
against amounts owed by us to the counterparty.
‘Settlement balances’
purchased or otherwise closed out, and the date the asset is delivered by or to the entity (the settlement date) and cash is received or paid.
‘Settlement risk’
settlement obligations.
‘Significant Increase in Credit Risk (SICR)’
qualitative assessments.
‘Slotting’
factors such as the financial strength of the counterparty. The requirements for the application of the Slotting approach are detailed in BIPRU 4 .5.
‘Sovereign exposure(s)’
‘Specific market risk’
investment due to factors related to the issuer or, in the case of a derivative, the issuer of the underlying investment.
‘Spread risk’
‘SRB ALRB’
The systemic risk buffer (SRB) additional leverage ratio buffer (ALRB) is firm specific requirement set by the PRA using its powers under
section 55M of the Financial Services and Markets Act (2000). Barclays is required to hold an amount of CET1 capital that is equal to or greater
than its ALRB.
‘Stage 1’
recognition. Stage 1 financial instruments are required to recognise a 12 month expected credit loss allowance.
‘Stage 2’
Stage 2 financial instruments are required to recognise a lifetime expected credit loss allowance.
‘Stage 3’
recognise a lifetime expected credit loss allowance.
‘Standard & Poor’s’
‘Standby facilities, credit lines and other commitments’
commitments are either made for a fixed period, or have no specific maturity but are cancellable by the lender subject to notice requirements.
‘Statutory’
Act 2006 and the requirements of International Financial Reporting Standards (IFRS).
‘Statutory return on average shareholders’ equity’
shareholders’ equity.
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 251
‘STD’ / ‘Standardised Approach’
based on counterparty type and a credit rating provided by an External Credit Assessment Institute.
‘Sterling Over Night Index Average (SONIA)’
market administrated and calculated by the Bank of England .
‘Stress Testing’
unfavourable effects on the Barclays Bank Group (either financial or non - financial), assessing the Barclays Bank Group’s ability to withstand such
changes, and identifying management actions to mitigate the impact.
‘Stressed Value at Risk (SVaR)’
An estimate of the potential loss arising from a 12 - month p eriod of significant financial stress calibrated to 99%
confidence level over a 10 - day holding period.
‘Structured entity’
create d to achieve a narrow and well defined objective with restrictions around their ongoing activities.
‘Structural hedge’ / ‘hedging’
on positions that exist within the balance sheet and do not re - price in line with market rates. See also ‘Equity structural hedge’ and ‘Product
structural hedge’.
‘Structural model of default’
A model based on the assumption that an obligor will default when its assets are insufficient to cover its liabilities.
‘Structured credit’
vehicles.
‘Structured finance/notes’
sometimes offers capital protection if the value declines. Structured notes can be linked to equities, interest rates, funds, commodities and foreign
currency .
‘Sub -prime’
potentially more severe problems such as court judgments and bankruptcies. They may also display reduced repayment capacity as measured by
credit scores, high debt - to- income ratios, or other criteria indicating heightened risk of default.
‘Subordinated liabilities’
other creditors of the issuer.
‘Supranational bonds’
Bonds issued by an international organisation, where membership transcends n ational boundaries (e.g. the European Union
or World Trade Organisation).
‘Synthetic Securitisation Transactions’
Securitisation transactions effected through the use of derivatives.
‘Systemic Risk Buffer’
CET1 capital that may be required to be held as pa rt of the Combined Buffer Requirement increasing the capacity of UK banks
to absorb stress and limiting the damage to the economy as a result of restricted lending.
‘Tangible net asset value’
‘Tangible net asset value per share (TNAV)’
instruments, less goodwill and intangible assets, by the number of issued ordinary shares.
‘Tangible shareholders’ equity’
intangibl e assets and goodwill.
‘Term premium’
‘The Fundamental Review of the Trading Book (FRTB)’
Supervision as part of Basel III applicable to banks’ wholesale trading activities.
‘The Standardised Approach (TSA)’
Under the TSA, banks are required to hold regulatory capital for operational risk equal to the annual average,
calculated over a rolling three - year period, of the relevant income indicator (across all business lines), multiplied by a supervisory defined
percentage factor by business lines.
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 252
‘The three lines of defence’
The three lines of defence operating model enables Barclays to separate risk management activities between those
client facing areas of the Barclays Bank Group and associated support functions responsible for identifying risk, operating within applicable limits
and escalating risk events (first line); colleagues in Risk and Compliance who establish the limits, rules and constraints under which the first line
operates and monitors their performance against those limits and constraints (second line); and, col leagues in Internal Audit who provide
assurance to the Board and Executive Management over the effectiveness of governance, risk management and control over risks (third line). The
Legal function does not sit in any of the three lines, but supports them all. The Legal function is, however, subject to oversight from Risk and
Compliance with respect to operational and conduct risks.
‘Tier 1 capital’
‘Tier 1 capital ratio’
‘Tier 2 (T2) capita
l’
accounts where qualifying conditio ns have been met.
‘Tier 2 (T2) securities’
‘Total capital ratio’
Total Regulatory capital as a percentage of RWAs.
‘Total Loss Absorbing Capacity (TLAC)’
A standard published by the FSB which is applicable to G - SIBs and requires a G - SIB to hold a prescriptive
minimum level of instruments and liabilities that should be readily available for bail- in within resolution to absorb losses and recapitalise the
institution.
‘Total outstanding balance’
In retail banking, total outstanding balance is defined as the gross month - end customer balances on all accounts
including accounts charged off to recoveries.
‘Total return swap’
capital value of the asset. The buyer of the protection in return receives a predetermined amount.
‘Total balances on forbearance programmes coverage ratio’
balance in forbearance.
‘Traded Market Risk’
The risk of a reduction to earnings or capital due to volatility of trading book positions.
‘Trading book’
All positions in financial instrument s and commodities held by an institution either with trading intent, or in order to hedge positions
held with trading intent.
‘Traditional Securitisation Transactions’
Securitisation transactions in which an underlying pool of assets generates cash flows to service payments
to investors.
‘Transitional’
provisions set out in Part Ten of CRR.
‘Treasury and Capital Risk’
‘Twelve month expected credit losses’
period if the expected life is less than 12 months), weighted by the probability of said default occurring.
‘Twelve month PD’
‘Unencumbered’
‘United Kingdom (UK)’
‘UK Bank levy’
of the chargeable equity and liabilities of the bank on its balance sheet date.
Glossary of terms
Barclays Bank PLC 2019 Annual Report on Form 20-F 253
‘UK leverage exposure’
Is calculated as per the PRA rulebook, where the exposure calculation also includes the FPC’s recommendation to allow
banks to exclude claims on the central bank from the calculation of the leverage exposure measure, as long as these are matched by deposits
denominated in the same currency and of identical or longer maturity.
‘UK leverage ratio’
A s per the PRA rulebook, means a bank’s tier 1 capital divided by its total exposure measure, with this ratio expressed as a
percentage.
‘Unfunded credit protection’
from the obligation of a third party to pay an amount in the event of the default of the borrower or the occurrence of other specified credit events.
‘US Partner Portfolio’
sectors.
‘US Residential Mortgages’
‘Utilisation rate’
‘Valuation weighted Loan to Value (LTV) Ratio’
market LTVs derived by comparing total outstanding balance and the value of total collateral we hold against these balances. Valuation weighted
loan to value is calculated using the following formula: LTV = total outstandings in portfolio/total property values of total outstandings in portfolio.
‘Value at Risk (VaR)’
a specific timeframe.
‘Weighted off balance sheet commitments’
Standardised Approach to credit risk.
‘Wholesale loans’ / ‘lending’
‘Write-off (gross)’
the asset or it is deemed immaterial or full and final settlement is reached and the shortfall written off. In the event of write- off, the customer
balance is removed from the balance sheet and the impairment allowance held against the asset is released. Net write- offs represent gross write-
offs less post write- off recoveries.
‘Wrong - way risk’
Arises, in a trading exposure, when there is significant correlation between the u nderlying asset and the counterparty, which in
the event of default would lead to a significant mark to market loss. When assessing the credit exposure of a wrong - way trade, analysts take into
account the correlation between the counterparty and the underl ying asset as part of the sanctioning process.
Barclays Bank PLC 2019 Annual Report on Form 20-F 254
EXHIBIT INDEX
Exhibit
Description
1.1
Articles of Association of Barclays Bank PLC (incorporated by reference to the Form 6 - K filed on May 13
, 2010)
2.1
Long Term Debt Instruments: Barclays Bank PLC is not party to any single instrument relating to long - term debt pursuant to which a
total amount of securities exceeding 10% of its total assets (on a consolidated basis) is authorised to be issued. Barclays PLC hereby
agrees to furnish to the Securities and Exchange Commission (the “Commission”), upon its request, a copy of any instrument defining
the r ights of holders of its long - term debt or the rights of holders of the long - term debt of any of its subsidiaries for which consolidated
or unconsolidated financial statements are required to be filed with the Commission.
2.2
Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
4.1
Barclays Bank PLC Directors Deferred Compensation Plan (incorporated by reference to the Barclays Bank PLC Registration Statement
4.2
Barclays Bank PLC Senior Management Deferred Compensation Plan (incorporated by reference to the Barclays Bank PLC Registration
4.3
Barclays Bank PLC 1999 Barclays Bank PLC Deferred Compensation Plan (incorporated by reference to the Barclays Bank PLC
4.4
Barclays Bank PLC U.S. Senior Management Deferred Compensation Plan (incorporated by reference to the Barclays Bank PLC
12.1
13.1
15.1
Consent of KPMG LLP for incorporation by reference of reports in certain securities registration statements of Barclays Bank PLC.
99.1
A table setting forth the issued share capital of Barclays Bank Group’s total shareholders’ equity, indebtedness and contingent liabilities
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema
101.CAL
XBRL Taxonomy Extension Schema Calculation Linkbase
101.DEF
XBRL Taxonomy Extension Schema Definition Linkbase
101.LAB
XBRL Taxonomy Extension Schema Label Linkbase
101.PRE
XBRL Taxonomy Extension Schema Presentation Linkbase
Barclays Bank PLC 2019 Annual Report on Form 20-F 255
Signatures
The registrant hereby certifies that it meets all of the requirements for filing on Form 20 - F and that it has duly caused and authorised the
undersigned to sign this annual report on its behalf.
Date February 13, 2020
Barclays Bank PLC
(Registrant)
By
/s/ Steven Ewart
Steven Ewart, Chief Financial Officer