UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 20-F
(Mark One)
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OR
☑
For the fiscal year ended December 31, 2020
OR
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For the transition period from to
OR
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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
1.700% Fixed Rate Senior Notes due 2022
BCS22A
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
®
BCM
NYSE Arca
iPath
®
OLEM
NYSE Arca
iPath
®
GRN
NYSE Arca
Pacer
®
®
GBUG
NYSE Arca
iPath
®
SBUG
NYSE Arca
Barclays ETN+ Shiller CAPE
TM
CAPE
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 Women in Leadership ETN
WIL
CBOE BZX Exchange
Barclays Return on Disability ETN
RODI
CBOE BZX Exchange
iPath
®
DFVL
CBOE BZX Exchange
iPath
®
DFVS
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
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If this report is an annual or transition report, 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
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Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes
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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
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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
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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.
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† 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 whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report.
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*Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP
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International Financial Reporting Standards as issued by the International Accounting Standards Board
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Other
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*If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has
elected to follow:
Item 17
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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
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(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
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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
24-38
4
Information on the Company
A. History and development of the company
Omitted
B. Business overview
i (Market and other data), 94-99, 116 -117
(Note 2), 208
C. Organizational structure
181-185 (Notes 32 and 33), 205-207
D. Property, plants and equipment
153-156 (Note 20)
4A
Unresolved staff comments
Not applicable
5
Operating and Financial Review and Prospects
A. Operating results
27-38, 41-45, 85, 90-99, 131-139 (Note 13),
208
B. Liquidity and capital resources
Omitted
C. Research and development, patents and licenses, etc.
Omitted
D. Trend information
27-38, 208
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
6-12
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
101-196
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
197-199
C. Material contracts
Not applicable
D. Exchange controls
203
E. Taxation
200-203
F. Dividends and paying assets
Not applicable
G. Statement by experts
Not applicable
H. Documents on display
203
I. Subsidiary information
181-182 (Note 32), 205-207
11
Quantitative and Qualitative Disclosure about Market Risk
21-99, 131-151 (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
203
B. Management’s annual report on internal control over financial reporting
13
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
17, 192 (Note 39)
16D
Exemptions from the Listing Standards for Audit Committees
Not applicable
16E
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
15
16F
Change in Registrant’s Certifying Accountant
Not applicable
16G
Corporate Governance
3-14
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 2020 to the corresponding twelve months of 2019 and balance sheet analysis as at 31
December 2020 with comparatives relating to 31 December 2019. The abbreviations ‘£m’ and ‘£bn’ represent millions and thousands of millions
of Pounds Sterling respectively; the abbreviations ‘$m’ and ‘$bn’ represent millions and thousands of millions of US Dollars respectively; and the
abbreviations ‘€m’ and ‘€bn’ represent millions and thousands of millions of Euros respectively.
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 Barclays Bank Group’s future financial position,
income growth, assets, impairment charges, provisions, business strategy, capital, leverage and other regulatory ratios, capital distributions
(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. Forward-looking 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 current and
future legal proceedings and regulatory investigations, future levels of conduct provisions, the policies and actions of governmental and
regulatory authorities, the Group's ability along with government and other stakeholders to manage and mitigate the impacts of climate change
effectively, geopolitical risks and the impact of competition. In addition, factors including (but not limited to) the following may have an effect:
capital, leverage and other regulatory rules 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; direct and indirect impacts of the
coronavirus (COVID-19) pandemic; instability as a result of the exit by the UK from the European Union (EU), the effects of the EU-UK Trade
and Cooperation Agreement and the disruption that may subsequently result in the UK and globally; the risk of cyber-attacks, information or
security breaches or technology failures on the Group's business or operations; 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, capital distributions, capital, leverage or other 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 Group’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
Contents
Barclays Bank PLC 2020 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
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2
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3
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15
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19
Governance
Chairman’s introduction
Barclays Bank PLC 2020 Annual Report on Form 20 -F 2
The 2020 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.
Strategy and performance
Barclays Bank PLC is the non ring-fenced bank within the Barclays Group (Barclays PLC together with its subsidiaries). The Barclays Bank
Group (Barclays Bank PLC together with its subsidiaries) contains the majority of the Barclays Group’s Barclays International division, which is
comprised of the CIB and CC&P businesses. The Board of BBPLC comprises a subset of the BPLC Board, with all members of the BPLC
board, except the Senior Independent Director, the Chairman of Barclays Bank UK PLC and one other Non-Executive Director, serving on the
Board of BBPLC.
During a challenging year due to the COVID-19 pandemic, the businesses in our CIB have seen heightened activity from our clients and
customers during 2020, with our Markets business in particular benefitting from increased trading volumes and wider margins. At the same time,
our CC&P businesses have faced challenges as a result of the economic shock and long-term low interest rate environment.
Looking ahead, across our CIB we will remain focused on maintaining our client-centric approach and, in doing so, developing opportunities to
grow our business and increase returns. Within our CC&P businesses, we intend to accelerate our strategy to invest in and build world-class
technology and digital capabilities.
The Board
I am very grateful for the support and hard work of all my Board colleagues during 2020, not least for the additional commitment required of
each of them in order to oversee our response to the COVID-19 pandemic. During the course of the year, scheduled Board meetings were
supplemented by additional Board meetings (including a number scheduled at short notice) in order to discuss key issues arising throughout the
pandemic.
We were fortunate to welcome Mohamed El-Erian to the Board in January 2020 who brought with him a wealth of valuable insight and
experience, relevant to the markets and geographies in which we operate. Matthew Lester stepped down from the Board on 1 January 2020 and
Mary Anne Citrino stepped down from the Board on 30 September 2020 and I would like to extend my personal thanks and those of the Board
to Matthew and Mary Anne for their service to the Company.
The future
With positive progress being made on the rollout of COVID-19 vaccines, there is cause for optimism. Whilst undoubtedly the ongoing pandemic
will continue to weaken the global economy for some time to come and impact our businesses, I believe that we are well placed to respond to
any challenges that lie ahead.
My thanks to all those with whom we have worked alongside this year - our clients, customers, regulators and governments. But let me finish by
thanking, most wholeheartedly, all our colleagues around the globe who have responded so magnificently to the challenges we have faced.
Nigel Higgins
Chairman – Barclays Bank Group
17 February 2021
Governance
Corporate Governance Statement
Barclays Bank PLC 2020 Annual Report on Form 20 -F 3
Introduction
Following the structural reform programme to realign the Barclays Group and ring-fence the Barclays Group's UK consumer banking business in
April 2018, and a further review (post structural reform programme) of the corporate governance structure of BBPLC and Barclays PLC
(Barclays or BPLC) (reflecting outcomes of discussions with the Barclays Group's regulators) in 2019, the membership of the BBPLC and BPLC
boards was consolidated, such that membership of the BBPLC Board now comprises a subset of the BPLC Board, with all members of the
BPLC board, except the Senior Independent Director, the Chairman of BBUKPLC and one other Non-Executive Director, also serving on the
board of BBPLC. This has helped improve coordination and efficiency between the two boards and reduced complexity and unnecessary
duplication. This 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. The Board aspires to have high standards of
corporate governance and, in accordance with the Companies (Miscellaneous Reporting) Regulations 2018 (the 2018 Regulations), has
adopted its own corporate governance arrangements, which it believes are appropriate to apply and are designed to ensure effective decision-
making to promote the Company’s success for the long term.
The Board chose not to adopt and report against the 2018 UK Corporate Governance Code, which is designed for premium listed companies
and, whilst fully supportive of the Wates Corporate Governance Principles for Large Private Companies (in particular the focus on purpose,
culture and employee and stakeholder engagement), the Board considers that those Principles 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. This
approach is consistent with the approach of other significant subsidiaries within the Barclays Group, which are subject to the 2018 Regulations.
The Board’s primary aim is that its governance arrangements:
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●
●
●
Set out below are the principles which underpin our corporate governance arrangements and how these principles have been applied during
2020.
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 Barclays Bank Group policies and approach in relation to matters such as Barclays’ purpose and values, Barclays’
Remuneration Policy and the Barclays’ Charter of Expectations. Where appropriate, this corporate governance statement makes reference to
those Group policies, which are relevant to the way in which the Company is governed.
The Company’s corporate governance principles and how the Company has applied them during 2020 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.
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strategy and culture of the organisation. This is embedded at every level of management.
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particular, embedding it in our response to the pandemic. We want to reinforce that clarity and conviction about our purpose and our values,
and stay true to that way of thinking about how we take action at pace. Accordingly, during 2020, the Board adopted a new, extended
narrative of the Barclays Group’s purpose and the refreshed descriptions of our values to make sure they are still relevant for the challenges
ahead.
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Culture remains a core area of focus for the Board and is reviewed in a number of ways. The Board supports The Barclays Way which sets
the framework for achieving a dynamic and positive culture.
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environment brings a significant degree of uncertainty. This has far-reaching impacts across our business and raised significant matters for
consideration by the Board in the context of the Board’s responsibility for the Company’s long-term sustainable success. To clearly establish
and implement the Company’s strategy, and be effective, with management, in addressing the challenges arising from the pandemic, the
Board has continued to deepen its understanding of our business and the risks and opportunities it faces.
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considering longer-term and strategic issues and the Company’s operational resilience, with strategy considered at every Board meeting.
Deep dive topics were informed by discussions with our shareholder and other stakeholders, as well as formal and informal Board
discussions. In response to the growing pandemic, during 2020 our deep dives programme was kept under review to give time to the
discussion of new topics flowing directly from the COVID-19 pandemic.
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the Company’s strategy on page 7 'What The Board did in 2020' available at home.barclays/annualreport.
Principle Two: Division of responsibilities
Governance
Corporate Governance Statement
Barclays Bank PLC 2020 Annual Report on Form 20 -F 4
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 Officer. 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.
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6
of this report. Page 6 sets out details of who is on the Board with a majority of the Board comprised of independent Non-Executive Directors.
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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.
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matters delegated to them by the Board. Detail on the principal Committees and their core responsibilities and activities in 2020 is set out on
pages 8 to 14 of this report.
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responsibilities. See page 6 for further details.
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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.
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 be based
on merit and objective criteria, 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 cohesive board that provides informed
and constructive challenge to the management team and measures its effectiveness.
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between Executive and independent Non-Executive Directors, with the Non-Executive Directors providing independent challenge. The Board
members have a strong combination of technical, finance (including significant financial services experience) and commercial skills and have
broader experience in culture and colleague engagement.
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◾
of diversity (of gender, social and ethnic backgrounds, cognitive and personal strengths) for an effective Board and organisation. This will
remain a key area of focus as the Company continues to strive to build a workforce that reflects the diversity of its customers and the
communities it serves.
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succession pipeline at the Board, Executive and key management level. This remains a key focus to maintain the quality of leadership that is
in place to lead the business in the delivery of the strategy, against a challenging economic and operating environment.
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report.
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Committee on pages 8 to 14 of this report.
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the business, contributing to informed and sound decision-making. Further detail on 'training and induction' can be found on page 14 of this
report.
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explaining Barclays’ Diversity & Inclusion strategy and progress during 2020.
Principle Four: Audit, Risk and Internal Control
A 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 objectives; (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.
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oversight by the Risk Committee and the Board. A key component of the risk management 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
Governance
Corporate Governance Statement
Barclays Bank PLC 2020 Annual Report on Form 20 -F 5
minimum requirements, in respect of the m ain risks, to achieve the Company’s strategic objectives and to provide reasonable assurance that
internal controls are effective. Further detail on the principal risks and management of them can be found on pages 39 to 45.
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parameters set by the BPLC Risk Committee. Significant steps have been taken in recent years to de-risk the business, to support sustainable
growth and value creation in the future.
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current and potential future risk exposures) and the Audit Committee (responsible for controls, including reviewing audit reports, internal
controls and risk management systems). Please see pages 8 to 11 for further detail on the role of these Committees.
◾
(including independence and effectiveness). Further detail can be found on pages 8 to 9 of this report.
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.
◾
Committee. Remuneration is aligned to the Company’s strategy and risk management approach and designed to promote the long-term
success of the Company.
◾
Director is involved in deciding their own remuneration outcome) and having regard to workforce remuneration policies and alignment of
incentives and rewards with culture and performance as reviewed annually by the BPLC Remuneration Committee and shared with the
Company’s Remuneration Committee.
◾
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.
◾
Government’s Gender Pay Gap reporting portal before the end of February 2021, along with the voluntary disclosure of Barclays’ Ethnicity
Pay Gap in the UK. For 2020, Barclays will also publish a Fair Pay report summarising its approach to pay fairness.
Principle Six: Stakeholder relationships 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.
◾
◾
clients, colleagues, suppliers, communities and society more broadly.
◾
◾
most valued asset.
Governance
Corporate Governance Statement
Barclays Bank PLC 2020 Annual Report on Form 20 -F 6
The Board
The Directors who served during the period ended 31 December 2020 are set out in the table below, together with the composition of each of
the Board’s Committees. Matthew Lester resigned on 1 January 2020 and is not reflected in the table below.
Board
Audit Committee
Risk Committee
Remuneration
Committee
Nominations
Committee
Nigel Higgins
Chair of the Board
C
C
Mike Ashely
Independent Non-Executive Director
M
C
M
M
Tim Breedon
Independent Non-Executive Director
M
M
C
C
M
Mary Anne Citrino*
Independent Non-Executive Director
M
M
Mohamed El-Erian
Independent Non-Executive Director
M
M+
Dawn Fitzpatrick
Independent Non-Executive Director
M
M
Mary Francis
Independent Non-Executive Director
M
M
Diane Schueneman
Independent Non-Executive Director
M
M
M
M
Jes Staley
Chief Executive Officer
M
Tushar Morzaria
M
C
M
Member of Board or Committee
* Resigned 30 September 2020
+ Mohamed El-Erian joined the Risk Committee with effect from 1 July 2020
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, demonstrating objective
judgement and promoting a culture of openness and constructive debate between all Directors. The Chairman facilitates the effective
contribution of all Non-Executive Directors and ensures Directors receive accurate, clear and timely information. It is the Board’s responsibility to
ensure that management deliver on short-term objectives, whilst promoting the long-term success of the Company and the Barclays Group. The
Board is also responsible for ensuring that management maintains an effective system of internal control which should provide assurance of
effective and efficient operations, internal financial controls and compliance with law and regulation. In meeting this responsibility, the Board
considers 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.
The Board is responsible for the Barclays Bank Group, which contains the majority of the Barclays Group’s Barclays International division, which
is comprised of the CIB and CC&P businesses.
The BBPLC Schedule of Matters Reserved to the Board ensures that appropriate coordination with the governance of the consolidated boards
is in place. The Schedule of 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, approval of financial
statements, approval of large transactions, 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.
The current Board comprises a Chairman, who was independent on appointment, two Executive Directors and six 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 the Non-Executive Directors is considered annually.
Governance
Corporate Governance Statement
Barclays Bank PLC 2020 Annual Report on Form 20 -F 7
Attendance
Directors are expected to attend every Board meeting. During 2020 there were a number of additional Board meetings convened (often at short
notice) due to the COVID-19 pandemic in addition to the usual schedule of Board meetings. Attendance was very strong at both scheduled and
ad hoc meetings, as reflected in the table below:
Director
Scheduled eligible meetings
attendance
Additional eligible
meetings attendance
Appointment/Resignation Dates
Nigel Higgins
7/7
6/6
Appointed 1 March 2019
Mike Ashley
7/7
6/6
Appointed 25 September 2019
Tim Breedon
7/7
5/6
Appointed 25 September 2019
Mohamed El-Erian
7/7
6/6
Appointed 1 January 2020
Mary Francis
7/7
6/6
Appointed 25 September 2019
Dawn Fitzpatrick
7/7
6/6
Appointed 25 September 2019
Tushar Morzaria*
7/7
4/4
Appointed 7 February 2020
Diane Schueneman
7/7
6/6
Appointed 25 September 2019
Jes Staley
7/7
4/4
Appointed 26 March 2019
Mary Anne Citrino
5/7
5/6
Appointed 25 September 2019; resigned 30
September 2020
* Tushar Morzaria was appointed as an Executive Director, pending regulatory approval, on 25 September 2019. Regulatory approval was given
on 7 February 2020, the date on which his formal appointment became effective.
What the Board did in 2020
During 2020, the Board focused on the following specific areas:
Strategy and operational matters
◾
range of stakeholder interests and matters key to reputation and considered and maintained oversight of our response to the crisis.
◾
colleagues’ needs during the pandemic).
◾
◾
strategy and business performance, operational and technology matters. The Board received increased reporting on operational matters in
particular, during the height of the pandemic.
◾
relevant for the challenges ahead.
Finance and liquidity
◾
BBPLC Chief Financial Officer and through business specific updates to the Board.
◾
◾
◾
Governance and risk (including regulatory issues)
◾
Capital Adequacy Assessment Process and Internal Liquidity Adequacy Assessment Process.
◾
◾
Execution Services Limited, the Barclays Group service company.
◾
creation of the roles of Co-President of the Company to ensure our Corporate Bank, Banking and Markets businesses work more closely
together. Mr Venkatakrishnan was appointed as Co-President alongside Mr Compton. The Board also approved changes to the BBPLC
Executive Committee, and the appointment of a new BBPLC Chief Risk Officer.
◾
page.
◾
◾
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 the Company’s 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 2020 on the following pages.
The Chair of each Board Committee provides a report on Committee business at each Board meeting, including any matters being
recommended by the Committee for Board approval.
Governance
Corporate Governance Statement
Barclays Bank PLC 2020 Annual Report on Form 20 -F 8
Board Audit Committee
The Audit Committee is comprised solely of independent Non-Executive Directors, with membership of the Audit Committee aligned with the
BPLC Audit Committee and 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. Audit Committee meetings were attended by
representatives from Barclays Group and/or BBPLC management in respect of matters relevant to their function or business area, including the
BBPLC Chief Financial Officer, Chief Compliance Officer, Chief Controls Officer, Chief Operating Officer, Chief Internal Auditor, and 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 audit engagement partner of the external auditor, 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, Mike Ashley met regularly during 2020 with the Barclays Bank UK PLC Audit Committee
Chair to share relevant information and to ensure embedment of information flows and governance practice. In addition, regular dialogue has
been held with the Audit Committee Chairs of the Company’s major subsidiaries, Barclays Bank Ireland PLC and Barclays US LLC.
Attendance at the Audit Committee during 2020 was as follows:
Member
Appointment Dates
Mike Ashley (Chairman)
10/10
Appointed 25 September 2019
Tim Breedon
10/10
Appointed 25 September 2019
Diane Schueneman
10/10
Appointed 25 September 2019
The principal role and responsibilities of the Audit Committee, pursuant to its Terms of Reference, are:
◾
management are sound
◾
◾
◾
◾
◾
accounts.
During 2020, the principal activities of the Audit Committee included:
◾
IFRS9 and in particular Expected Credit Loss (ECL) judgements and disclosures from an IFRS perspective in light of guidance issued by
regulators as part of their response to the COVID-19 pandemic
◾
appropriate. As part of its monitoring, the Committee considered a number of reports from management (among others) on the economic
impact of the COVID-19 pandemic, and the continued development and embedding of controls over internal processes supporting the ECL
calculation and related assessment of US Sarbanes Oxley Act (SOx) compliance
◾
◾
considering the adequacy of disclosures; assessing management’s judgements and estimates regarding provisions
◾
◾
◾
including the Barclays Group Internal Control Enhancement Programme (which was substantially concluded in March 2020); monitored and
evaluated the status of significant control issues across the business of the Barclays Bank Group and functions through regular reports from
the Chief Controls Officer, including updates on progress of the related remediation programmes and lessons learned from critical risk events;
utilising the output from the Risk and Control Self Assessments to review and monitor the control environment and related risks
◾
Group’s whistleblowing procedures and controls. Monitoring whistleblowing metrics and instances of retaliation reports, including whether any
instances had been substantiated
◾
audit reports; evaluating reports regarding Barclays Internal Audit’s assessment of the management control approach and control environment
in the Barclays Bank Group
◾
the progress of the 2020 audit. The Audit Committee also reviewed audit quality and discussed KPMG’s feedback on the Company’s critical
accounting estimates and judgements.
An internal review of the effectiveness of the Audit Committee was undertaken in respect of the Committee’s performance in 2020. The results
confirm that the Committee is operating effectively. It is considered well-constituted and provides an effective and appropriately broad level of
challenge and oversight of the areas within its remit.
Governance
Corporate Governance Statement
Barclays Bank PLC 2020 Annual Report on Form 20 -F 9
Following the consolidation of the membership of the Committee with the BPLC Board Audit Committee in September 2019, coverage of BBPLC
within concurrent meetings was considered adequate.
Board Nominations Committee
The Nominations Committee is comprised solely of independent Non-Executive Directors. The Nominations Committee members are Nigel
Higgins, as Chairman of the BBPLC Board along with Mike Ashley, Tim Breedon and Diane Schueneman.
In addition to scheduled meetings, the Nominations Committee also held a number of additional meetings during 2020. Attendance by the
Nominations Committee members is shown in the table below. Nominations Committee meetings were attended during the year by the Chief
Executive Officer, the BPLC HR Director and the BBPLC HR Director, as appropriate.
Attendance at the Nominations Committee during 2020 was as follows:
Member
Meetings attended/eligible to attend
Appointment Dates
Nigel Higgins (Chairman)
6/6
Appointed 1 March 2019
Mike Ashley
6/6
Appointed 25 September 2019
Tim Breedon
6/6
Appointed 25 September 2019
Diane Schueneman
6/6
Appointed 25 September 2019
The principal role and responsibilities of the Nominations Committee, pursuant to its Terms of Reference, are:
◾
◾
◾
◾
◾
◾
◾
◾
During 2020, the principal activities of the Committee included:
◾
diversity of the Directors, and identifying any desirable skills to aid the Company in operating and competing effectively
◾
remotely in order to comply with Government guidelines
◾
Executive Committee, the succession planning review process for the Executive Committee and the global Barclays Group campaigns to
promote a diverse and inclusive workforce.
◾
racism and improve opportunities and representation for ethnically diverse colleagues. This included a review of the Race at Work action plan
focussed on opening up opportunities to attract, develop and add to our Black talent, which was implemented during the year. More
information on diversity and inclusion, including Barclays’ Global Race at Work agenda and latest Ethnicity data, is available in Barclays
Diversity and Inclusion Report published on 18 February 2021
◾
Barclays US LLC, Barclays Bank Delaware and Barclays Capital Securities Limited
◾
◾
An internal review of the effectiveness of the Nominations Committee was undertaken in respect of Committee performance in 2020. The results
confirm that the Committee is operating effectively. This year’s review highlights that the Committee continues to be well constituted and that the
role and responsibilities of the Committee are clear and well understood. The Committee’s interaction with the Board, Board Committees and
senior management is considered effective. This year’s review noted that the Committee continued to operate effectively in the context of the
COVID-19 pandemic. The review noted that the Committee may benefit from a more formalised meeting schedule. Due to the nature of the
Committee’s roles and responsibilities this may not always be possible, but further consideration will be given to this during the year.
Following the consolidation of the membership of the Committee with the BPLC Board Nominations Committee in September 2019, coverage of
BBPLC within concurrent meetings was considered effective.
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 the other member.
The principal role and responsibilities of the Remuneration Committee, pursuant to its Terms of Reference, are to:
◾
Committee
◾
specified individuals as determined by the Remuneration Committee from time to time
◾
Governance
Corporate Governance Statement
Barclays Bank PLC 2020 Annual Report on Form 20 -F 10
◾
In addition to scheduled meetings, the Remuneration Committee also held a number of additional meetings during 2020. 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.
Attendance at the Remuneration Committee during 2020 was as follows:
Member
Meetings attended/eligible to attend
Appointment Dates
Tim Breedon (Chairman)
6/6
Appointed 25 September 2019
Mary Francis
6/6
Appointed 25 September 2019
During 2020, the principal activities of the Committee included:
◾
Funding Frameworks
◾
◾
◾
◾
◾
An internal review of the effectiveness of the Remuneration Committee was undertaken in respect of Committee performance in 2020. The
results confirm that the Committee is operating effectively. The Committee continues to provide an effective level of challenge and oversight of
the areas within its remit. The Committee’s interaction with the Board, Board Committees and senior management is considered effective, with
continued positive engagement and dialogue with senior management.
Following the consolidation of the membership of the Committee with the BPLC Board Remuneration Committee in September 2019, coverage
of BBPLC matters within aligned meetings was considered adequate.
Board Risk Committee
The Risk Committee is comprised solely of independent Non-Executive Directors with membership of the Committee broadly aligned with the
BPLC Risk Committee. The Risk Committee is chaired by Tim Breedon. Mike Ashley, Mohamed El-Erian (with effect from 1 July 2020), Dawn
Fitzpatrick and Diane Schueneman are the other members of the Committee. Mary Anne Citrino was a member of the Committee until she
stepped down from the Board on 30 September 2020. In addition to scheduled meetings, the Risk Committee also held a number of additional
meetings during 2020. 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 Barclays Group Finance Director and Barclays Group and/or BBPLC Chief Risk Officer,
Chief Compliance Officer, Chief Internal Auditor, General Counsel, as appropriate, and the Company’s external auditors, KPMG. Following the
BPLC and BBPLC consolidation, the Committee continued to invite the relevant BBPLC Senior management to attend meetings for the
appropriate agenda items.
Attendance at the Risk Committee during 2020 was as follows:
Member
Appointment/Resignation Dates
Tim Breedon (Chairman)
12/12
Appointed 25 September 2019
Mike Ashley
12/12
Appointed 25 September 2019
Mohamed El-Erian
5/5
Appointed 1 July 2020
Dawn Fitzpatrick
10/12
Appointed 1 January 2020
Diane Schueneman
9/12
Appointed 25 September 2019
Mary Anne Citrino
7/9
Appointed 25 September 2019; resigned 30
September 2020
The principal role and responsibilities of the Risk Committee, pursuant to its Terms of Reference, are:
◾
matter reserved to the Board
◾
for those principal risks
◾
◾
During 2020, the principal activities of the Risk Committee included:
◾
recommending to the Board for approval the proposed overall risk appetite statement and risk limits for the Company. The Committee
continued, periodically, to review and /or approve risk appetite and risk limits throughout the year
◾
assumptions, including both internal stress tests and a climate change stress test in the context of consideration of the MTP and risk appetite
for 2021
Governance
Corporate Governance Statement
Barclays Bank PLC 2020 Annual Report on Form 20 -F 11
◾
◾
and Review following submission of the CCAR stress test results to the Federal Reserve Bank (the FRB). The FRB also required US banks,
including Barclays US LLC, to resubmit capital plans using new supervisory and internal baseline stress scenarios, which were reviewed by
the Committee
◾
into account potential impacts for the COVID-19 pandemic and other macro-economic factors
◾
approval of the operational risk tolerance statement. The Committee focussed particular attention on the financial and capital implications of
operational risk throughout the year, including in light of the COVID-19 pandemic as the workforce largely switched to remote working
◾
relation to managing model risk
◾
◾
requirements, approving the Company’s Internal Capital Adequacy Assessment Process and Individual Liquidity Adequacy Assessment
Process, including reviewing later updates to reflect the impact of the COVID-19 pandemic
◾
◾
◾
management systems made in the Company’s Strategic Report, Annual Report, and BBPLC elements of the BPLC Pillar 3 reporting.
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 Risk
Committee), including:
◾
prudential and financial environment and their impact on the Company’s risk appetite and risk profile. This included responses to the COVID –
19 pandemic and management actions to manage its impact
◾
Compliance function in the management of conduct risk. This included a review of the Compliance functions contribution in supporting the
Company’s response to the COVID-19 pandemic through monitoring areas of heightened conduct risk and overseeing the implementation of
additional controls, particularly in the context of ongoing remediation activities, monitoring working from home arrangements and
reprioritisation of risks
◾
◾
19 pandemic, including updates on risks from the CIB.
An internal review of the effectiveness of the Risk Committee was undertaken in respect of Committee performance in 2020. The results of the
review were positive and indicated that the Committee is operating effectively; and that it is well constituted and provides an effective and broad
level of challenge and oversight of the areas within its remit. The Committee was considered to be both challenging and influential, providing
strong support to the new Chief Risk Officer. The review noted that the Committee has a broad remit having taken on oversight of Conduct and
Compliance matters in 2019 following the disbanding of the Reputation Committee and that a continued focus on these areas was considered to
be beneficial. The review concluded that the Committee’s interaction with the Board, Board Committees and senior management is considered
effective.
Following the consolidation of the membership of the Committee with the BPLC Board Risk committee in September 2019, coverage of BBPLC
matters within concurrent meetings was considered appropriate.
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, Non-Executive Directors, Executive Directors and
Committee Chairs. In accordance with 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 Charter of Expectations can be found at home.barclays/who-we-are/ourgovernance/board-responsibilities.
Appointment and retirement of Directors
The appointment and retirement of Directors is governed by the Company’s Articles of Association (the Articles), the Companies Act 2006 (the
Act) and related legislation.
The Articles may be amended only 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 Meeting (AGM) and may offer
himself/herself for re-election. All Directors will stand for election or re-election at the 2021 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 process facilitated by the Nominations Committee, with the aid of an external search consultancy
firm.
You can read more about the work of the Nominations Committee on page 9.
Governance
Corporate Governance Statement
Barclays Bank PLC 2020 Annual Report on Form 20 -F 12
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 14.
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 Chair 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 typically serve up to a total of six years.
Effectiveness
Appointments to the Board are 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 Company’s strategic direction.
As at the date of this report, we have met the Board gender diversity target of 33% with three 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, notwithstanding that the Company has chosen not to adopt and report against the 2018 UK Corporate Governance Code, as
stated above, and there is appropriate cross-membership on the Board Committees to further promote effectiveness.
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 Committee meetings, as well as making time to understand the business and meet with executives.
The Company’s Charter of
Expectations sets out responsibilities for providing the Board with accurate, timely and high-quality information necessary for it to fulfil its duties.
An internal evaluation of the Board and Board Committees, led by the Senior Independent Director of Barclays PLC Chair and the Company
Secretary has been concluded, relating to 2020 activity. The results confirm the Board was operating effectively, Challenge by the Board was
considered to be strong yet constructive and collegiate.
In its 2020 Annual Report Barclays PLC has disclosed the following in relation to its annual director effectiveness assessment:
In accordance with the Code, all of the current Directors of Barclays PLC, other than Sir Ian Cheshire who is stepping down from the Board at
the end of the AGM, will be submitting themselves for election or re-election at the 2021 AGM to be held on 5 May 2021 and will be unanimously
recommended by the Board for election or re-election as appropriate. As part of its decision in respect of Mr Staley, the Board has had regard to
the conclusions it reached last year, which conclusions remain unchanged, in relation to the investigations by the PRA and the FCA, details of
which were disclosed in our 2019 Annual Report and which remain ongoing.
Accountability
The Board is responsible for setting the Barclays Bank Group risk appetite within the overall parameters set by the Barclay’s Group, being 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 objectives 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 BBPLC 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 Bank Group. The purpose
and activities of this Committee are contained in the Remuneration Committee report on pages 9-10 of this report.
The Board has delegated responsibility to the Remuneration Committee for the consideration and approval of the remuneration arrangements of
the Chair, Executive Directors, other senior executives and certain Barclays Bank Group employees. The Remuneration Committee when
considering the remuneration policies and practices, seeks to ensure that they support the Company’s strategy and promote the long-term
success of the Company and that they are aligned to successful delivery of the Barclays Group’s strategy. All executive and senior management
remuneration policies will be developed only in accordance with the Barclays Group’s formal and transparent 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 members are expected to 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 paid to Non-Executive Directors.
Governance
Corporate Governance Statement
Barclays Bank PLC 2020 Annual Report on Form 20 -F 13
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 committees report their conclusions to the Audit Committee, which debates the conclusions and provides further challenge. Finally, the
Board scrutinises and approves results announcements and the BBPLC Annual Report, and ensures that appropriate disclosures have been
made. This governance process ensures that both management and the Board are given sufficient opportunity to debate and challenge the
financial statements of the Barclays Bank Group and other significant disclosures before they are made public.
Audit, 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 provide only reasonable, rather than 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 achieve 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 model, future performance, solvency or liquidity,
as well as reports on risk measurement methodologies and risk appetite. Further detail of the work of the Risk Committee can be found on
pages 10 to 11 of this report.
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 2020 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 independence and effectiveness of the internal and external audit
functions. For this reason, the Audit Committee members met regularly with the Chief Barclays Internal Auditor and the Lead Audit Engagement
Partner of the external auditor without management present. Further details of the work of the Audit Committee can be found on pages 8
to 9 of
this report.
Management is responsible for establishing and maintaining adequate internal controls over financial 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:
◾
◾
with IFRS and that receipts and expenditures are being made only in accordance with authorisations of management and the respective
Directors
◾
have a material effect on the financial statements.
Internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that internal controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management has assessed the internal control over financial reporting as of 31 December 2020. 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 2020.
The system of internal financial and operational controls is also subject to regulatory oversight in the UK and overseas. Further information on
supervision by the financial services regulators is provided under Supervision and Regulation in the Risk review section on pages 94 to 99.
Governance
Corporate Governance Statement
Barclays Bank PLC 2020 Annual Report on Form 20 -F 14
Changes in internal control over financial reporting
There have been no changes in the Barclays Bank 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 Bank Group’s internal control over financial
reporting.
Executive Committee
During 2020, the Executive Committee membership included the Chief Executive Officer, Global Heads of Markets and Banking (the Co-
Presidents of BBPLC), Corporate Banking and Consumer Banking & Payments along with their functional partners, the Chief Financial Officer,
Chief Risk Officer and other functional partners. The Executive Committee meets monthly 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 communicated consistently to colleagues – for example through regular leadership
team conferences,
and communications that are available to all colleagues
.
Non-Executive Directors time commitment and conflict of interest
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 Board 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, the Board has authority to authorise conflicts of interest, and this ensures that the influence of third
parties does not compromise or override 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 2020, Directors engaged regularly (albeit virtually for the majority of the year) with senior management, as well as attending town halls
and senior leadership gatherings (virtually).
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. Opportunities for in-person Director training were
more limited in 2020 as a result of social distancing and as the Board and senior management focussed on the response to the COVID-19
pandemic. However, training and development was supported through Board deep dives. The Board also received an annual briefing on
regulatory responsibilities including the Senior Mangers Regime and on Barclays’ conduct and financial crime policies and standards.
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 inclusion
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 Global 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, as adopted by the Board, and D&I strategy can be found on page 84 of the Barclays PLC Annual
Report 2020
available at home.barclays/annualreport.
Governance
Directors’ report
Barclays Bank PLC 2020 Annual Report on Form 20 -F 15
The Directors present their report together with the audited accounts for the Company for the year ended 31 December 2020.
Other information that is relevant to the Directors’ Report, and which is incorporated by reference into this report, can be located at:
Pages
Corporate Governance Report
3
Risk Management
24
Principal Risks
39
Disclosures required pursuant to Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations
2008 as updated by the 2018 Regulations can be found on the following pages:
Engagement with employees (Sch.7 Para 11 and 11A Regs 2008/2018 and S172(1) Statement)
19
Policy concerning the employment of disabled persons (Sch.7 Para 10 Regs 2008)
20
Financial Instruments (Sch.7 Para 6 Regs 2008 )
130
Hedge accounting policy (Sch.7 Para 6 Regs 2008 )
131
Profits and dividends
The results of the Barclays Bank Group show
statutory profit after tax of £2,451m (2019: £2,780m). The Barclays Bank Group had net assets of
£53,710m at 31 December 2020 (2019: £50,615m).
Barclays PLC will pay a full year dividend in respect of 2020 of 1p (2019: nil) per ordinary share on
1 April
2021 to shareholders on the share
register on
26
February 2021. The Company will pay a £174m dividend to Barclays PLC in order to fund Barclays PLC’s external dividend
payment. In addition, the Company will pay a £520m dividend to Barclays PLC in order to partially fund a share buy-back. Further details on
total dividends on ordinary shares paid in 2020 are set out in Note 10
to the financial statements. Dividends paid on preference shares for the
year ended 31 December 2020 amounted to £42m (2019: £41m).
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, including preference shares 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 Articles. No shares were issued or bought back in 2020. 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 2020 AGM. It will be proposed at the 2021 AGM that the Directors be granted new authorities to allot and buy-back shares.
Repurchase of preference shares
No preference shares were redeemed by the Company during 2020.
Governance
Directors’ report
Barclays Bank PLC 2020 Annual Report on Form 20 -F 16
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
Mohamed El Erian
Non-Executive Director
Appointed 1 January 2020
Tushar Morzaria*
Executive Director
Appointed 7 February 2020
Matthew Lester
Non-Executive Director
Resigned 1 January 2020
Mary Anne Citrino
Non-Executive Director
Resigned 30 September 2020
*Tushar Morzaria was appointed as an Executive Director, pending regulatory approval, on 25 September 2019. Regulatory approval was given on 7 February 2020, the date on
which his formal appointment became effective.
Directors’ indemnities
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 2020 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’ & Off icers’ 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 2020 for the benefit of the then directors; and at the date of this report are in force for the benefit of directors of Barclays
Pension Funds Trustees Limited as trustee of the Barclays Bank UK Retirement Fund, Barclays Capital International 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 trustee’s activities in relation to the aforementioned schemes.
Political donations
The Barclays Bank Group did not give any money for political purposes in the UK, 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 Barclays PLC Annual Report 2020
available at home.barclays/annualreport.
Environment
The Barclays Group focuses on addressing environmental issues where it felt that there is the greatest potential to make a difference. As the
global effort to tackle climate change grows, the Barclays Group is moving rapidly to take a leading role in contributing to the transition to a low
carbon economy. In March 2020, Barclays Group set out its ambition to be a net zero bank by 2050. In November 2020, on its way to achieving
that ambition, Barclays Group set out the methodology and targets that begin to align the emissions Barclays finances with the Paris Climate
Agreement. More information is set out in the Barclays Group Environmental Social Governance Report, published alongside the Barclays PLC
Annual Report 2020 available at home.barclays/annualreport.
Barclays Group focusses on managing its own carbon footprint and reducing its absolute carbon emissions, developing products and services to
help enable the transition to a low-carbon economy and managing the risks of climate change to its operations, clients, customers and society at
large.
Barclays Group invests in improving the energy efficiency of its operations and offsets the emissions remaining through the purchase of carbon
credits. Barclays Group also has a long-standing commitment to managing the environmental and social risks associated with its lending
practices, which is embedded into its risk management 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. For more information about how Barclays Group’s is
helping to tackle climate change please see the Barclays PLC Annual Report 2020 available at home.barclays/annualreport.
Disclosure of global greenhouse gas emissions is done at a Barclays Group level with information available in the Barclays PLC Annual Report
2020 available at home.barclays/annualreport with fuller disclosure available on the Barclays Group website at home.barclays.com/esg.
Engagement with customers, suppliers and others in a business relationship with the Company
Our engagement with suppliers is important. The Directors have regard, via management oversight, to the need to foster business relationships
with suppliers and, as such, engage with them to ensure adherence to the Barclays’ Supplier Code of Conduct and Supply Control obligations
which cover our expectations of suppliers. Adherence is confirmed through pre-contract attestation. Further, Barclays is a signatory to the
Prompt Payment Code in the UK, committing to pay our suppliers within clearly defined terms.
For further information on managing our supply chain, please see our ESG Report at
home.barclays/esg
.
Branches and Country-by-Country reporting
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 exempt 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 available on the Barclays website; hone.barclays/annualreport.
Research and development
In the ordinary course of business, the Barclays Bank Group develops new products and services in each of its business divisions.
Governance
Directors’ report
Barclays Bank PLC 2020 Annual Report on Form 20 -F 17
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 39
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 its independence and objectivity, and the BPLC Audit Committee remains satisfied with its
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 services
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 Barclays 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 be performed by the auditor only in certain controlled circumstances. The Policy sets out those types of
services that are strictly permitted.
Under the Policy, except for specific categories of ‘permitted’ services that require explicit Committee approval, the BPLC audit committee has
pre-approved all permitted 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 permitted 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 Annual Report 2020 available at
home.barclays/annualreport.
The fees payable to KPMG for the year ended 31 December 2020 amounted to £38m (2019:£35m), of which £8m
(2019:£7m) 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 39
to
the financial statements.
Disclosure of information to the Auditor
Each Director confirms that, so far as he/she is aware, there is no relevant audit information of which the Company’s auditors are unaware and
that each 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
The following statement, which should be read in conjunction with the auditor’s report set out on pages 101 to 104, is made with a view to
distinguishing for shareholders the respective responsibilities of the Directors and of the auditor in relation to the accounts.
Going concern
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:
●
concern; and
●
realistic alternative but to do so.
The Barclays Bank Group’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 available at
home.barclays/annualreport and 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 regard to
Barclays Bank Group accounts, in accordance with article 4 of the IAS regulation. The Directors have prepared these accounts a) in accordance
with international accounting standards in conformity with the requirements of the Companies Act 2006; and b) international financial reporting
standards as issued by the IASB and adopted pursuant to Regulation EC No. 1606/2002 as it applies in the European Union. Pursuant to the
Governance
Directors’ report
Barclays Bank PLC 2020 Annual Report on Form 20 -F 18
Companies Act 2006, 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 have 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’ responsibility statement
The Directors have responsibility 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 with 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 ma intenance 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 and functions are set out on page 6, confirm to the best of their knowledge that:
(a) the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
(b) the management report, in Strategic Report within Barclays Bank PLC Annual Report on pages 1 to 10, 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
17 February 2021
Barclays Bank PLC
Registered in England. Company No. 1026167
Governance
People and Culture
Barclays Bank PLC 2020 Annual Report on Form 20 -F 19
The strength and success of Barclays is in our people. We want to support their health and wellbeing, enable them to build their career and
empower and motivate them to be able to provide excellent service. The following sub-sections are consistent with those detailed in the People
Section of the Barclays PLC Annual Report 2020 and figures mentioned are for the Barclays Group other than where specifically mentioned.
Adapting to challenge
Events over the last 12 months have affected all our lives, and the potential for disruption has been significant. Nevertheless, we have continued
to invest in our colleagues in order to strengthen our business and protect our culture. Our people have shown extraordinary adaptability and
resilience, and thanks to them so has Barclays.
Throughout the COVID-19 pandemic, colleagues around the world have been working incredibly hard to continue to support our customers and
clients. Many were designated as frontline or critical workers in the countries in which they work. At all times, we have worked tirelessly to
prioritise each other’s safety and wellbeing, as well as taking all necessary steps to slow the spread of the virus.
We put in place a set of global principles to ensure we were doing as much as possible to support our people. This included instigation of new
working patterns and technology. We also helped colleagues cope with some of the personal challenges the COVID-19 pandemic created,
including offering paid leave to support self-quarantine, sickness or care for dependents, financial help with childcare and advice made available
to help protect physical and mental health. Through our colleague surveys, we have also regularly checked in with our people to better
understand the impact that working through the COVID-19 pandemic has had.
Barclays continues to believe that people working together in the same physical location reinforces our culture and helps with collaboration and
inspiration. Where possible, and in line with local government guidance, we have instigated gradual returns to the office in certain parts of the
business and in certain parts of the world. In time, with the safety and wellbeing of colleagues as our first priority, we envisage more people will
return to on-site working. In advance of this, we have already put in place additional measures to ensure we are COVID-secure, including risk
assessments at our sites and Return to Office Crews to support social distancing and minimise risks.
Over the last 12 months, we have learnt an enormous amount about the benefits and challenges of working more flexibly. Ultimately, we believe
this will inform our ambitions for future ways of working.
A continuous conversation with colleagues
We think colleague engagement should be a two-way exercise, with equal weight placed on listening to our people as it is on keeping them
informed. We want to be able to consider our colleagues’ perspective when we make decisions, including at the most senior level.
Our regular Here to Listen and Your View surveys are a key part of how we track engagement. In 2020, in part in response to the challenge of
the COVID-19 pandemic, we improved the effectiveness and regularity of how we do this.
We saw a 3 percentage point increase in the response rate to our annual Your View employee engagement survey with 62% of Barclays Bank
PLC colleagues responding. The results showed an increase in Barclays Bank PLC engagement levels, up 9 percentage points to 82%, and an
increase of 9 percentage points to 86% of colleagues saying they would recommend Barclays as a good place to work. We were also very
pleased to see that our colleagues have continued their focus on customer and client feedback, with 83% of Barclays Bank PLC respondents
responding favourably to this question. In addition, 93% of Barclays Bank PLC respondents said they believe they and their teams do a good job
of role modelling the values every day, an increase of 2 percentage points.
Overall, we are encouraged by our ability to work remotely in many more roles than we had previously thought possible. Our colleagues told us
that they enjoyed having more flexibility in their lives, with 73% of Barclays Bank PLC respondents saying they have been able to balance
personal and work demands, and 78% saying there is effective collaboration between teams.
With that said, we recognise there are also areas where we need to do more. We saw a 3 percentage point decrease this year to 77% in the
number of Barclays Bank PLC colleagues who feel it is safe to speak up, while colleague feedback also indicates we have room to make our
internal processes more user friendly, with only 52% of Barclays Bank PLC colleagues saying work processes make it easy for employees to be
productive.
We maintain an engagement approach that is in line with the UK’s Financial Reporting Council (FRC) governance requirements. This extends to
those who work for us indirectly as well, such as contractors, although in a more limited way. As of 2020, our supplier code of conduct requires
organisations with more than 250 employees to demonstrate that they have an effective workforce engagement approach of their own.
The results from our surveys are an important part of the conversations our Executive Committee and Board have about our culture and how we
run Barclays. We also update the Board and its relevant sub-committees throughout the year.
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 wider leadership can identify areas of continued strength of our culture and areas of focus for
leaders.
In addition to these data sources, our leaders engage regularly with colleagues locally to hear what they think. Where possible this year, leaders
visited branches or trading floors to support colleagues during the COVID-19 pandemic. However, the majority of engagement activities moved
to virtual forums, with opportunities for face to face engagement being more limited due to social distancing requirements, including large-scale
virtual town halls, training and development activity, mentoring, informal breakfast sessions, committee membership, ex-officio roles, diversity
and wellbeing programmes, focus and consultative groups.
Governance
People and Culture
Barclays Bank PLC 2020 Annual Report on Form 20 -F 20
Direct engagement, a 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.
We make sure we are keeping everyone up to date on the strategy, performance and progress of the organisation through a strategic,
multichannel approach. This combines leader-led engagement, digital and print communication, blogs, vlogs and podcasts. In response to the
COVID-19 pandemic, this year we also provided additional regular updates to colleagues to provide practical advice and support, including via a
dedicated COVID-19 pandemic intranet-page.
We also engage with our people collectively through a strong and effective partnership with Unite, as well as the Barclays Group European
Forum, which represents all colleagues within the European Union. In 2020 we worked together closely with the specific goal of ensuring the
safety and wellbeing of our colleagues throughout the COVID-19 pandemic. Unite strongly supported the transition of many colleagues to
homeworking, as well as the introduction of measures to protect colleagues working in our branches and offices. As we progress to return more
colleagues to work, our union partners remain centrally involved.
We regularly brief our union partners on the strategy and progress of the business, seeking their input on ways in which we can improve the
colleague experience of working for Barclays. The collective bargaining coverage of Unite in the UK represents around 84% of the Barclays
Group UK workforce and 50% of the global Barclays workforce. We consult in detail with colleague representatives on major change
programmes affecting our people. We do this to help us minimise compulsory job losses wherever possible, including through voluntary
redundancy and redeployment.
Creating an inclusive and supportive culture
Creating an inclusive and supportive culture is not only the right thing to do, but also best for our business. It creates a sense of belonging and
value and enables colleagues to perform at their best.
In 2020, we increased our focus on embedding a culture of inclusion and encouraged colleagues to become allies in the workplace. Through a
new toolkit we supported them to take conscious, positive steps to make everyone feel that they belong, and develop empathy towards another
group’s challenges or issues. In our Your View survey, 83% of Barclays Bank PLC colleagues told us they believe we are all in this together.
Events last year rightly prompted organisations like ours to appraise what we have been doing to aid the fight against racism, and to ask
ourselves whether we can do m ore. Over recent months, Barclays has worked extensively with its Black colleague forums in both the UK and
the US to produce a Race at Work Action Plan. The plan comprises a thorough set of actions that will open up new opportunities to attract,
develop, and add to our great Black talent, using data to measure success. From 2021, we will expand our plan to include all ethnically diverse
groups as well as actions to enhance our long-standing support for citizenship programmes dedicated to tackling racial inequalities in
communities, as well as support of this agenda for customers and clients.
We want to become one of the most accessible and inclusive FTSE companies for all our customers, clients and colleagues. We require
managers to give full and fair consideration to those with a disability on the basis of strengths, potential and ability, both when hiring and
managing. We also ensure opportunities for training, career development and promotion are available to all. As part of the UK Government
Disability Confident scheme, we encourage applications from people with a disability, or a physical or mental health condition.
Through our BeWell programme, we continue to provide expert advice and guidance on the practical steps colleagues can take to look after
their physical and mental health. In 2020, our Mental Health Awareness e-learning became mandatory, and we regularly check-in with
managers to ensure they are supporting colleagues’ wellbeing. We were also one of the first businesses to sign up to the Mental Health at Work
Commitment. In our Your View survey, 77% of Barclays Bank PLC colleagues told us that Barclays supports their efforts to enhance their
wellbeing.
We encourage our people to benefit from Barclays’ performance by enrolling in our share ownership plans, further strengthening their
commitment to the organisation.
Risk review
Contents
Barclays Bank PLC 2020 Annual Report on Form 20 -F 21
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 managem ent strategy
Page
Overview of the Barclays Bank Group’s approach
to risk management.
◾
◾
◾
◾
◾
◾
24
24
24
24
25
25
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.
◾
one principal risk
27
◾
32
◾
33
◾
33
◾
34
◾
36
◾
37
◾
37
◾
38
Climate change risk management
Overview of the Barclays Bank Group’s approach
to managing climate change risk.
◾
◾
38
38
◾
39
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.
◾
39
◾
41
◾
41
◾
43
◾
44
◾
44
◾
44
◾
45
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.
◾
47
◾
48
◾
51
◾
56
◾
57
◾
68
◾
70
◾
75
Risk review
Contents
Barclays Bank PLC 2020 Annual Report on Form 20 -F 22
Risk performance continued
Page
Market risk:
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.
◾
◾
76
76
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.
◾
◾
◾
79
79
79
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.
◾
84
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.
◾
performance
◾
◾
◾
(FVOCI) portfolio in the liquidity pool
87
88
88
89
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.
◾
◾
90
90
Model risk:
The risk of the potential adverse
consequences from financial assessments or
decisions based on incorrect or misused model
outputs and reports.
◾
93
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.
◾
93
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.
◾
93
Risk review
Contents
Barclays Bank PLC 2020 Annual Report on Form 20 -F 23
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.
◾
93
Supervision 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.
◾
94
Risk review
Risk management
Barclays’ risk management strategy
Barclays Bank PLC 2020 Annual Report on Form 20 -F 24
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:
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management and reporting of risks.
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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:
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out. St andards 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:
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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.
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under which first line activities shall be performed, consistent with the risk 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 operational risk,
will be set by the first line and overseen by the Chief Controls Office. These will remain subject to supervision by the second line.
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management and control over current, systemic and evolving risks.
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line oversight.
Principal risks
The ERMF identifies eight principal risks (see managing risks in the strategic report section) and sets out associated responsibilities and
expectations around risk management. The principal risks are: credit risk, market risk, treasury and capital risk, operational risk, model risk,
conduct risk, reputation risk and legal risk.
Each of the principal risks is overseen by an accountable executive within the Barclays Group who is responsible for the framework, policies and
standards that detail the related requirements. Risk reports to executive and Board committees are clearly organised by principal risk. 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 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 Group 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 2020 Annual Report on Form 20 -F 25
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 risk 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 policies. 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 Barclays PLC Board.
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The Barclays Bank PLC Board:
is approved by the Barclays 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.
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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 methodologies, the effectiveness of risk management, and the
Barclays Bank Group 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 risk managers in the
businesses.
All members are independent non-executive Directors. The Chairman of the BRC also sits on the BAC.
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The Barclays Bank PLC Board Audit Committee (BAC):
The BAC receives regular reports on the effectiveness of internal control systems,
on material control issues of significance, and on accounting judgements (including impairment), and a quarterly review of the adequacy of
impairment allowances, relative to the risk inherent in the portfolios, the business environment, and Barclays policies and methodologies.
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The Barclays Bank PLC Board Remuneration Committee (RemCo):
performance and risk profile, and proposals on and ex-post risk adjustments to variable remuneration. These inputs are considered in
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ex-antethe 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 of 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:
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Bank Group that are relevant to the risk profile of the Barclays Group;
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specific addenda are agreed with the Barclays Group where local regulations would otherwise 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:
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Risk review
Risk management
Barclays’ risk management strategy
Barclays Bank PLC 2020 Annual Report on Form 20 -F 26
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Specifically, all employees regardless of their positions, functions or locations must play their part in the Barclays Bank Group’s risk
management. 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 defined 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 2020 Annual Report on Form 20 -F 27
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 period. In addition, certain other factors beyond the Barclays Bank Group’s control, including
escalation of terrorism or global conflicts, natural disasters, pandemics 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)
Risks relating to the impact of COVID-19
The COVID-19 pandemic has had, and continues to have, a material impact on businesses around the world and the economic environments
in which they operate. There are a number of factors associated with the pandemic and its impact on global economies that could have a
material adverse effect on (among other things) the profitability, capital and liquidity of financial institutions such as Barclays Bank Group.
The COVID-19 pandemic has caused disruption to the Barclays Bank Group's customers, suppliers and staff globally. Most jurisdictions in
which the Barclays Bank Group operates have implemented severe restrictions on the movement of their respective populations, with a
resultant significant impact on economic activity in those jurisdictions. These restrictions are being determined by the governments of individual
jurisdictions (including through the implementation of emergency powers) and impacts (including the timing of implementation and any
subsequent lifting or extension of restrictions) may vary from jurisdiction to jurisdiction and/or within jurisdictions. It remains unclear how the
COVID-19 pandemic will evolve through 2021 (including whether there will be further waves of the COVID-19 pandemic, whether COVID-19
vaccines approved for use by regulatory authorities will be deployed successfully with desired results, whether further new strains of COVID-19
will emerge and whether, and in what manner, additional restrictions will be imposed and/or existing restrictions extended) and the Barclays
Bank Group continues to monitor the situation closely. However, despite the COVID-19 contingency plans established by the Barclays Bank
Group, the ability to conduct business may be adversely affected by disruptions to infrastructure, business processes and technology services,
resulting from the unavailability of staff due to illness or the failure of third parties to supply services. This may cause significant customer
detriment, costs to reimburse losses incurred by the Barclays Bank Group’s customers, potential litigation costs (including regulatory fines,
penalties and other sanctions), and reputational damage.
In many of the jurisdictions in which the Barclays Bank Group operates, schemes have been initiated by central banks, national governments
and regulators to provide financial support to parts of the economy most impacted by the COVID-19 pandemic. These schemes have been
designed and implemented at pace, meaning lenders (including Barclays) continue to address operational issues which have arisen in
connection with the implementation of the schemes, including resolving the interaction between the schemes and existing law and regulation. In
addition, the full extent of how these schemes will impact the Barclays Bank Group’s customers and therefore the impact on the Barclays Bank
Group remains uncertain at this stage. However, certain actions (such as the introduction of payment holidays for various consumer lending
products or the cancellation or waiver of fees associated with certain products) may negatively impact the effective interest rate earned on
certain of the Barclays Bank Group's portfolios and may reduce fee income being earned on certain products and negatively impact the
Barclays Bank Group's profitability. Furthermore, the introduction of, and participation in, central-bank supported loan and other financing
schemes introduced as a result of the COVID-19 pandemic may negatively impact the Barclays Bank Group's risk weighted assets (RWAs),
level of impairment and, in turn, capital position (particularly when any transitional relief applied to the calculation of RWAs and impairment
expires). This may be exacerbated if the Barclays Bank Group is required by any government or regulator to offer forbearance or additional
financial relief to borrowers or if the Barclays Bank Group is unable to rely on guarantees provided by governments in connection with financial
support schemes as a result of the Barclays Banks Group’s failure to comply with scheme requirements or otherwise.
As these schemes and other financial support schemes provided by national governments (such as job retention and furlough schemes) expire,
are withdrawn or are no longer supported, economic growth may be negatively impacted which may impact the Barclays Bank Group’s results
of operations and profitability. In addition, the Barclays Bank Group may experience a higher volume of defaults and delinquencies in certain
portfolios and may initiate collection and enforcement actions to recover defaulted debts. Where defaulting borrowers are harmed by the
Barclays Bank Group’s conduct, this may give rise to civil legal proceedings, including class actions, regulatory censure, potentially significant
fines and other sanctions, and reputational damage. Other legal disputes may also arise between the Barclays Bank Group and defaulting
borrowers relating to matters such as breaches or enforcement of legal rights or obligations arising under loan and other credit agreements.
Adverse findings in any such matters may result in the Barclays Bank Group’s rights not being enforced as intended. For further details, refer to
“viii) Legal risk and legal, competition and regulatory matters” below.
The actions taken by various governments and central banks, in particular in the United Kingdom and the United States, may indicate a view on
the potential severity of any economic downturn and post recovery environment, which from a commercial, regulatory and risk perspective
could be significantly different to past crises and persist for a prolonged period. The COVID-19 pandemic has led to a weakening in gross
domestic product (GDP) in most jurisdictions in which the Barclays Bank Group operates and an expectation of higher unemployment in those
same jurisdictions. These factors all have a significant impact on the modelling of expected credit losses (ECLs) by the Barclays Bank Group.
As a result, the Barclays Bank Group experienced higher ECLs in 2020 compared to prior periods and this trend ma y continue in 2021. The
economic environment remains uncertain and future impairment charges may be subject to further volatility (including from changes to
macroeconomic variable forecasts) depending on the longevity of the COVID-19 pandemic and related containment measures and the efficacy
of any COVID-19 vaccines, as well as the longer term effectiveness of central bank, government and other support measures. For further
details on macroeconomic variables used in the calculation of ECLs, refer to the credit risk performance section. In addition, ECLs may be
adversely impacted by increased levels of default for single name exposures in certain sectors directly impacted by the COVID-19 pandemic
(such as the oil and gas, retail, airline, and hospitality and leisure sectors).
Risk review
Material existing and emerging risks
Barclays Bank PLC 2020 Annual Report on Form 20 -F 28
Furthermore, 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 and assessing capital adequacy. 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 and/or misused. This
may be exacerbated when dealing with unprecedented scenarios, such as the COVID-19 pandemic, due to the lack of reliable historical
reference points and data. For further details on model risk, refer to “(v) Model risk” below.
The disruption to economic activity globally caused by the COVID-19 pandemic could adversely impact the Barclays Bank Group's other assets
such as goodwill and intangibles, and the value of Barclays Bank PLC’s investments in subsidiaries. It could also impact the Barclays Bank
Group's income due to lower lending and transaction volumes due to volatility or weakness in the capital markets. Other potential risks include
credit rating migration which could negatively impact the Barclays Bank Group's RWAs and capital position, and potential liquidity stress due to
(among other things) increased customer drawdowns, notwithstanding the significant initiatives that governments and central banks have put in
place to support funding and liquidity. Furthermore, a significant increase in the utilisation of credit cards by customers could have a negative
impact on the Barclays Bank Group's RWAs and capital position.
Furthermore, in order to support lending activity to promote economic growth, governments and/or regulators may limit management’s flexibility
in managing its business, require the deployment of capital in particular business lines or otherwise restrict or limit capital distributions and
capital allocation.
Any and all such events mentioned above could have a material adverse effect on the Barclays Bank Group's business, financial condition,
results of operations, prospects, liquidity, capital position and credit ratings (including potential credit rating agency changes of outlooks or
ratings), as well as on the Barclays Bank Group's customers, employees and suppliers.
ii)
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 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 conditions and market disruption.
Geopolitical events may lead to further financial instability and affect economic growth. In particular:
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governments implemented financial stimulus packages to counter the economic impact of the pandemic, recovery has been slower than
anticipated and concerns remain as to whether (a) there will be subsequent waves of the COVID-19 pandemic, (b) further financial stimulus
will be required and/or (c) governments will be required to significantly increase taxation to fund these commitments. All of these factors could
adversely affect economic growth, affect specific industries or countries or affect the Barclays Bank Group’s employees and business
operations in affected countries. See “i) Risks relating to the impact of COVID-19” above for further details.
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investment and market confidence in the UK and the remainder of EU. See “(iii) The UK’s withdrawal from the European Union” below for
further details.
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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 increased levels of impairment, resulting in a negative
impact on the Barclays Bank Group’s profitability.
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An escalation in geopolitical tensions or increased use of protectionist measures may negatively impact the Barclays Bank Group’s business
in the affected regions.
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stronger than expected slowdown could result if authorities fail to appropriately manage growth during the transition from manufacturing
towards services 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.
iii)
The UK’s withdrawal from the European Union
There are a number of factors associated with the UK’s withdrawal from the EU, which could have a material adverse effect on the Barclays
Bank Group’s business, results of operations, financial condition and prospects.
Trade and economic activity between the EU and UK
The EU-UK Trade and Cooperation Agreement (TCA), which provides a new economic and social partnership between the EU and UK
(including zero tariffs and zero quotas on all goods that comply with the appropriate rules of origin) came into force provisionally on 1 January
2021.
Risk review
Material existing and emerging risks
Barclays Bank PLC 2020 Annual Report on Form 20 -F 29
The TCA is a new, unprecedented arrangement between the EU and the UK, and there is some uncertainty as to its operation and the manner
in which trading arrangements will be enforced by both the EU and the UK. Furthermore, the EU and/or the UK can invoke trade remedies
(such as tariffs and non-tariff barriers) against each other in certain circumstances under the TCA. Resultant trading disruption may have a
significant impact on economic activity in the EU and the UK which (in turn) could have a material adverse effect on the Barclays Bank Group’s
business, results of operations, financial condition and prospects. Unstable economic conditions could result in (among other things):
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falling property prices, which could lead to increased impairments in relation to a number of the Barclays Bank Group’s portfolios
(including, but not limited to, its UK mortgage portfolio, unsecured lending portfolio (including credit cards) and commercial real estate
exposures);
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positions and affect the underlying value of assets in the banking book and securities held by the Barclays Bank Group for liquidity
purposes;
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the UK sovereign credit ratings), which 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 Barclays Bank Group’s interest margins and liquidity position; and/or
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negatively impact the Barclays Bank Group’s cost of and/or access to funding.
Current provision of financial services
The TCA does not cover financial services regulation. Accordingly, UK-based entities within the Barclays Group (such as Barclays Bank PLC
and Barclays Bank UK PLC) are no longer able to rely on the European passporting framework for financial services. Barclays Bank PLC and
Barclays Capital Securities Limited have put in place new arrangements in the provision of cross-border banking and investment services to
customers and counterparties in the EEA (including by servicing EEA clients through the Barclays Group’s EEA hub (Barclays Bank Ireland
PLC), whilst Barclays Bank UK PLC remains focused on UK customers.
The TCA was accompanied by a Joint Declaration on Financial Services, requiring the parties to agree a Memorandum of Understanding
(MoU), by March 2021, establishing the framework for cooperation in financial services. The MoU will also cover how to move forward on
equivalence determinations between the EU and the UK.
There can be no assurance that the EU and the UK will reach further agreement on equivalence decisions. As a result, equivalence decisions
which would enable UK firms to access EEA clients on a cross border basis for certain markets products, cannot be relied upon to allow UK-
based entities within the Barclays Bank Group to meet all of the needs of customers and clients based in the EEA. However, there are certain
other types of equivalence decisions which are material to the operations of the Barclays Bank Group. To date, the EU and the UK have only
agreed a temporary position on mutual equivalence in relation to clearing and settlement (CCP equivalence). If the current mutual, temporary
equivalence decision in relation to CCP equivalence expires and is not replaced, this could have a material adverse effect on the Barclays Bank
Group’s business as well as its clients. In addition, HM Treasury has made certain unilateral equivalence decisions, (including under the Capital
Requirements Regulation (CRR) and the removal of such decisions could have a material impact on the operations of the Barclays Bank
Group.
The Barclays Bank Group provides the majority of its cross-border banking and investment services to EEA clients via Barclays Bank Ireland
PLC. Additionally, in certain EEA Member States, Barclays Bank PLC and Barclays Capital Securities Limited (BCSL) have applied for and
received cross border licences to enable them to continue to conduct a limited range of activities, including accessing EEA trading venues and
interdealer trading. As a result of the onshoring of EU legislation in the UK and the exercise of the UK regulators’ Temporary Transitional
Powers, UK-based entities within the Barclays Bank Group are currently subject to substantially the same rules and regulations as prior to the
UK’s withdrawal from the EU. It is the UK’s intention eventually to recast onshored EU legislation as part of UK legislation and PRA and FCA
rules, which could result in changes to regulatory requirements in the UK.
If the regulatory regimes for EU and UK financial services change further, or if temporary permissions and equivalence decisions expire, and
are not replaced, the provision of cross-border banking and investment services across the Barclays Bank Group may become more complex
and costly which could have a material adverse effect on the Barclays Bank Group’s business and results of operations and could result in the
Barclays Bank Group modifying its legal entity, capital and funding structures and business mix, exiting certain business activities altogether or
not expanding in areas despite otherwise attractive potential returns. This may also be exacerbated if, Barclays Bank Ireland PLC expands
further and, as a result of its growth and importance to the Barclays Bank Group and the EEA banking system as a whole, Barclays Bank
Ireland PLC is made subject to higher capital requirements or restrictions are imposed by regulators on capital allocation and capital
distributions by Barclays Bank Ireland PLC.
Risk review
Material existing and emerging risks
Barclays Bank PLC 2020 Annual Report on Form 20 -F 30
iv)
The impact of interest rate changes on the Barclays Bank Group’s profitability
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 they 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 rate cuts and/or negative interest rates, 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.
Interest rate rises could positively impact the Barclays Bank Group’s profitability as retail and corporate business income increases due to
margin de-compression. However, further increases in interest rates, if larger or more frequent than expected, could lead to generally weaker
than expected growth, reduced business confidence and higher unemployment. This, in turn, could cause stress in the lending portfolio and
underwriting activity of the Barclays Bank Group with resultant higher credit losses driving an increased impairment charge which would most
notably impact retail unsecured portfolios and wholesale non-investment grade lending and could have a material effect on the Barclays 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 Fair Value through Other
Comprehensive Income (FVOCI) reserves.
v)
Competition in the banking and financial services industry
The Barclays Bank Group operates in a highly competitive environment (in particular, in the UK and US) in which it must evolve and adapt to
the significant changes as a result of financial regulatory reform, technological advances, increased public scrutiny and current economic
conditions. The Barclays Bank Group expects that competition in the financial services industry will continue to be intense and may have a
material adverse effect on the Barclays Bank Group’s future business, results of operations and prospects.
New competitors in the financial services industry continue to emerge. For example, technological advances and the growth of e-commerce
have made it possible for non-banks to offer products and services that traditionally were banking products. This has allowed financial
institutions and other companies to provide electronic and internet-based financial solutions, including electronic securities trading, payments
processing and online automated algorithmic-based investment advice. Furthermore, both financial institutions and their non-banking
competitors face the risk that payments processing and other services could be significantly disrupted by technologies, such as
cryptocurrencies, that require no intermediation. New technologies have required and could require the Barclays Bank Group to spend more to
modify or adapt its products or make additional capital investments in its businesses to attract and retain clients and customers or to match
products and services offered by its competitors, including technology companies.
Ongoing or increased competition may put pressure on the pricing for the Barclays Bank Group’s products and services, which could reduce
the Barclays Bank Group's revenues and profitability, or may cause the Barclays Bank Group to lose market share, particularly with respect to
traditional banking products such as deposits, bank accounts and mortgage lending. This competition may be on the basis of quality and variety
of products and services offered, transaction execution, innovation, reputation and price. The failure of any of the Barclays Bank Group’s
businesses to meet the expectations of clients and customers, whether due to general market conditions, under-performance, a decision not to
offer a particular product or service, changes in client and customer expectations or other factors, could affect the Barclays Bank Group’s ability
to attract or retain clients and customers. Any such impact could, in turn, reduce the Barclays Bank Group’s revenues.
vi)
Regulatory change agenda and impact on business 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 adversely 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:
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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:
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regulations introduced which require the reporting and clearing of standardised over the counter (OTC) derivatives and the mandatory
margining of non-cleared OTC derivatives. These regulations may increase costs for market participants, as well as reduce liquidity in the
derivatives markets, in particular if there are areas of overlapping or conflicting regulation. 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 have a significant impact on certain markets in which the Barclays Bank Group
operates.
Risk review
Material existing and emerging risks
Barclays Bank PLC 2020 Annual Report on Form 20 -F 31
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number of jurisdictions. These exercises currently include the programmes of the Bank of England, 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 the Supervision and regulation
section.
vii)
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
Barclays Bank Group’s operations and business strategy to address the financial risks resulting from both: (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 Bank 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 portfolios, 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 Group’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 the climate change risk management section.
viii)
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 adoption of alternative “risk-free” reference rates and the proposed discontinuation of certain reference rates
(including LIBOR), with further changes anticipated, including UK, EU and US legislative proposals to deal with ‘tough legacy’ contracts that
cannot convert into or cannot add fall-back risk-free reference rates. The consequences of reform are unpredictable and may have an adverse
impact on any financial instruments linked to, or referencing, any of these benchmark interest rates.
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 Group’s financial assets and liabilities) that use these reference rates and
indices and introduce a number risks for the Barclays Bank Group, including, but not limited to:
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of◾
Conduct risk:
the Barclays Bank Group faces conduct risks. These may lead to customer complaints, regulatory sanctions or reputational impact if the
Barclays Bank Group is considered to be (among other things) (i) undertaking market activities that are manipulative or create a false or
misleading impression, (ii) misusing sensitive information or not identifying or appropriately managing or m itigating conflicts of interest, (iii)
providing customers with inadequate advice, misleading information, unsuitable products or unacceptable service, (iv) not taking a consistent
approach to remediation for customers in similar circumstances, (v) unduly delaying the communication and migration activities in relation to
client exposure, leaving them insufficient time to prepare or (vi) colluding or inappropriately sharing information with competitors;
◾
Financial risks:
alternative “risk-free” reference rates may impact the ability of members of the Barclays Bank Group to calculate and model amounts
receivable 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;
◾
Pricing risk:
“risk-free” reference rates may impact the pricing mechanisms used by the Barclays Bank Group on certain transactions;
Risk review
Material existing and emerging risks
Barclays Bank PLC 2020 Annual Report on Form 20 -F 32
◾
Operational risk:
“risk-free” reference rates may require changes 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:
Group’s 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 condition and
prospects.
For further details on the impacts of benchmark interest rate reforms on the Barclays Bank Group, see Note 40 to the financial statements.
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 principal, 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 be volatile, particularly under st ressed 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 7 to the financial statements.
b) Specific sectors and concentrations
The Barclays Bank Group is subject to risks arising from changes in credit quality and recovery rates of loans and advances due from
borrowers and counterparties in any specific portfolio. 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 and 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 reposition themselves, the
trend represents a potential risk in the Barclays Bank Group’s UK corporate portfolio from the perspective of 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 both unsecured and
secured products. The Barclays Bank Group is exposed to the adverse credit performance of unsecured products, particularly in the US
through its US Cards business.
◾
UK real estate market.
Barclays Bank Group’s corporate credit exposure is vulnerable to the impacts of the ongoing COVID-19 stress, with
particular weakness in retail property as a result of reduced rent collections and residential development, and faces the risk of increased
impairment from a material fall in property 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.
◾
talian mortgage and wholesale exposure
. The Barclays Bank Group is exposed to a decline in the Italian economic environment through a
mortgage portfolio in run-off and positions to wholesale customers. The Italian economy was severely impacted by the COVID-19 pandemic
in 2020 and recovery has been slower than anticipated. Should the Italian economy deteriorate further or any recovery take longer to
materialise, there could be a material adverse effect on the Barclays Bank Group’s results of operations including, but not limited to,
increased credit losses and higher impairment charges.
◾
Oil & Gas sector.
The Barclays Bank Group’s corporate credit exposure includes companies whose performance is dependent on the oil and
gas sector. Weaker demand for energy products, in particular as a result of the COVID-19 pandemic, combined with a sustained period of
lower energy prices has led to the erosion of balance sheet strength, particularly for higher cost producers and those businesses who supply
goods and services to the oil and gas sector. Any recovery from the drop in demand is likely to remain volatile and energy prices could
remain subdued at low levels for the foreseeable future, below the break-even point for some companies. Furthermore, in the longer term,
costs associated with the transition towards renewable sources of energy may place great demands on companies that the Barclays Bank
Group has exposure to globally. These factors could have a material adverse effect on the Barclays Bank Group’s business, results of
operations and financial condition through increased impairment charges.
Risk review
Material existing and emerging risks
Barclays Bank PLC 2020 Annual Report on Form 20 -F 33
The Barclays Bank Group also has large individual exposures to single name counterparties, 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 cannot be realised, or has to be liquidated at prices which are insufficient to recover the full amount of the loan or derivative exposure. Any
such defaults could have a material adverse effect on the Barclays Bank Group’s results due to, for example, increased credit losses and
higher impairment charges.
For further details on the Barclays Bank Group’s approach to credit risk, see the credit risk management and credit risk performance sections.
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 spreads,
implied volatilities and asset correlations.
Economic and financial market uncertainties remain elevated, as the path of the COVID-19 pandemic is inherently difficult to predict. Further
waves of the COVID-19 pandemic, deployment of COVID-19 vaccines not being as successful as desired, intensifying social unrest that weighs
on market sentiment, and deteriorating trade and geopolitical tensions 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 the market risk management and market risk performance
sections.
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:
In particular, that part which is based on accounts and deposits
payable on 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 m arket 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, macroeconomic conditions
and the sovereign credit ratings 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 particular, 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, reduce 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 regulatory 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.
Risk review
Material existing and emerging risks
Barclays Bank PLC 2020 Annual Report on Form 20 -F 34
◾
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 adversely impacted by an increase in long-term inflation expectations.
c) Interest rate risk in the banking book
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 cannot 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 Barclays Bank Group’s liquid asset portfolio 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 the treasury and capital risk management and
treasury and capital risk performance sections.
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 Barclays Bank Group functions in a highly competitive market, with market participants that expect consistent and smooth business
processes. 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 personnel 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-attacks
Cyber-attacks continue to be a global threat that is inherent across all industries, with a spike in both number and severity of attacks observed
recently. The financial sector remains a primary target for cyber criminals, hostile nation states, opportunists and hacktivists. The Barclays Bank
Group, like other financial institutions, experiences numerous attempts to compromise its cyber security.
The Barclays Bank Group dedicates significant resources to reducing cyber security risks, but it cannot provide absolute security against cyber-
attacks. Malicious actors are increasingly sophisticated in their methods, seeking to steal money, gain unauthorised access to, destroy or
manipulate data, and disrupt operations, and some of their attacks may not be recognised until launched, such as zero-day attacks that are
launched before patches and defences can be readied. Cyber-attacks can originate from a wide variety of sources and target the Barclays
Bank Group in numerous ways, including attacks on networks, systems, or devices used by the Barclays Bank Group or parties such as service
providers and other suppliers, counterparties, employees, contractors, customers or clients, presenting the Barclays Bank Group with a vast
and complex defence perimeter. Moreover, the Barclays Bank Group does not have direct control over the cyber security of the systems of its
clients, customers, counterparties and third-party service providers and suppliers, limiting the Barclays Bank Group’s ability to effectively
defend against certain threats.
A in the Barclays Bank Group’s adherence to its cyber security policies, procedures or controls, employee malfeasance, and human,
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failuregovernance or technological error could also compromise the Barclays Bank Group’s ability to successfully defend against cyber-attacks.
Furthermore, certain legacy technologies that are at or approaching end-of-life may not be able to be able to maintained to acceptable levels of
security. The Barclays Bank Group has experienced cyber security incidents and near-misses in the past, and it is inevitable that additional
incidents will occur in the future. Cyber security risks will continue to increase, due to factors such as the increasing demand across the
industry and customer expectations for continued expansion of services delivered over the Internet; increasing reliance on Internet-based
products, applications and data storage; and changes in ways of working by the Barclays Bank Group’s employees, contractors, and third party
service providers and suppliers and their sub-contractors in response to the COVID-19 pandemic. Bad actors have taken advantage of remote
working practices and modified customer behaviours during the COVID-19 pandemic, exploiting the situation in novel ways that may elude
defences.
Common types of cyber-attacks include deployment of malware, including destructive ransomware; denial of service and distributed denial of
service (DDoS) attacks; infiltration via business email compromise, including phishing, or via social engineering, including vishing and smishing;
automated attacks using botnets; and credential validation or stuffing attacks using login and password pairs from unrelated breaches. A
successful cyber-attack of any type has the potential to cause serious harm to the Barclays Bank Group or its clients and customers, including
exposure to potential contractual liability, litigation, regulatory or other government action, loss of existing or potential customers, damage to the
Barclays Bank Group’s brand and reputation, and other financial loss. The impact of a successful cyber-attack also is likely to include
operational consequences (such as unavailability of services, networks, systems, devices or data) remediation of which could come at
significant cost.
Risk review
Material existing and emerging risks
Barclays Bank PLC 2020 Annual Report on Form 20 -F 35
Regulators worldwide 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 resilience to cyber-attacks. A successful cyber-attack may, therefore,
result in significant regulatory fines on the Barclays Bank Group.
For further details on the Barclays Bank Group’s approach to cyber-attacks, see the operational risk performance section.
c) New and emergent technology
Technology is fundamental to the Barclays Bank Group’s business and the financial services industry. Technol ogical 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. For example, payment services and securities, futures and options trading are
increasingly occurring electronically, both on the Barclays Bank Group’s own systems and through other alternative systems, and becoming
automated. Whilst increased use of electronic payment and trading systems and direct electronic access to trading markets could significantly
reduce the Barclays Bank Group’s cost base, it may, conversely, reduce the commissions, fees and margins made by the Barclays Bank Group
on these transactions which could have a material adverse effect on the Barclays Bank Group’s business, results of operations, financial
condition and prospects.
Introducing new forms of technology, however, 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
The nature of fraud is wide-ranging and continues to evolve, as criminals continually seek opportunities to target the Barclays Bank Group’s
business activities and exploit changes to customer behaviour and product and channel use (such as the increased use of digital products and
enhanced online services). Fraud attacks can be very sophisticated and are often orchestrated by highly organised crime groups who use ever
more sophisticated techniques to target customers and clients directly to obtain confidential or personal information that can be used to commit
fraud. The impact from fraud can lead to customer detriment, financial losses (including the reimbursement of losses incurred by customers),
loss of business, missed business opportunities and reputational damage, all of which could have a material adverse impact 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 and the Barclays Bank Group’s businesses are subject to complex and evolving laws and regulations governing the privacy and
protection of personal information of individuals, including Regulation (EU) 2016/679 (General Data Protection Regulation (GDPR)). The
protected parties can include: (i) the Barclays Bank Group’s clients and customers, and prospective clients and customers; (ii) clients and
customers of the Barclays Bank Group’s clients and customers; (iii) employees and prospective employees; and (iv) employees of the Barclays
Bank Group’s suppliers, counterparties and other external parties.
The international nature of both the Barclays Bank Group’s business and its IT infrastructure also means that personal information may be
available in countries other than those from where it originated. Accordingly, the Barclays Bank Group needs to ensure that its collection, use,
transfer and storage of personal information complies with all applicable laws and regulations in all relevant jurisdictions, which could: (i)
increase the Barclays Bank Group’s compliance and operating costs; (ii) impact the development of new products or services, impact the
offering of existing products or services, or affect how products and services are offered to clients and customers; (iii) demand significant
oversight by the Barclays Bank Group’s management; and (iv) require the Barclays Bank Group to review some elements of the structure of its
businesses, operations and systems in less efficient ways.
Concerns regarding the effectiveness of the Barclays Bank Group’s measures to safeguard personal information, or even the perception that
those measures are inadequate, could expose the Barclays Bank Group to the risk of loss or unavailability of data or data integrity issues
and/or cause the Barclays Bank Group to lose existing or potential clients and customers, and thereby reduce the Barclays Bank Group’s
revenues. Furthermore, any failure or perceived failure by the Barclays Bank Group to comply with applicable privacy or data protection laws
and regulations may subject it to potential contractual liability, litigation, regulatory or other government action (including significant regulatory
fines) and require changes to certain operations or practices which could also inhibit the Barclays Bank Group’s development or marketing of
certain products or services, or increase the costs of offering them to customers. Any of these events could damage the Barclays Bank Group’s
reputation and otherwise materially adversely affect its 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 pricing abilities,
which could have a material adverse effect on the Barclays Bank Group’s business, results of operations, financial condition and prospects and
reputation.
Risk review
Material existing and emerging risks
Barclays Bank PLC 2020 Annual Report on Form 20 -F 36
g) Processing error
The Barclays Bank Group’s businesses are highly dependent on its ability to process and monitor, on a daily basis, a very large number of
transactions, many of which are highly complex and occur at high volumes and frequencies, across numerous and diverse markets in many
currencies. As the Barclays Bank Group’s customer base and geographical reach expand and the volume, speed, frequency and complexity of
transactions, especially electronic transactions (as well as the requirements to report such transactions on a real-time basis to clients,
regulators and exchanges) increase, developing, maintaining and upgrading operational systems and infrastructure becomes more challenging,
and the risk of systems or human error in connection with such transactions increases, as well as the potential consequences of such errors
due to the speed and volume of transactions involved and the potential difficulty associated with discovering errors quickly enough to limit the
resulting consequences. Furthermore, events that are wholly or partially beyond the Barclays Bank Group’s control, such as a spike in
transaction volume, could adversely affect the Barclays Bank Group’s ability to process transactions or provide banking and payment services.
Processing errors could result in the Barclays Bank Group, among other things, (i) failing to provide information, services and liquidity to clients
and counterparties in a timely manner; (ii) failing to settle and/or confirm transactions; (iii) causing funds transfers, capital markets trades and/or
other transactions to be executed erroneously, illegally or with unintended consequences; and (iv) adversely affecting financial, trading or
currency markets. Any of these events could materially disadvantage the Barclays Bank Group’s customers, clients and counterparties
(including them suffering financial loss) and/or result in a loss of confidence in the Barclays Bank Group which, in turn, could have a material
adverse effect on the Barclays Bank Group’s business, results of operations, financial condition and prospects.
h) Supplier exposure
The Barclays Bank Group depends on suppliers 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 continue 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) Estimates and judgements relating to critical accounting policies and capital disclosures
The preparation of financial statements requires the application of accounting policies and judgements to be made in accordance with IFRS.
Regulatory returns and capital disclosures are prepared in accordance with the relevant capital reporting requirements and also require
assumptions and estimates to be made. 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, taxes, fair value of financial instruments,
pensions and post-retirement benefits, and provisions including conduct and legal, competition and regulatory matters (see the notes to the
audited financial statements for further details). 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 Barclays Bank Group, beyond what was anticipated or provided
for. Further development of accounting standards and capital interpretations could also materially impact the Barclays Bank Group’s results of
operations, financial condition and prospects.
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 the operational risk management and operational risk
performance sections.
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 and/or misused. This may be exacerbated when dealing with unprecedented
scenarios, such as the COVID-19 pandemic, due to the lack of reliable historical reference points and data. 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.
Model 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 could 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 Bank Group’s approach to model risk, see the model risk management and model risk performance sections.
Risk review
Material existing and emerging risks
Barclays Bank PLC 2020 Annual Report on Form 20 -F 37
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 standards and instances of
wilful and negligent misconduct by employees, all of which could result in potential customer and client detriment, enforcement action (including
regulatory fines and/or sanctions), increased operation and compliance costs, redress or remediation or reputational damage which in turn
could have a material adverse effect on the Barclays Bank Group’s business, results of operations, financial condition and prospects. Examples
of employee misconduct which could have a material adverse effect on the Barclays Bank Group’s business include (i) employees improperly
selling or marketing the Barclays Bank Group’s products and services; (ii) employees engaging in insider trading, market manipulation or
unauthorised trading; or (iii) employees misappropriating confidential or proprietary information belonging to the Barclays Bank Group, its
customers or third parties. These risks may be exacerbated in circumstances where the Barclays Bank Group is unable to rely on physical
oversight and supervision of employees (such as during the COVID-19 pandemic where employees have worked remotely).
b) Customer engagement
The Barclays Bank Group must ensure that its customers, particularly those that are vulnerable, are able to make well-informed decisions on
how best to use the Barclays Bank Group’s financial services and understand that they are appropriately protected if something goes wrong.
Poor customer outcomes can result from the failure to: (i) communicate fairly and clearly with customers; (ii) provide services in a timely and fair
manner; and (iii) undertake appropriate activity to address customer detriment, including the adherence to regulatory and legal requirements on
complaint handling. The Barclays Bank Group is at risk of financial loss and reputational damage as a result.
c) Product design and review risk
Products and services must meet the needs of clients, customers, markets and the Barclays Bank Group throughout their lifecycle, However,
there is a risk that the design and review of the Barclays Bank Group products and services fail to reasonably consider and address potential or
actual negative outcomes, which may result in customer detriment, enforcement action (including regulatory fines and/or sanctions), redress
and remediation and reputational damage. Both the design and review of products and services are a key area of focus for regulators and the
Barclays Bank Group, and this focus is set to continue in 2021.
d) 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, breaches of economic and financial
sanctions, bribery and corruption, and the facilitation of tax evasion). UK and US regulations covering financial institutions continue to focus on
combating financial crime. Failure to comply may lead to enforcement action by the Barclays 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.
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 drive positive outcomes for customers,
colleagues, clients and markets. The requirements and expectations of the UK Senior Managers Regime, Certification Regime and Conduct
Rules have reinforced 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 the conduct risk management and conduct risk performance
sections.
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 expectations 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
transaction, 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 audiences 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 m ay 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).
Risk review
Material existing and emerging risks
Barclays Bank PLC 2020 Annual Report on Form 20 -F 38
For further details on the Barclays Bank Group’s approach to reputation risk, see reputation risk management and reputation risk performance
sections.
viii) Legal risk and legal, competition and regulatory matters
The Barclays Bank Group conducts activities in a highly regulated market which exposes it and its employees 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 and its employees 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 any number of the risk material existing and
emerging risks identified above.
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. 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 parties 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 described 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 penalties 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; increased 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, counterparties, 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 (including
formerly active matters or those arising after the date of this Annual Report) will not have a material adverse effect on the Barclays Bank
Group’s business, results of operations, financial condition and prospects.
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. A
dedicated Sustainability team considers how the Barclays Group approaches wider sustainability and environmental, social and governance
(ESG) matters, working closely with the ERM function.
In 2020 the bank has implemented a Financial and Operational Risks of Climate Change Plan built around three ma in pillars:
1. Embedding climate risk into ERMF, via the Climate Change Financial and Operational Risk Policy.
2. Developing methodologies and including climate in stress testing (see Barclays PLC Climate-related financial disclosures 2020
in the Risk Management Section).
3. Developing a carbon methodology to assess risk within high emitting sectors (see Barclays PLC Climate-related financial
disclosures 2020 in the Strategy Section).
For more detail on how climate change risks arise and their impact on the Barclays Bank Group, refer to the ‘material existing and emerging
risks’ section.
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 Group.
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. Reputation risk is the responsibility of the Barclays PLC Board, which directly handles the
most material issues facing the Barclays Group. Broader sustainability matters and other reputation risks associated with climate change are co-
ordinated by the Sustainability team.
Two new roles were introduced in 2020: a Barclays Group Head of Public Policy and Corporate Responsibility, reporting to the CEO; and a
Barclays Group Head of Climate Risk appointed to develop Barclays’ climate risk methodologies and manage climate risk in the portfolio.
Working groups have been established to support management of climate risk at Barclays International and Barclays Bank UK Group.
Risk review
Climate change risk management
Barclays Bank PLC 2020 Annual Report on Form 20 -F 39
Risk management – Policy
Financial and Operational Risks:
The Barclays Group’s
‘Climate Change Financial Risk and Operational Risk Policy’
certain principal risks: credit risk, market risk, treasury & capital risk and operational risk. The policy is jointly owned by the relevant Principal
Risk Delegates with oversight by the Barclays PLC BRC and applies across the Barclays Group including within the Barclays Bank Group.
Each relevant Principal Risk Delegate has developed a methodology and implementation plan for quantifying climate change risk.
Linking with ESG and Reputation Risk:
The Barclays Group has developed an internal standard to reflect its net zero carbon ambition in more detail and together with other climate-
related Standards (such as the Forestry & Palm Oil Standard), these now determine the approach to climate change and relevant sensitive
sectors. These standards sit under the management of reputation risk within the ERMF and are enforced through an existing transaction
origination, review and approval process.
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 honour their
obligations to the Barclays Bank Group, including the whole and timely payment of principal, interest, collateral and other receivables.
Overview
The credit risk that the Barclays Bank Group faces arises from wholesale and retail loans and advances together with the counterparty credit
Risk review
Principal risk management
Barclays Bank PLC 2020 Annual Report on Form 20 -F 40
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:
◾
◾
level of individual facilities up to the total portfolio;
◾
◾
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 Management 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 balances 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 agreements (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 retail portfolios; and review and validation of credit risk measurement
models. 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 Officers. For exposures in
excess of the Barclays Bank PLC Senior Credit Officers’ 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 Barclays Bank PLC Senior Credit Officers,
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 Barclays 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
Credit 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 exposure (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:
finance 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 portfolio measured on a net basis.
◾
reverse repurchase agreements:
Bank Group subject 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:
◾
Risk review
Principal risk management
Barclays Bank PLC 2020 Annual Report on Form 20 -F 41
◾
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 policies and standards.
Market risk oversight and challenge is provided by business committees and Barclays Group committees, including the Market Risk Committee
(MRC).
The objectives of market risk management are to:
◾
◾
◾
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 Board.
The Market Risk Committee (MRC) reviews and makes recommendations concerning the Barclays Group-wide market risk profile. This includes
overseeing the operation of the Market Risk Framework and associated standards and policies; 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.
In addition to MRC, the Corporate and Investment Bank Risk Committee (CIBRC) is the main forum in which market risk exposures are
discussed and reviewed with senior business heads. The Committee is chaired by the CRO of Barclays International and meets weekly,
covering current market events, notable market risk exposures, and key risk topics. New business initiatives are generally socialised at CIBRC
before any changes to risk appetite or associated limits are considered in other governance committees.
Management value at risk (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 76 for a review of management VaR in 2020.
Treasury and capital risk management
This comprises:
Liquidity risk:
The risk that Barclays Bank PLC is unable to meet its contractual or contingent obligations or that it does not have the
appropriate amount, tenor and composition of funding and liquidity to support its assets.
Capital risk:
The risk that 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 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 interest 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 oversight and
provide insight into key capital, liquidity, interest rate risk in the banking book (IRRBB) and pension risk management activities.
Risk review
Principal risk management
Barclays Bank PLC 2020 Annual Report on Form 20 -F 42
Liquidity risk management (audited)
Overview
The efficient management of liquidity is essential to Barclays Bank PLC 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 both 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 Internal Liquidity Adequacy Assessment Process (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 PLC
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 recovery plan which includes application to Barclays Bank PLC.
Together, these tools reduce the likelihood that a liquidity stress event could lead to an inability to meet Barclays Bank PLC obligations as they
fall due.
The Barclays Bank PLC Board approves the Barclays Bank PLC funding plan, internal stress tests and of regulatory stress tests results,
recovery plan and Liquidity Risk Appetite. Barclays Bank PLC’s Asset and Liability Committee (‘ALCO’) is responsible for monitoring and
managing liquidity risk in line with Barclays Bank PLC’s funding management objectives, funding plan and risk appetite. . 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 Barclays Bank PLC’s funding plan/forecast in order to agree Barclays Bank PLC’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, roles 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 Internal Capital Adequacy Assessment Process (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 policy 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 regulatory 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 2020, Barclays complied with all regulatory 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.
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 benefit 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 was 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, hedging strategies are executed 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.
Risk review
Principal risk management
Barclays Bank PLC 2020 Annual Report on Form 20 -F 43
◾
Customer behavioural risk:
the risk that net interest income could be adversely impacted by the discretion that customers 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 PLC’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:
◾
◾
defence provides robust, independent, and effective oversight and challenge; and
◾
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. 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 Operational Risk Profile Forum,
the Operational
Risk Committee, the Barclays Bank Risk Forum, the Barclays Bank PLC Board Risk Committee or the Barclays Bank PLC Board Audit
Committee. In addition, specific reports are prepared by Operational Risk on a regular basis for the Barclays Bank Risk Forum, GRC and the
Barclays Bank PLC Board Risk Committee.
Businesses and functions are required to report their operational risks on both a regular and an event-driven basis. The reports include a profile
of the material risks 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 overseeing the
portfolio of operational risk across all businesses.
The Operational Risk function 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. The Operational Risk function 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 categories
Operational risks are grouped into risk categories to support effective risk management, measurement and reporting. These comprise: Data
Management Risk; Financial Reporting Risk; Fraud Risk; Information Security Risk; Operational Resilience Planning Risk; Payments Process
Risk; People Risk; Premises Risk; Physical Security Risk; Strategic Investment Change Management Risk; Supplier Risk; Tax Risk; Technology
Risk; and Transaction Operations Risk.
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 monit or and manage adherence to new prudential regulatory
requirements.
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 risk themes which require an overarching and integrated risk management approach.
The Barclays Bank Group’s risk themes include Cyber, Data and Resilience.
For definitions of the Barclays Bank Group’s operational risk categories and enterprise risk themes, refer to pages 202 to 203 of the Barclays
PLC Pillar 3 Report 2020.
Risk review
Principal risk management
Barclays Bank PLC 2020 Annual Report on Form 20 -F 44
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 four teams: (i) Independent Validation Unit (IVU),
responsible for model validation and approval; (ii) Model Governance and Controls (MGC), responsible for regulatory, audit, policy, standards,
conformance and controls; (iii) Strategy and Transformation responsible for inventory, strategy, communications and business management and
(iv) Model Risk Measurement and Quantification (MRMQ), responsible for the design of the framework and methodology to accurately measure
and quantify model risk.
The model risk management framework consists of the model risk policy and standards. The policy prescribes the Barclays Group-wide, end-to-
end requirements for the identification, measurement and management of model risk, covering model documentation, development,
implementation, monitoring, annual review, independent validation and approval, change and reporting processes. The policy is supported by
global standards covering model inventory, documentation, validation, complexity and materiality, testing and monitoring, overlays, 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 central
objective of the Barclays Group.
The key model risk management activities include:
◾
Database (GMD), the Barclays Group-wide model inventory.
◾
IVU for validation and maintain that the model presented to IVU is and remains fit for purpose.
◾
◾
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,
protecting market integrity and promoting effective competition.
Conduct risk incorporates risks associated with the maintenance of market integrity, customer protection, and product and services lifecycle
governance and the prevention of financial crime.
Organisation, roles and responsibilities
The Conduct Risk Management Framework (CRMF) outlines how the Barclays Bank Group manages and measures its Conduct Risk Profile. The
Barclays Group Chief Compliance Officer is accountable for developing, maintaining and overseeing a group-wide CRMF. The Barclays Bank
Group Chief Compliance Officer is responsible for providing effective oversight, management and escalation of conduct risk in line with the CRMF.
This includes overseeing the development and maintenance of the relevant conduct risk policies and standards and monitoring and reporting on the
consistent application and effectiveness of the implementation of controls to manage conduct risk. It is the responsibility of the first line of defence to
establish controls to manage its performance and assess conformance to these policies and controls.
Senior managers are accountable within their areas of responsibility for owning and managing conduct risk in accordance with the CRMF, as
defined within their regulatory Statement of Responsibilities.
Compliance as an independent second line function is designed to help prevent, detect and manage breaches of applicable laws, rules, regulations
and procedures and has a key role in helping Barclays Bank Group achieve the right conduct outcomes and evolve a conduct-focused culture.
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 defence with clear escalation and reporting lines to the Board. The Barclays Group and Barclays Bank Group Risk Committee is the
primary second line governance committees for the oversight of the Conduct Risk Profile. The risk committee’s responsibilities include the
identification and discussion of any emerging conduct risks exposures in the Barclays Group and Barclays Bank Group.
Reputation risk management
The risk that an action, transaction, investment, event, decision, or business relationship 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
Risk review
Principal risk management
Barclays Bank PLC 2020 Annual Report on Form 20 -F 45
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 management 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 Bank Group Risk Committee is the most senior executive body responsible for 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 risk 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 and oversight of the implementation of controls to manage the risk. The Barclays Bank Group is required to prepare reports for the
Barclays Bank 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 high
level of inherent legal risk which Barclays Bank Group seeks to mitigate through the operation of a Group-wide legal risk management
framework, including the implementation of Group-wide legal risk policies requiring the engagement of legal professionals in situations that
have the potential for legal risk. Notwithstanding these mitigating actions, Barclays Bank Group operates with a level of residual 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 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 legal expertise to businesses, functions, products, activities and geographic
locations so that the Barclays Bank Group receives support from appropriate legal professionals, working in partnership to manage legal risk.
The senior management of the Legal Function oversees, challenges and monitors the legal risk profile and effectiveness of the legal risk
control environment across the Barclays Group. The Legal Function does not sit in any of the Three Lines of Defence but supports them all.
The Barclays Group General Counsel is responsible for maintaining a 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 committees and control committees. The
Barclays Bank Group Board Risk Committee 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 2020 Annual Report on Form 20 -F 46
Summary of Contents
Page
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.
◾
◾
47
48
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.
◾
-
-
and advances at amortised cost including provisions for loan
commitments and financial guarantees
-
-
◾
◾
51
51
52
56
56
56
57
The Barclays Bank Group reviews and monitors risk
concentrations in a variety of ways. This section
outlines performance against key concentration risks.
◾
-
-
◾
-
-
-
-
68
68
69
70
70
70
70
72
Credit Risk monitors exposure performance across a
range of significant portfolios.
◾
-
75
75
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 47
All disclosures in this section pages 47 to 75 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.
The impact of the COVID-19 pandemic has increased the level of judgement that management has been required to exercise over the course of
2020. Customer and client default rates have remained relatively stable despite the impact of the pandemic and volatile macroeconomic
environment. In retail cards, credit profiles improved or were stable versus pre-pandemic levels as a result of government support measures and
customer deleveraging. In wholesale, furlough and liquidity funding schemes are supporting businesses through the pandemic, with limited
credit deterioration. This lack of deterioration, combined in some cases with improving economics, is leading to large scale credit loss stock
releases on a modelled basis in pockets of the portfolio. Given this backdrop, management has applied COVID-19 specific adjustments to
modelled outputs to ensure the full potential impacts of stress are provided for. These adjustments address the temporary nature of ongoing
government support, the uncertainty in relation to the timing of stress and the degree to which economic consensus has yet captured the range
of economic uncertainty, particularly in the UK. Refer to the Management adjustment to models for impairment section on pages 56 to 57 for
further details.
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 to £3,377m (2019: £1,202m). CIB credit impairment charges increased to £1,565m (2019: £157m) and
CC&P credit impairment charges increased to £1,720m (2019: £1,016m) due to the deterioration in economic outlook driven by the COVID-19
pandemic. The current year charge is broadly driven by non-default provision for potential future customer and client stress of £711m in CIB and
£752m in CC&P, and £800m of single name wholesale charges. As at 31 December 2020, 30 and 90 days arrears rates in US cards were 2.5%
(2019: 2.7%) and 1.4% (2019: 1.4%) respectively.
Key metrics
Increase of £1,887m impairment allowance
Impairment allowances on loans and advances at amortised cost, including off-balance sheet elements of the allowance in Barclays Bank Group
increased by £1,887m to £5,835m (2019: £3,948m) during the year. This is driven by an increase in Wholesale Loans of £922m, Credit cards,
unsecured loans and other retail lending of £362m and Home Loans £86m and an increase in off-balance sheet provisions of £517m. Please
refer to page 51 Expected Credit loss section for further details.
Please see risk management section on pages
39
to
41
for details of governance, policies and procedures.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 48
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 were 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. Further detail on
these forms of credit enhancement is presented on page 40 of the credit risk management section.
Overview
As at 31 December 2020, the Barclays Bank Group’s net exposure to credit risk, after taking into account credit risk mitigation, increased 9% to
£719.6bn. Overall, the extent to which the Barclays Bank Group holds mitigation against its total exposure increased to 43% (2019: 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 and balances at central banks, cash collateral and settlement balances, trading
portfolio assets and derivative financial instruments. Trading portfolio liability positions, which to a significant extent economically hedge trading
portfolio assets but which are not held specifically for risk m anagement purposes, are excluded from the analysis. The credit quality of
counterparties to derivatives, financial investments and wholesale loan assets are predominantly investment grade and there are no significant
changes from prior year. Further analysis on the credit quality of assets is presented on pages 70 to 75.
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 2020, as a result
of the enforcement of collateral, was £6m (2019: £6m).
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 49
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 2020
£m
£m
£m
£m
£m
£m
On-balance sheet:
Cash and balances at central banks
155,902
-
-
-
-
155,902
Cash collateral and settlement balances
97,616
-
-
-
-
97,616
Loans and advances at amortised cost:
Home loans
11,193
-
(283)
(10,782)
(85)
43
Credit cards, unsecured loans and other retail lending
23,368
-
(827)
(3,459)
(195)
18,887
Wholesale loans
99,706
(6,988)
(50)
(24,328)
(4,419)
63,921
Total loans and advances at amortised cost
134,267
(6,988)
(1,160)
(38,569)
(4,699)
82,851
723
-
(13)
(708)
-
2
600
-
(10)
(218)
(2)
370
1,327
-
(4)
(167)
(85)
1,071
2,650
-
(27)
(1,093)
(87)
1,443
Reverse repurchase agreements and other similar secured lending
8,981
-
-
(8,981)
-
-
Trading portfolio assets:
Debt securities
56,196
-
-
(391)
-
55,805
Traded loans
8,348
-
-
(374)
-
7,974
Total trading portfolio assets
64,544
-
-
(765)
-
63,779
Financial assets at fair value through the income statement:
Loans and advances
27,449
-
(9)
(21,819)
-
5,621
Debt securities
1,697
-
-
(292)
-
1,405
Reverse repurchase agreements
138,558
-
(685)
(137,466)
-
407
Other financial assets
315
-
-
-
-
315
Total financial assets at fair value through the income statement
168,019
-
(694)
(159,577)
-
7,748
Derivative financial instruments
302,693
(233,088)
(43,164)
(4,656)
(6,409)
15,376
Financial assets at fair value through other comprehensive income
51,901
-
-
(106)
(1,065)
50,730
Other assets
614
-
-
-
-
614
Total on-balance sheet
984,537
(240,076)
(45,018)
(212,654)
(12,173)
474,616
Off-balance sheet:
Contingent liabilities
20,932
-
(1,095)
(2,135)
(282)
17,420
Loan commitments
265,022
-
(56)
(35,970)
(1,479)
227,517
Total off-balance sheet
285,954
-
(1,151)
(38,105)
(1,761)
244,937
Total
1,270,491
(240,076)
(46,169)
(250,759)
(13,934)
719,553
Off -balance sheet exposures are shown gross of provisions of £769m (2019: £252m). See Note 24 for further details.
In addition to the above, Barclays Bank Group holds forward starting reverse repos amounting to £30.8bn (2019: £31.1bn). The balances are
fully collateralised.
Wholesale loans and advances at amortised cost include £1bn of CBILs and CLBILs supported by UK government guarantees.
For further information on credit risk mitigation techniques, refer to page 40 within the credit risk management section.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 50
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 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
Corporate 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
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 51
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 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.
Barclays Bank Group (audited)
Stage 2
As at 31 December 2020
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
9,627
761
53
87
901
1,099
11,627
Credit cards, unsecured loans and other retail lending
18,923
4,987
393
191
5,571
1,853
26,347
Wholesale loans
83,254
14,184
1,066
688
15,938
2,167
101,359
Total
111,804
19,932
1,512
966
22,410
5,119
139,333
Impairment allowance
Home loans
6
40
6
6
52
376
434
Credit cards, unsecured loans and other retail lending
399
1,092
111
124
1,327
1,253
2,979
Wholesale loans
280
475
49
9
533
840
1,653
Total
685
1,607
166
139
1,912
2,469
5,066
Net exposure
Home loans
9,621
721
47
81
849
723
11,193
Credit cards, unsecured loans and other retail lending
18,524
3,895
282
67
4,244
600
23,368
Wholesale loans
82,974
13,709
1,017
679
15,405
1,327
99,706
Total
111,119
18,325
1,346
827
20,498
2,650
134,267
Coverage ratio
%
%
%
%
%
%
%
Home loans
0.1
5.3
11.3
6.9
5.8
34.2
3.7
Credit cards, unsecured loans and other retail lending
2.1
21.9
28.2
64.9
23.8
67.6
11.3
Wholesale loans
0.3
3.3
4.6
1.3
3.3
38.8
1.6
Total
0.6
8.1
11.0
14.4
8.5
48.2
3.6
As at 31 December 2019
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
Note
a Other financial assets subject to impairment excluded 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 £150.3bn (December 2019: £125.5bn) and impairment allowance of £145m
(December 2019: £22m). This comprises £7m (December 2019: £10 m) ECL on £ 146.3bn (December 2019: £124.7bn) Stage 1 assets, £6m (December 2019: £2m) on £3.8bn
(December 2019: £0.8bn) Stage 2 fair value through other comprehensive income assets, cash collateral and settlement assets and £132m (December 201 9: £10m) on
£132m (December 2019: £10m) Stage 3 other assets. Loan commitme nts and financial guarantee contracts have total ECL of £769m (December 2019: £252 m).
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 52
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 121. 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 2020
9,604
16
674
40
1,056
292
11,334
348
Transfers from Stage 1 to Stage 2
(537)
(1)
537
1
-
-
-
-
Transfers from Stage 2 to Stage 1
204
7
(204)
(7)
-
-
-
-
Transfers to Stage 3
(157)
-
(52)
(7)
209
7
-
-
Transfers from Stage 3
29
-
55
1
(84)
(1)
-
-
Business activity in the year
1,193
1
-
-
1
-
1,194
1
Net drawdowns, repayments, net re-
measurement and movements due to
exposure and risk parameter changes
133
(17)
(62)
25
32
96
103
104
Final repayments
(842)
-
(47)
(1)
(98)
(1)
(987)
(2)
Disposals
b
-
-
-
-
-
-
-
-
Write -offs
c
-
-
-
-
(17)
(17)
(17)
(17)
As at 31 December 2020
d
9,627
6
901
52
1,099
376
11,627
434
Credit cards, unsecured loans and other retail lending
As at 1 January 2020
29,541
362
4,450
784
2,129
1,471
36,120
2,617
Transfers from Stage 1 to Stage 2
(4,116)
(92)
4,116
92
-
-
-
-
Transfers from Stage 2 to Stage 1
994
139
(994)
(139)
-
-
-
-
Transfers to Stage 3
(464)
(19)
(516)
(188)
980
207
-
-
Transfers from Stage 3
21
12
59
8
(80)
(20)
-
-
Business activity in the year
3,467
35
130
32
29
7
3,626
74
Net drawdowns, repayments, net re-
measurement and movements due to
exposure and risk parameter changes
(4,613)
15
(1,231)
806
38
731
(5,806)
1,552
Final repayments
(2,232)
(29)
(168)
(23)
(68)
(8)
(2,468)
(60)
Transfers to Barclays Group
a
(2,182)
(16)
(92)
(25)
(47)
(41)
(2,321)
(82)
Disposals
b
(1,493)
(8)
(183)
(20)
(92)
(58)
(1,768)
(86)
Write -offs
c
-
-
-
-
(1,036)
(1,036)
(1,036)
(1,036)
As at 31 December 2020
d
18,923
399
5,571
1,327
1,853
1,253
26,347
2,979
Wholesale loans
As at 1 January 2020
89,200
114
7,515
234
1,163
383
97,878
731
Transfers from Stage 1 to Stage 2
(10,213)
(31)
10,213
31
-
-
-
-
Transfers from Stage 2 to Stage 1
2,651
25
(2,651)
(25)
-
-
-
-
Transfers to Stage 3
(772)
(3)
(642)
(50)
1,414
53
-
-
Transfers from Stage 3
189
-
34
1
(223)
(1)
-
-
Business activity in the year
19,773
44
1,954
144
393
67
22,120
255
Net drawdowns, repayments, net re-
measurement and movements due to
exposure and risk parameter changes
7,033
154
2,969
248
5
687
10,007
1,089
Final repayments
(24,098)
(22)
(2,844)
(28)
(283)
(59)
(27,225)
(109)
Transfers to Barclays Group
a
(509)
(1)
(600)
(22)
(18)
(6)
(1,127)
(29)
Disposals
b
-
-
(10)
-
-
-
(10)
-
Write -offs
c
-
-
-
-
(284)
(284)
(284)
(284)
As at 31 December 2020
d
83,254
280
15,938
533
2,167
840
101,359
1,653
Notes
a Transfers to Barclays Group include a £2.3 bn transfer of the Barclays Partner Finance retail portfolio reported within Credit cards, unsecured loans and other retail lending and
£1.1bn transfer of the Barclays Mercantile Business Finance Limited reported within Wholesale loans to Barclay s Principa l Investments Limited.
b The £1.8bn
disposals reported within Credit cards, unsecured loans and other retail lending portfolio include sale of motor financing business within the Barclays Partner
Finance business. Disposal within W holesale loans include sale of debt securities as part of Group Treasury Operations.
c In 2020, gross write -offs amounted to £ 1,337m (2019: £1,293m) and post write -off recoveries amounted to £ 4m (2019: £73 m). Net write -offs represent gross write -offs less
post write -off recoverie s and amounted to £1,333m (2019: £1,220m).
d Other financial assets subject to impairment excluded 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 £150.3bn (December 2019: £125.5bn) and impairment allowance of £145m
(December 2019: £22m). This comprises £7m (December 2019: £10m) ECL on £146.3bn (December 2019: £124.7bn) Stage 1 assets, £6m (December 2019: £2m) on £3.8bn
(December 2019: £0.8bn) Stage 2 fair value through other comprehensive income assets, cash collateral and settlement assets and £132m (December 2019: £10m) on
£132m (December 2019: £10m) Stage 3 other assets. Loan commitments and financial guarantee contracts have total ECL of £769m (December 2019: £252m).
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 53
Reconciliation of ECL movement to impairment charge/(release) for the period
£m
Home loans
103
Credit cards, unsecured loans and other retail lending
1,484
Wholesale loans
1,206
ECL movement excluding assets derecognised due to disposals and write-offs
2,793
Recoveries and reimbursements
a
(368)
Exchange and other adjustments
b
267
Impairment charge on loan commitments and financial guarantees
547
Impairment charge on other financial assets
c
138
Income statement charge for the period
3,377
Notes
a Recoveries and reimbursements includes £364m for reimbursements expected to be received under the arrangement where Group has entered into financial guarantee
contracts which provide credit protection over certain loans assets with third parties. Cash recoveries of previ ously written off amounts to £4m.
b Includes foreign exchange and interest and fees in suspense
c Other financial assets subject to impairment excluded 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 £150.3bn (December 2019: £125.5bn) and impairment allowance of £145m
(December 2019: £22m). This comprises £7m (December 2019: £10m) ECL on £146.3bn (December 2019: £124.7bn) Stage 1 assets, £6m (December 2019: £2m) on £3.8bn
(December 2019: £0.8bn) Stage 2 fair value through other comprehensiv e income assets, cash collateral and settlement assets and £132m (December 2019: £10m) on
£132m (December 2019: £10m) Stage 3 other assets. Loan commitments and financial guarantee contracts have total ECL of £769m (December 2019: £252m).
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 2020
34
-
-
-
-
-
34
-
Net transfers between stages
(4)
-
4
-
-
-
-
-
Business activity in the year
113
-
-
-
-
-
113
-
Net drawdowns, repayments, net re-
measurement and movement due to
exposure and risk parameter changes
1
-
-
-
4
-
5
-
Limit management and final repayments
(19)
-
(2)
-
-
-
(21)
-
As at 31 December 2020
125
-
2
-
4
-
131
-
Credit cards, unsecured loans and other retail lending
As at 1 January 2020
78,257
22
2,053
15
67
14
80,377
51
Net transfers between stages
(4,124)
6
3,603
(2)
521
(4)
-
-
Business activity in the year
4,591
2
128
1
1
1
4,720
4
Net drawdowns, repayments, net re-
measurement and movement due to
exposure and risk parameter changes
1,471
5
1,076
20
(553)
15
1,994
40
Limit management and final repayments
(11,984)
(1)
(616)
(1)
(6)
(3)
(12,606)
(5)
As at 31 December 2020
68,211
34
6,244
33
30
23
74,485
90
Wholesale loans
As at 1 January 2020
183,001
63
12,053
97
636
41
195,690
201
Net transfers between stages
(28,048)
67
27,052
(72)
996
5
-
-
Business activity in the year
42,904
32
4,705
102
774
2
48,383
136
Net drawdowns, repayments, net re-
measurement and movement due to
exposure and risk parameter changes
12,755
50
(219)
334
(79)
(19)
12,457
365
Limit management and final repayments
(50,208)
(7)
(4,165)
(15)
(296)
(1)
(54,669)
(23)
As at 31 December 2020
160,404
205
39,426
446
2,031
28
201,861
679
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 54
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 retail lending portfolio relates to debt sales undertaken during the year.
c
In 2019, gross write -offs amounted to £1, 293 m (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 (Decemb er 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 comprehensiv e 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 2020 Annual Report on Form 20 -F 55
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
Recoveries and reimbursements
(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 201 8 : £120.1bn) and impairment allow ance of £22m
(December 2018 : £11 m). This comprises £10m ECL (December 2018 : £9m) on £124.7 bn stage 1 assets (December 2018: £119 .6bn) and £2 m (December 2018: £2m) on
£0.8bn stage 2 fair value through other comprehensive income assets, cash collateral and settle ment assets (December 201 8: £0.5bn) and £10 m (December 2018: £ nil) on
£10m Stage 3 other assets (December 201 8: £ 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)
-
-
-
-
-
Limit management and 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)
Limit management and 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
Limit management and 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 2020 Annual Report on Form 20 -F 56
Stage 2 decomposition
Loans and advances at amortised cost
a
2020
2019
Gross Exposure
Impairment
allowance
Gross Exposure
Impairment
allowance
As at 31 December
£m
£m
Quantitative test
17,434
1,698
8,415
848
Qualitative test
3,228
180
3,365
181
30 days past due backstop
1,748
34
859
29
Total Stage 2
22,410
1,912
12,639
1,058
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 probability of default (PD) has deteriorated more than
a pre-determined amount since origination during the year driven by changes in macro-economic variables. 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 £2bn
(2019: £1.7bn) relating to Corporate and Investment Bank, £0.3bn (2019: £0.9bn) relating to Barclaycard International and £0.7bn (2019:
£0.7bn) relating to Private Bank.
A small number of other accounts (2% of impairment allowances and 8% 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 days 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
2020
2019
Gross Exposure
Impairment
allowance
Gross Exposure
Impairment
allowance
As at 31 December
£m
£m
Exposures not charged-off including within cure period
a
1,294
398
1,429
490
Exposures individually assessed or in recovery book
b
3,825
2,071
2,919
1,656
Total Stage 3
5,119
2,469
4,348
2,146
Notes
a Includes £0.6bn (2019: £0.6 bn) 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
2020
2019
Management
adjustments to
impairment
allowances
Proportion of
total impairment
allowances
Management
adjustments to
impairment
allowances
Proportion of
total impairment
allowances
b
As at 31 December
£m
%
£m
%
Home loans
54
12.4
-
-
Credit cards, unsecured loans and other retail lending
960
31.3
3
0.1
Wholesale loans
(78)
(3.3)
(40)
(4.3)
Total
936
16.0
(37)
(0.9)
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 57
Management adjustments to models for impairment charges (audited)
a
Impairment
allowance pre
management
adjustments
c
Economic
uncertainty
adjustments
Other
adjustments
Total impairment
allowance
As at 31 December 2020
£m
£m
£m
£m
Home loans
380
21
33
434
Credit cards, unsecured loans and other retail lending
2,109
986
(26)
3,069
Wholesale loans
2,410
379
(457)
2,332
Total
4,899
1,386
(450)
5,835
Note
a Positive values relate to an increase in impairment allowance .
b The 2019 comparative figures have been restated to include impairment allowance on both drawn and undrawn exposures.
c Includes £3.9 bn of modelled ECL, £0.8bn of individual ly assessed impairments and £0.2bn ECL from non-modelled exposures.
Economic uncertainty adjustments:
longer term impacts will result in higher unemployment levels and customer and client stress. However, to date, little real credit deterioration has
occurred, largely as a result of government and bank support. Observed 30 day arrears rates in consumer loans in particular have remained
stable in US cards (2020: 2.5%; 2019: 2.7%). A similar phenomenon is observed in wholesale, where the average risk profile of the portfolio has
broadly remained stable between Dec’19 and Dec’20 and has not deteriorated in line with the macro-economic crisis.
Given this backdrop, management has applied COVID-19 specific adjustments to modelled outputs to ensure the full potential impacts of stress
are provided for. These adjustments address the temporary nature of ongoing government support, the uncertainty in relation to the timing of
stress and the degree to which economic consensus has not yet captured the range of economic uncertainty.
The COVID-19 adjustments of £1.4bn are broadly comprised as follows:
●
Use of expert judgement to adjust the probability of default £0.1bn to pre-COVID levels to reflect the impact of temporary support
measures on underlying customer behaviour.
●
Adjusting macro-economic variables deemed temporarily influenced by support measures, enabling models to consume the expected
stress, £1.0bn.
●
average Stage 2 coverage of the respective sector. This adjustment is materially in response to the increased stress in these sectors
not captured through the ECL models.
Other adjustments:
Wholesale loans:
Federal Tax Receipts and a correction to Corporate and Investment Bank ECL to adjust for model inaccuracies informed by back-testing.
Management adjustments of £37m in 2019 represent a number of small adjustments to PDs and losses given default (LGD) partially offset by
£50m for UK economic uncertainty, now subsumed within managements broader approach to economic uncertainty.
Measurement uncertainty and sensitivity analysis
The measurement of ECL involves complexity and judgement, including estimation of PDs, 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 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 forecasts) and the Urban Land Institute (for US House Prices),
which forms the Baseline 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 broadly similar severity to Barclays’
internal stress tests and stress scenarios provided by regulators whilst also considering IFRS 9 specific sensitivities and non-linearity. Downside
2 is benchmarked to the Bank of England’s stress 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 reflect upside risks to the Baseline scenario to the extent that is broadly consistent with
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 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.
Scenarios used to calculate the Group’s ECL charge were reviewed and updated regularly throughout 2020, following the outbreak of the
COVID-19 pandemic in the first quarter. The current Baseline scenario reflects the latest consensus economic forecasts with a steady recovery
in GDP in the UK and the US, and unemployment continuing to decrease in the US and peaking at Q221 in the UK followed by a steady decline.
In the downside scenarios, an economic downturn in early 2021 in the UK and the US begins to recover later in the year, with unemployment
increasing to the end of 2021. In the upside scenarios, the strong rebound in UK and US GDP continues into 2021, following the bounce-back in
growth in Q320 and, subsequently, the projections stay above the year on year growth rates seen in the Baseline for a prolonged period of time
before finally reverting to the long term run rate. This reflects the assumption of approved vaccines being successfully rolled out throughout
2021 and pent up savings being deployed into a more certain consumer environment to drive significant growth. Scenario weights have been
updated to reflect the latest economics.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 58
As a result of government and bank support measures, significant credit deterioration has not yet occurred. This delay increases uncertainty on
the timing of the stress and the realisation of defaults. Management has applied COVID-19 specific adjustments to modelled outputs to reflect
the temporary nature of ongoing government support, the uncertainty in relation to the timing of stress and the degree to which economic
consensus has yet captured the range of economic uncertainty, particularly in the UK. As a result, ECL is higher than would be the case if it
were based on the forecast economic scenarios alone.
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 methodology works such that the Baseline (reflecting current
consensus outlook) has the highest weight and the weights of adverse and favourable scenarios depend on the deviation from the Baseline; the
further from the Baseline, the smaller the weight. This is reflected in the table below where the probability weights of the scenarios are shown. 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 Barclays 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 credit cards and unsecured consumer loans are highly sensitive to unemployment.
The range of forecast paths generated in the calculation of the weights at 31 December 2020 is much wider than in previous periods due to the
uncertainty caused by COVID-19, thus the Upside and Downside scenarios are further away from the tails of the distribution than previously
resulting in a more even spread of weights than at 31 December 2019.
The economic environment remains uncertain and future impairment charges may be subject to further volatility (including from changes to
macroeconomic variable forecasts) depending on the longevity of the COVID-19 pandemic and related containment measures, as well as the
longer term effectiveness of central bank, government and other support measures.
The tables on the next page show the key consensus macroeconomic variables used in the five scenarios (Three-year annual paths), the
probability weights applied to each scenario and the macroeconomic variables by scenario using ‘specific bases’ i.e. the most extreme position
of each variable in the context of the scenario, for example, the highest unemployment for downside scenarios and the lowest unemployment for
upside scenarios. Five-year average tables and movement over time graphs provide additional transparency.
Annual paths show quarterly averages for the year (unemployment and base rate) or change in the year (GDP and HPI). Expected worst point is
the most negative quarter, in the relevant 3 year period, which is calculated relative to the start point for GDP and HPI.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 59
Baseline average macroeconomic variables used in the calculation of ECL
2021
2022
2023
Expected Worst
Point
As at 31.12.20
%
UK GDP
a
6.3
3.3
2.6
1.2
UK unemployment
b
6.7
6.4
5.8
7.4
UK HPI
c
2.4
2.3
5.0
0.6
UK bank rate
–
(0.1)
-
(0.1)
US GDP
a
3.9
3.1
2.9
1.0
US unemployment
d
6.9
5.7
5.6
7.5
US HPI
e
2.8
4.7
4.7
0.7
US federal funds rate
0.3
0.3
0.3
0.3
2020
2021
2022
Expected Worst
Point
As at 31.12.19
%
UK GDP
a
1.3
1.5
1.6
0.3
UK unemployment
b
4.1
4.2
4.2
4.2
UK HPI
c
1.9
3.1
3.6
0.3
UK bank rate
0.6
0.5
0.8
0.5
US GDP
a
2.1
1.9
1.9
0.5
US unemployment
d
3.6
3.9
4.0
4.0
US HPI
e
3.4
2.9
2.8
1.0
US federal funds rate
1.7
1.5
1.7
1.5
Downside 2 average macroeconomic variables used in the calculation of ECL
2021
2022
2023
Expected Worst
Point
As at 31.12.20
%
UK GDP
a
(3.9)
6.5
2.6
(11.0)
UK unemployment
b
8.0
9.3
7.8
10.1
UK HPI
c
(13.6)
(10.8)
0.5
(23.0)
UK bank rate
(0.2)
(0.2)
(0.1)
(0.2)
US GDP
a
(2.4)
3.6
2.1
(6.0)
US unemployment
d
13.4
11.9
10.1
13.7
US HPI
e
(17.2)
(0.7)
0.6
(17.8)
US federal funds rate
0.3
0.3
0.3
0.3
2020
2021
2022
Expected Worst
Point
As at 31.12.19
%
UK GDP
a
(2.3)
(2.7)
(0.3)
(5.7)
UK unemployment
b
5.7
8.2
8.7
8.8
UK HPI
c
(7.8)
(22.2)
(5.8)
(32.4)
UK bank rate
2.7
4.0
4.0
1.5
US GDP
a
(1.2)
(2.6)
(0.6)
(5.3)
US unemployment
d
4.9
7.7
8.5
8.5
US HPI
e
(4.4)
(13.6)
(2.9)
(19.8)
US federal funds rate
3.1
3.5
3.5
2.5
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 60
Downside 1 average macroeconomic variables used in the calculation of ECL
2021
2022
2023
Expected Worst
Point
As at 31.12.20
%
UK GDP
a
0.1
6.6
3.2
(7.0)
UK unemployment
b
7.3
8.0
6.9
8.4
UK HPI
c
(6.7)
(3.5)
1.7
(10.0)
UK bank rate
(0.1)
(0.1)
-
(0.1)
US GDP
a
0.4
3.6
2.3
(3.0)
US unemployment
d
11.0
8.9
6.9
11.5
US HPI
e
(5.9)
1.8
2.6
(5.9)
US federal funds rate
0.3
0.3
0.3
0.3
2020
2021
2022
Expected Worst
Point
As at 31.12.19
%
UK GDP
a
0.6
0.3
0.6
0.1
UK unemployment
b
4.7
5.7
5.7
5.8
UK HPI
c
(2.6)
(4.1)
(1.7)
(8.2)
UK bank rate
1.7
2.8
2.8
0.8
US GDP
a
1.2
0.4
0.8
0.2
US unemployment
d
4.0
5.1
5.3
5.4
US HPI
e
1.2
0.5
0.8
0.5
US federal funds rate
2.6
3.0
3.0
2.0
Upside 2 average macroeconomic variables used in the calculation of ECL
2021
2022
2023
Expected Worst
Point
As at 31.12.20
%
UK GDP
a
12.2
5.3
3.9
5.0
UK unemployment
b
6.2
5.5
4.8
7.4
UK HPI
c
6.6
10.4
10.8
1.1
UK bank rate
0.1
0.3
0.3
0.1
US GDP
a
7.1
4.6
4.0
3.4
US unemployment
d
5.5
4.3
4.1
6.1
US HPI
e
8.8
9.1
8.9
1.7
US federal funds rate
0.3
0.4
0.6
0.3
2020
2021
2022
Expected Worst
Point
As at 31.12.19
%
UK GDP
a
3.0
4.0
3.4
0.9
UK unemployment
b
3.7
3.4
3.5
3.9
UK HPI
c
6.8
10.8
9.9
1.0
UK bank rate
0.6
0.5
0.5
0.5
US GDP
a
3.4
4.2
3.6
1.0
US unemployment
d
3.3
3.0
3.0
3.5
US HPI
e
7.4
7.6
7.2
1.6
US federal funds rate
1.7
1.5
1.5
1.5
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 61
Upside 1 average macroeconomic variables used in the calculation of ECL
2021
2022
2023
Expected Worst
Point
As at 31.12.20
%
UK GDP
a
9.3
3.9
3.4
3.5
UK unemployment
b
6.4
6.0
5.2
7.4
UK HPI
c
4.6
6.1
6.1
0.8
UK bank rate
0.1
0.1
0.3
0.1
US GDP
a
5.5
4.0
3.7
2.1
US unemployment
d
6.0
4.8
4.6
6.7
US HPI
e
6.8
6.7
6.3
1.4
US federal funds rate
0.3
0.3
0.5
0.3
2020
2021
2022
Expected Worst
Point
As at 31.12.19
%
UK GDP
a
2.2
2.8
2.5
0.6
UK unemployment
b
3.9
3.8
3.9
4.0
UK HPI
c
5.0
7.0
6.8
0.7
UK bank rate
0.6
0.5
0.5
0.5
US GDP
a
2.8
3.3
2.9
0.8
US unemployment
d
3.5
3.6
3.7
3.7
US HPI
e
5.1
4.7
4.4
1.4
US federal funds rate
1.7
1.5
1.5
1.5
Notes
a Average Real GDP seasonally adjusted change in year; expected worst point is the minimum growth relative to Q420 (2019: Q419) based on a 12 quarter period.
b Averag e UK unemployment rate 16-year+; expected worst point is the highest rate in the 12 quarter period starting Q121 (2019: Q120).
c Change in year end UK HPI = Halifax All Houses, All Buyers index, relative to prior year end; worst point is based on minimum growth relative to Q420 (2019:
Q419) based on a 12 quarter period.
d Average US civilian unemployment rate 16-year+; expected worst point is the highest rate in the 12 quarter period starting Q121 (2019: Q120).
e Change in year end US HPI = FHFA house price index, relative to prior year end; worst point is based on minimum growth relative to Q420 (2019: Q419) based
on a 12 quarter period.
Scenario probability weighting (audited)
Upside 2
Upside 1
Baseline
Downside 1
Downside 2
As at 31 December 2020
Scenario probability weighting
20.2
24.2
24.7
15.5
15.4
As at 31 December 2019
Scenario probability weighting
10.1
23.1
40.8
22.7
3.3
Specific bases show the most extreme position of each variable in the context of the scenario, for example, the highest unemployment for
downside scenarios, average unemployment for baseline scenarios and lowest unemployment for upside scenarios. GDP and HPI downside
and upside scenario data represents the lowest and highest points relative to the start point in the 20 quarter period.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 62
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 2020
UK GDP
b
14.2
8.8
0.7
(22.1)
(22.1)
UK unemployment
c
4.0
4.0
5.7
8.4
10.1
UK HPI
d
48.2
30.8
3.6
(4.5)
(18.3)
UK bank rate
c
0.1
0.1
–
0.6
0.6
US GDP
b
15.7
12.8
1.6
(10.6)
(10.6)
US unemployment
c
3.8
3.8
6.4
13.0
13.7
US HPI
d
42.2
30.9
3.8
(3.7)
(15.9)
US federal funds rate
c
0.1
0.1
0.3
1.3
1.3
As at 31 December 2019
UK GDP
b
15.4
11.7
1.5
0.2
(4.6)
UK unemployment
c
3.4
3.8
4.1
5.8
8.8
UK HPI
d
41.1
28.8
2.8
(6.3)
(31.1)
UK bank rate
c
0.5
0.5
0.7
2.8
4.0
US GDP
b
17.9
14.9
2.1
0.5
(3.0)
US unemployment
c
3.0
3.5
3.9
5.4
8.5
US HPI
d
35.8
23.7
3.2
0.3
(16.7)
US federal funds rate
c
1.5
1.5
1.8
3.0
3.5
Average basis represents the average quarterly value of variables in the 20 quarter period with GDP and HPI based on yearly average and
quarterly CAGRs respectively.
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 2020
UK GDP
e
2.5
1.6
0.7
0.1
(0.9)
UK unemployment
f
5.0
5.3
5.7
6.5
7.2
UK HPI
g
8.2
5.5
3.6
(0.2)
(3.6)
UK bank rate
f
0.3
0.2
–
–
(0.1)
US GDP
e
2.9
2.4
1.6
0.8
0.1
US unemployment
f
5.3
5.7
6.4
8.3
10.4
US HPI
g
7.3
5.5
3.8
0.8
(3.0)
US federal funds rate
f
0.5
0.5
0.3
0.3
0.3
As at 31 December 2019
UK GDP
e
2.9
2.2
1.5
0.8
(0.6)
UK unemployment
f
3.6
3.9
4.1
5.1
7.0
UK HPI
g
7.1
5.2
2.8
(1.1)
(6.9)
UK bank rate
f
0.6
0.6
0.7
2.1
3.1
US GDP
e
3.4
2.9
2.1
1.3
(0.1)
US unemployment
f
3.2
3.7
3.9
4.7
6.6
US HPI
g
6.3
4.3
3.2
1.6
(3.4)
US federal funds rate
f
1.7
1.7
1.8
2.8
3.2
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 Maximum growth relative to Q419 (2019: Q418), based on 20 quarter period in Upside scenarios; 5-year yearly average CAGR in Baseline; minimum growth relative to Q419
(2019: Q418), based on 20 quarter period in Downside scenarios.
c Lowest quarter in Upside sce narios; 5-year average in Baseline; highest quarter in Downside scenarios. Period based on 20 quarters from Q120 (2019: Q119).
d Maximum growth relative to Q419 (2019: Q418), based on 20 quarter period in Upside scenarios; 5-year quarter end CAGR in Baseline; minimum growth relative to Q419
(2019: Q418), based on 20 quarter period in Downside scenarios.
e 5-year yearly average CAGR, starting 2019 (2019: 2018)
f 5-year average. Period based on 20 quarters from Q120 (2019: Q1 19)
g 5-year quarter end CAGR, starting Q419 (2019: Q418)
2019 data presented on a revised, simplified basis for ease of comparison.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 63
-25
-15
-5
5
15
25
35
2017
2019
2021
2023
2025
2027
2029
%
UK GDP
U2
U1
BL
D1
D2
0
2
4
6
8
10
12
2017
2019
2021
2023
2025
2027
2029
%
UK Unemployment
U2
U1
BL
D1
D2
-15
-10
-5
0
5
10
15
2017
2019
2021
2023
2025
2027
2029
%
US GDP
U2
U1
BL
D1
D2
0
2
4
6
8
10
12
14
16
2017
2019
2021
2023
2025
2027
2029
%
US Unemployment
U2
U1
BL
D1
D2
GDP growth based on year on year growth each quarter (Q/(Q-4))
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 reported 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 reduction.
All ECL using a model is included, with the exception of Treasury assets (£8.8m of ECL), providing additional coverage as compared to the
2019 year-end disclosure. Non-modelled exposures and management adjustments are excluded. Management adjustments can be found on
pages 56 to 57.
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 2020 and not on macroeconomic scenarios.
The Downside 2 scenario represents a severe global recession with substantial falls in UK GDP. Unemployment rises towards 10% in UK
markets and 14% in US markets 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 2020 Annual Report on Form 20 -F 64
Scenarios
As at 31 December 2020
Weighted
Upside 2
Upside 1
Baseline
Downside 1
Downside 2
Stage 1 Model Exposure (£m)
Home loans
4,404
4,422
4,416
4,407
4,387
4,365
Credit cards, unsecured loans and other retail lending
24,980
24,929
25,097
24,820
24,411
24,247
Wholesale loans
115,949
121,769
120,741
118,930
113,027
101,759
Stage 1 Model ECL (£m)
Home loans
4
4
4
4
5
5
Credit cards, unsecured loans and other retail lending
236
187
204
230
258
263
Wholesale loans
219
239
231
205
218
221
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
0.8
0.8
0.9
1.1
1.1
Wholesale loans
0.2
0.2
0.2
0.2
0.2
0.2
Stage 2 Model Exposure (£m)
Home loans
557
539
545
554
575
597
Credit cards, unsecured loans and other retail lending
3,171
2,111
2,462
3,215
4,721
5,796
Wholesale loans
29,834
24,015
25,043
26,853
32,757
44,024
Stage 2 Model ECL (£m)
Home loans
33
31
31
32
36
40
Credit cards, unsecured loans and other retail lending
512
327
382
481
796
1,045
Wholesale loans
1,358
922
1,010
1,174
1,683
2,751
Stage 2 Coverage (%)
Home loans
5.9
5.8
5.7
5.8
6.3
6.7
Credit cards, unsecured loans and other retail lending
16.1
15.5
15.5
15.0
16.9
18.0
Wholesale loans
4.6
3.8
4.0
4.4
5.1
6.2
Stage 3 Model Exposure (£m)
Home loans
728
728
728
728
728
728
Credit cards, unsecured loans and other retail lending
1,279
1,279
1,279
1,279
1,279
1,279
Wholesale loans
a
863
863
863
863
863
863
Stage 3 Model ECL (£m)
Home loans
298
278
281
284
306
363
Credit cards, unsecured loans and other retail lending
1,190
1,170
1,180
1,191
1,211
1,210
Wholesale loans
a
25
20
21
23
29
40
Stage 3 Coverage (%)
Home loans
40.9
38.2
38.6
39.0
42.0
49.9
Credit cards, unsecured loans and other retail lending
93.0
91.5
92.3
93.1
94.7
94.6
Wholesale loans
a
2.9
2.3
2.4
2.7
3.4
4.6
Total Model ECL (£m)
Home loans
335
313
316
320
347
408
Credit cards, unsecured loans and other retail lending
1,938
1,684
1,766
1,902
2,265
2,518
Wholesale loans
a
1,602
1,181
1,262
1,402
1,930
3,012
Total ECL
3,875
3,178
3,344
3,624
4,542
5,938
Note
a Material wholesale loan defaults are individually assessed across different recovery strategies. As a result, ECL of £835m is reported as individually assessed impairments in
the table below.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 65
Reconciliation to total ECL
£m
Total model ECL
3,875
ECL from individually assessed impairments
835
ECL from non-modelled and other management adjustments
a
1,125
Total ECL
5,835
Note
a Includes £0.9bn of post model adjustments and £0.2bn ECL from non-modelled exposures.
The dispersion of results around the Baseline is an indication of uncertainty around the future projections. The disclosure highlights the results
of the alternative scenarios enabling the reader to understand the extent of the impact on exposure and ECL from the upside/downside
scenarios. Consequently, the use of five scenarios with associated weightings results in a total weighted ECL uplift from the Baseline ECL of
7%, largely driven wholesale loans.
Home loans:
Credit cards, unsecured loans and other retail lending:
(£1,902m) reflecting the range of economic scenarios used, mainly impacted by Unemployment and key retail variables. Total ECL increases to
£2,518m under the Downside 2 scenario, mainly driven by Stage 2, where coverage rates increase to 18% from a weighted scenario approach
of 16.1% and a £3bn increase in model exposure that meets the Significant Increase in Credit Risk criteria and transitions from Stage 1 to Stage
2.
Wholesale loans:
economic scenarios used, with exposures in the Investment Bank particularly sensitive to the Downside 2 scenario.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 66
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
Total ECL
3,356
2,985
3,090
3,242
3,907
6,053
Note
a Material wholesale loan defaults are individually assessed across different recovery strategies. As a result, ECL of £398m is reported as individually assessed impairments in
the table below
.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 67
Reconciliation to total ECL
a
£m
Total model ECL
3,355
ECL from individually assessed impairments
398
ECL from non-modelled and other management adjustments
195
Total ECL
3,948
Note
a The table has been re-presented to separately show the impact of individually assessed impairments of £398m. This was included in the Barclays Bank PLC Annual Report
2019 with non-modelled and other adjustments of £232m. Non-modelled and other adjustments are now disclosed within the other management adjustments category of
£195m.
Staging sensitivity (audited)
An increase of 1% (£1,393m) of total gross exposure into Stage 2 (from Stage 1), would result in an increase in ECL impairment allowance of
£110 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 amortised cost by product on page 51).
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 68
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 presented below are based on the location of the counterparty or customer or the industry in which they are engaged.
Geographic concentrations
Exposure is concentrated in the Americas 41% (2019: 43%), in the UK 25% (2019: 26%) and Europe 26% (2019: 24%).
Credit risk concentrations by geography (audited)
Barclays Bank Group
United
Kingdom
Americas
Europe
Asia
Africa and
Middle East
Total
As at 31 December 2020
£m
£m
£m
£m
£m
£m
On-balance sheet:
Cash and balances at central banks
31,235
36,063
69,962
17,987
655
155,902
Cash collateral and settlement balances
30,261
27,255
30,105
9,487
508
97,616
Loans and advances at amortised cost
61,754
40,403
23,931
4,859
3,320
134,267
Reverse repurchase agreements and other similar secured lending
10
152
323
8,285
211
8,981
Trading portfolio assets
9,787
31,003
16,861
5,947
946
64,544
Financial assets at fair value through the income statement
31,745
88,302
25,706
14,742
7,524
168,019
Derivative financial instruments
93,685
90,796
101,099
14,532
2,581
302,693
Financial assets at fair value through other comprehensive income
6,921
19,451
22,138
3,276
115
51,901
Other assets
392
185
37
-
-
614
Total on-balance sheet
265,790
333,610
290,162
79,115
15,860
984,537
Off-balance sheet:
Contingent liabilities
5,200
10,121
3,809
1,222
580
20,932
Loan commitments
46,746
175,893
36,713
4,132
1,538
265,022
Total off-balance sheet
51,946
186,014
40,522
5,354
2,118
285,954
Total
317,736
519,624
330,684
84,469
17,978
1,270,491
As at 31 December 2019
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 investments - debt securities
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
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 69
Industry concentrations
Total exposures concentrated in banks and other financial institutions is 51% (2019: 46%), predominantly within derivative financial instruments
and financial assets. The proportion of the overall exposure concentrated in governments and central banks is 21% (2019: 20%). Further
details on material and emerging risks can be found on pages 27 to 38.
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
distributio
n
leisure
Business
and other
services
Home
loans
Cards,
unsecured
loans and
other
personal
lending
Other
Total
As at 31 December 2020
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
On-balance sheet:
Cash and balances at central
banks
3
-
-
-
155,899
-
-
-
-
-
-
155,902
Cash collateral and settlement
balances
17,961
66,696
375
35
10,828
871
30
576
-
-
244
97,616
Loans and advances at amortised
cost
8,649
24,766
7,122
12,889
13,759
4,554
7,814
13,528
11,193
23,955
6,038
134,267
Reverse repurchase agreements
and other similar secured lending
656
7,964
-
-
361
-
-
-
-
-
-
8,981
Trading portfolio assets
2,752
11,464
4,104
516
35,607
3,052
1,883
2,625
-
-
2,541
64,544
Financial assets at fair value
through the income statement
22,766
131,929
603
2,481
5,519
13
64
3,479
971
-
194
168,019
Derivative financial instruments
155,986
116,421
4,126
2,725
11,649
3,288
1,235
2,496
-
-
4,767
302,693
Financial assets at fair value
through other comprehensive
income
13,003
4,258
1
333
33,774
-
-
527
-
-
5
51,901
Other assets
303
193
5
3
1
10
1
95
-
-
3
614
Total on-balance sheet
222,079
363,691
16,336
18,982
267,397
11,788
11,027
23,326
12,164
23,955
13,792
984,537
Off-balance sheet:
Contingent liabilities
1,150
5,501
3,187
1,260
1,028
3,223
978
2,283
-
155
2,167
20,932
Loan commitments
1,773
51,900
39,447
12,843
1,398
25,766
16,626
24,001
134
69,646
21,488
265,022
Total off-balance sheet
2,923
57,401
42,634
14,103
2,426
28,989
17,604
26,284
134
69,801
23,655
285,954
Total
225,002
421,092
58,970
33,085
269,823
40,777
28,631
49,610
12,298
93,756
37,447
1,270,491
As at 31 December 2019
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
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 70
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 51 to 56.
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
11.35%
20-21
100%
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.
These credit quality descriptions can be summarised as follows:
Strong:
Satisfactory:
the asset may not be collateralised, or 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:
actual delinquency. There may also be doubts over the value of collateral or security provided. However, the borrower or counterparty is
continuing to make payments when due and is expected to settle all outstanding amounts of principal and interest.
Debt securities
For assets held at fair value, the carrying value on the balance sheet will include, among other things, the credit risk of the issuer. Most listed
and some unlisted securities are rated by external rating agencies. The 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 2020, the ratio of the Barclays Bank Group’s on-balance sheet assets classified as strong (0.0 < 0.60%) remained stable at
86% (2019: 85%) of total assets exposed to credit risk.
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 71
Balance sheet 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 2020
£m
£m
£m
£m
%
%
%
%
Cash and balances at central banks
155,902
-
-
155,902
100
-
-
100
Cash collateral and settlement balances
86,882
10,725
9
97,616
89
11
-
100
Loans and advances at amortised cost
Home loans
7,582
2,840
771
11,193
68
25
7
100
Credit cards, unsecured loans and other retail
lending
10,742
11,259
1,367
23,368
46
48
6
100
Wholesale loans
75,672
20,828
3,206
99,706
76
21
3
100
Total loans and advances at amortised cost
93,996
34,927
5,344
134,267
70
26
4
100
Reverse repurchase agreements and other
similar secured lending
8,969
12
-
8,981
100
-
-
100
Trading portfolio assets:
Debt securities
51,109
4,871
216
56,196
91
9
-
100
Traded loans
704
5,107
2,537
8,348
9
61
30
100
Total trading portfolio assets
51,813
9,978
2,753
64,544
80
16
4
100
Financial assets at fair value through the
income statement:
Loans and advances
13,174
14,232
43
27,449
48
52
-
100
Debt securities
1,136
515
46
1,697
67
30
3
100
Reverse repurchase agreements
96,318
41,566
674
138,558
70
30
-
100
Other financial assets
302
13
-
315
96
4
-
100
Total financial assets at fair value through
the income statement
110,930
56,326
763
168,019
66
34
-
100
Derivative financial instruments
282,864
19,352
477
302,693
94
6
-
100
Financial assets at fair value through other
comprehensive income
51,893
8
-
51,901
100
-
-
100
Other assets
572
42
-
614
93
7
-
100
Total on-balance sheet
843,821
131,370
9,346
984,537
86
13
1
100
As at 31 December 2019
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
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 72
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 to the financial statements on page 121), 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 2020
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
36,388
689
-
37,077
2
3
-
5
37,072
–
4-5
0.05 to < 0.15%
Strong
17,008
627
-
17,635
17
4
-
21
17,614
0.1
6-8
0.15 to < 0.30%
Strong
13,667
2,463
-
16,130
34
52
-
86
16,044
0.5
9-11
0.30 to < 0.60%
Strong
21,049
2,432
-
23,481
88
127
-
215
23,266
0.9
12-14
0.60 to < 2.15%
Satisfactory
16,951
4,913
-
21,864
293
351
-
644
21,220
2.9
15-19
2.15 to < 10%
Satisfactory
5,264
6,661
-
11,925
183
651
-
834
11,091
7.0
19
10 to < 11.35%
Satisfactory
1,042
1,698
-
2,740
25
99
-
124
2,616
4.5
20-21
11.35 to < 100%
Higher Risk
435
2,927
-
3,362
43
625
-
668
2,694
19.9
22
100%
Credit
Impaired
-
-
5,119
5,119
-
-
2,469
2,469
2,650
48.2
Total
111,804
22,410
5,119
139,333
685
1,912
2,469
5,066
134,267
3.6
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
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 73
As at 31 December 2020
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
5,502
188
-
5,690
1
-
-
1
5,689
–
4-5
0.05 to < 0.15%
Strong
2,765
428
-
3,193
3
2
-
5
3,188
0.2
6-8
0.15 to < 0.30%
Strong
1,468
165
-
1,633
3
4
-
7
1,626
0.4
9-11
0.30 to < 0.60%
Strong
3,524
552
-
4,076
5
33
-
38
4,038
0.9
12-14
0.60 to < 2.15%
Satisfactory
2,712
546
-
3,258
8
25
-
33
3,225
1.0
15-19
2.15 to < 10%
Satisfactory
305
398
-
703
7
21
-
28
675
4.0
19
10 to < 11.35%
Satisfactory
264
423
-
687
17
83
-
100
587
14.6
20-21
11.35 to < 100%
Higher Risk
40
769
-
809
-
61
-
61
748
7.5
22
100%
Credit
Impaired
-
-
654
654
-
-
10
10
644
1.5
Total
16,580
3,469
654
20,703
44
229
10
283
20,420
1.4
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 2020 Annual Report on Form 20 -F 74
As at 31 December 2020
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
52,522
5,311
-
57,833
3
1
-
4
57,829
–
4-5
0.05 to < 0.15%
Strong
62,677
5,730
-
68,407
11
8
-
19
68,388
–
6-8
0.15 to < 0.30%
Strong
41,621
6,260
-
47,881
15
20
-
35
47,846
0.1
9-11
0.30 to < 0.60%
Strong
25,461
6,187
-
31,648
14
19
-
33
31,615
0.1
12-14
0.60 to < 2.15%
Satisfactory
20,730
6,978
-
27,708
113
18
-
131
27,577
0.5
15-19
2.15 to < 10%
Satisfactory
3,621
2,991
-
6,612
23
44
-
67
6,545
1.0
19
10 to < 11.35%
Satisfactory
4,778
4,971
-
9,749
11
25
-
36
9,713
0.4
20-21
11.35 to < 100%
Higher Risk
750
3,775
-
4,525
5
115
-
120
4,405
2.7
22
100%
Credit
Impaired
-
-
1,411
1,411
-
-
41
41
1,370
2.9
Total
212,160
42,203
1,411
255,774
195
250
41
486
255,288
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
Note
a Excludes loan commitments and financial guarantees carried at fair value of £9.5bn (2019: £17.7bn) for Barclays Bank Group .
Risk review
Risk performance
Credit risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 75
Analysis of specific portfolios and asset types
Credit cards, unsecured loans and other retail lending
The principal portfolios listed below accounted for 77% (2019: 83%) 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 2020
US cards
16,845
2.5
1.4
5.6
5.6
Germany consumer lending
3,458
1.9
0.8
1.2
1.1
As at 31 December 2019
US cards
22,041
2.7
1.4
4.5
4.4
Barclays Partner Finance
a
4,134
0.9
0.3
1.7
1.7
Germany consumer lending
3,683
1.8
0.7
1.1
1.0
Notes
a On 1 April 2020, the Barclays Partner Finance business moved from Barclays International to Barclays UK. The 2019 comparative figures have not been restated.
US cards:
accounts entering into delinquency. 90 day arrears rate remained stable at 1.4%. Write -off rates were in line with seasonal trends. A total of
251k payment holidays were provided to customers in the year. At 31 December 2020, the book value of the portfolio where payment holidays
remain in place was £54.7m, representing 0.3% of the portfolio.
Germany consumer lending:
payment holidays were provided to customers in the year. At 31 December 2020, the book value of the portfolio where payment holidays remain
in place was £0.24m, representing 0.01% of the portfolio.
Risk review
Risk performance
Market risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 76
Summary of Contents
Page
◾
◾
accounting measures
◾
76
76
76
Outlines key measures used to summarise the market risk profile of
the Barclays Bank Group such as VaR.
◾
◾
-
management VaR
-
76
76
77
77
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.
All disclosures in this section (pages 76 to 77) are unaudited unless otherwise stated.
Overview
This section contains key statistics describing the market risk profile of the Barclays Bank Group:
●
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:
●
●
●
For these reasons, it is not possible to present direct reconciliations of traded market risk and accounting measures.
Summary of performance in the period
Average management VaR increased to £31m (2019: £23m), driven by an increase in market volatility in late Q1 and Q2 during the initial phase
of the COVID-19 pandemic. Management VaR stabilised and declined in the second half of the year.
Traded market risk review
Review of management measures
The following disclosures provide details of 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 m anagement VaR, which are then cascaded further by risk managers to each
business.
Risk review
Risk performance
Market risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 77
The daily average, maximum and minimum values of management VaR
Management VaR (95%, one day) (audited)
2020
2019
Average
High
Low
Average
High
Low
For the year ended 31 December
£m
£m
£m
£m
£m
£m
Credit risk
20
38
10
12
17
8
Interest rate risk
10
17
6
6
11
3
Equity risk
13
35
6
10
22
5
Basis risk
9
14
7
8
11
6
Spread risk
5
9
3
4
5
3
Foreign exchange risk
4
7
2
3
5
2
Commodity risk
1
1
–
1
2
-
Inflation risk
2
3
1
2
3
1
Diversification effect
a
(33)
n/a
n/a
(23)
n/a
n/a
Total management VaR
31
57
17
23
29
16
Notes
a 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 for the high
and low VaR figures would not be meaningful and is therefore omitted from the above table.
Barclays Bank Group Management VaR
a
Business scenario stresses
As part of the Barclays Bank Group’s risk management framework, on a regular basis the performance of the trading business in hypothetical
scenarios characterised by severe macroeconomic conditions is modelled. Up to 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 2020 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 2020 Annual Report on Form 20 -F 78
Summary of Contents
Page
Liquidity risk performance
◾
◾
79
79
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.
◾
79
Provides details on the contractual maturity of all financial
instruments and other assets and liabilities.
Capital risk performance
◾
- Capital ratios
- Capital resources
- Capital Requirements Regulation (CRR) leverage ratio
84
84
84
84
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 pension plans.
This section details Barclays Bank Group’s capital and leverage
position.
◾
-
-
-
85
85
85
85
Barclays Bank Group discloses the two sources of
foreign exchange risk that it is exposed to.
◾
-
-
-
-
86
86
86
87
87
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
◾
of performance
◾
◾
◾
87
88
88
89
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 2020 Annual Report on Form 20 -F 79
Liquidity risk
All disclosures in this section (pages 79 to 83) are unaudited unless otherwise stated.
Overview
The efficient management of liquidity is essential to the Barclays Bank Group in order to retain the confidence of 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 both internal and
regulatory liquidity metrics.
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 CRR II) Liquidity Coverage 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 31 December 2020, Barclays Bank PLC DoLSub held eligible liquid assets well above 100% of net stressed outflows to its internal and
regulatory requirements. The split of the liquidity pool between cash and deposits with central banks, government bonds and other eligible
securities is broadly similar to the Barclays Group.
A significant proportion of the liquidity pool is located in Barclays Bank PLC and Barclays Bank Ireland PLC. The residual portion of the liquidity
pool, which is predominantly in the US subsidiaries, is held against entity-specific stress outflows and local regulatory requirements.
The liquidity pool increased to £206bn (December 2019: £169bn) and the LCR remained above the 100% regulatory requirement at 145%
(December 2019:141%). The increase in the liquidity pool was driven by a 14% growth in deposits and lower unsecured lending in Consumer,
Cards and Payments. The growth in deposits was largely a consequence of government and central bank policy response to the COVID19
pandemic.
As at
As at
31.12.20
31.12.19
£bn
£bn
Barclays Bank Group liquidity pool
206
169
%
%
Barclays Bank PLC DoLSub Liquidity Coverage Ratio
145
141
The Barclays Bank Group has direct access to US, European and Asian capital markets through its global investment banking operations and to
long-term investors through its clients worldwide. Key sources of wholesale funding include money markets, certificates of deposit, commercial
paper, medium term issuances (including structured notes) and securitisations. This funding capacity enables the Barclays Bank Group to
maintain a stable and diversified funding base.
The Barclays Bank Group also supports various central bank monetary initiatives, such as the Bank of England’s Term Funding Scheme (TFS)
and Term Funding Scheme with additional incentives for SMEs (TFSME), and the European Central Bank’s Targeted Long-Term Refinancing
Operations (TLTRO). These are reported under ‘repurchase agreements and other similar secured borrowing’ on the balance sheet. In addition
to the £1.4bn TFS balance outstanding at the beginning of the year, the Barclays Bank Group drew £3.6bn under TFSME and £2.2bn under
TLTRO during the year. These balances were outstanding at the year-end.
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 relationship) and trading portfolio assets and liabilities are included in the ‘on demand’ column at their
fair value. Liquidity risk on these items is not managed on the basis of contractual maturity since these items 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 2020 Annual Report on Form 20 -F 80
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
2020
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Assets
Cash and balances
at central banks
155,122
182
598
-
-
-
-
-
-
-
155,902
Cash collateral and
settlement balances
1,281
96,335
-
-
-
-
-
-
-
-
97,616
Loans and advances
at amortised cost
12,854
11,149
6,291
3,770
4,314
21,271
16,663
22,387
14,127
21,441
134,267
Reverse repurchase
agreements and
other similar secured
lending
150
8,648
-
-
-
-
183
-
-
-
8,981
Trading portfolio
assets
127,664
-
-
-
-
-
-
-
-
-
127,664
Financial assets at
fair value through the
income statement
17,377
123,948
7,547
6,959
4,027
4,294
1,216
2,284
1,853
2,256
171,761
Derivative financial
instruments
302,429
24
-
-
-
15
15
112
77
21
302,693
Financial assets at
fair value through
other comprehensive
income
-
3,086
1,627
151
95
3,059
3,770
12,741
19,236
8,137
51,902
Other financial
assets
213
286
107
5
-
3
-
-
-
-
614
Total financial
assets
617,090
243,658
16,170
10,885
8,436
28,642
21,847
37,524
35,293
31,855
1,051,400
Other assets
8,331
Total assets
1,059,731
Liabilities
Deposits at
amortised cost
181,455
39,409
13,975
3,665
2,283
1,144
532
602
1,252
379
244,696
Cash collateral and
settlement balances
1,944
83,605
-
-
-
-
-
-
-
-
85,549
Repurchase
agreements and
other similar secured
borrowing
4
2,545
-
-
-
1,400
2,329
4,073
-
92
10,443
Debt securities in
issue
-
12,207
3,808
3,833
1,791
2,124
640
2,815
1,995
210
29,423
Subordinated
liabilities
-
3,708
3,222
459
143
3,545
4,811
6,241
5,629
4,247
32,005
Trading portfolio
liabilities
46,139
-
-
-
-
-
-
-
-
-
46,139
Financial liabilities
designated at fair
value
15,555
172,250
8,677
5,067
2,928
8,593
6,939
8,576
8,344
12,697
249,626
Derivative financial
instruments
299,637
-
50
-
-
66
67
174
183
403
300,580
Other financial
liabilities
70
2,072
15
15
16
233
50
90
187
62
2,810
Total financial
liabilities
544,804
315,796
29,747
13,039
7,161
17,105
15,368
22,571
17,590
18,090
1,001,271
Other liabilities
4,750
Total liabilities
1,006,021
Cumulative
liquidity gap
72,286
148
(13,429)
(15,583)
(14,308)
(2,771)
3,708
18,661
36,364
50,129
53,710
Risk review
Risk performance
Treasury and Capital risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 81
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 investments
-
-
-
-
-
-
-
-
-
-
-
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
Expected maturity date may differ from the contractual dates, to account for:
◾
Group’s trading strategies.
◾
practice, their behavioural maturity is typically longer than their contractual maturity, and therefore provide stable funding for the Barclays Bank
Group’s operations and liquidity needs.
◾
may be repaid earlier in line with terms and conditions of the contract.
◾
Risk review
Risk performance
Treasury and Capital risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 82
Contractual maturity of financial liabilities on an undiscounted basis
The following table 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 2020
Deposits at amortised cost
181,455
39,409
13,975
5,949
1,686
600
1,258
385
244,717
Cash collateral and settlement
balances
1,944
83,605
-
-
-
-
-
-
85,549
Repurchase agreements and
other similar secured borrowing
4
2,545
-
-
3,729
4,087
-
154
10,519
Debt securities in issue
-
12,226
3,818
5,629
2,799
2,923
2,098
277
29,770
Subordinated liabilities
-
3,716
3,342
703
8,845
6,555
6,922
6,500
36,583
Trading portfolio liabilities
46,139
-
-
-
-
-
-
-
46,139
Financial liabilities designated at
fair value
15,555
172,282
8,684
7,998
15,599
8,586
8,369
20,398
257,471
Derivative financial instruments
299,637
4
50
-
133
175
190
442
300,631
Other financial liabilities
70
2,076
19
39
313
113
227
86
2,943
Total financial liabilities
544,804
315,863
29,888
20,318
33,104
23,039
19,064
28,242
1,014,322
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
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.
Risk review
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Treasury and Capital risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 83
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
2020
Guarantees, letters of
credit and credit
insurance
6,462
86
37
68
8
18
14
47
40
25
6,805
Other commitments
received
92
-
-
-
-
-
-
-
-
-
92
Total off-balance sheet
commitments received
6,554
86
37
68
8
18
14
47
40
25
6,897
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
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
2020
Contingent liabilities
20,630
213
57
6
1
25
-
-
-
-
20,932
Documentary credits
and other short-term
trade related
transactions
1,084
1
1
-
-
-
-
-
-
-
1,086
Standby facilities, credit
lines and other
commitments
262,586
564
93
123
95
49
196
202
21
7
263,936
Total off-balance sheet
commitments given
284,300
778
151
129
96
74
196
202
21
7
285,954
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
Risk review
Risk performance
Treasury and Capital risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 84
Capital risk
All disclosures in this section (pages 84 to 87) 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 2020, due to be published on
18 February 2021 and which will be available at home.barclays/investor-relations/reports-and-events/annual-reports.
Under the withdrawal agreement between the UK and the EU, the 11 -month transition period expired at 11pm on 31 December 2020. Any
references to CRR as amended by CRR II mean, unless otherwise specified, CRR as amended by CRR II, as it forms part of UK law pursuant
to the European Union (Withdrawal) Act 2018 and subject to the temporary transitional powers (TTP) available to UK regulators to delay or
phase-in on-shoring changes to UK regulatory requirements arising at the end of the transition period until 31 March 2022, as at the applicable
reporting date. Throughout the TTP period, the Bank of England and PRA are expected to review the UK legislation framework and any
disclosures made by the Barclays Bank Group will be subject to any resulting guidance.
Following its stated intention to consult, on 12 February
2021 the PRA launched a consultation on certain items within the Basel standards that remain to be implemented in the UK as well as setting
out proposed new PRA CRR rules.
The following regulatory updates formed part of CRR as amended by CRR II prior to 31 December 2020 and subsequently form part of UK law
as defined above.
On 22 April 2020, the regulatory technical standards on prudent valuation were amended to include an increase to diversification factors applied
to certain additional valuation adjustments. The amendments temporarily reduced the additional value adjustment deduction (PVA) and were
applied until 31 December 2020 inclusive.
On 27 June 2020, CRR as amended by CRR II was further amended to accelerate specific CRR II measures and implement a new IFRS 9
transitional relief calculation. Previously due to be implemented in June 2021, the accelerated measures primarily relate to the CRR leverage
calculation to include additional settlement netting and limited changes to the calculation of RWAs.
The IFRS 9 transitional arrangements have been extended by two years and a new modified calculation has been introduced. 100% relief will
be applied to increases in Stage 1 and Stage 2 provisions from 1 January 2020 throughout 2020 and 2021; 75% in 2022; 50% in 2023; 25% in
2024 with no relief applied from 2025. The phasing out of transitional relief on the “day 1” impact of IFRS 9 as well as increases in Stage 1 and
Stage 2 provisions between 1 January 2018 and 31 December 2019 under the modified calculation remain unchanged and continue to be
subject to 70% transitional relief throughout 2020; 50% for 2021; 25% for 2022 and with no relief applied from 2023.
Capital ratios
a,b,c
As at 31 December
2020
2019
CET1
14.2%
13.9%
Tier 1 (T1)
18.1%
18.1%
Total regulatory capital
21.0%
22.1%
Capital resources (audited)
2020
2019
As at 31 December
£m
£m
CET1 capital
25,227
22,080
T1 capital
32,172
28,600
Total regulatory capital
37,493
34,955
Total risk weighted assets (RWAs) (unaudited)
178,156
158,393
Capital Requirements Regulation (CRR) leverage ratio
a,d,e
2020
2019
As at 31 December
£m
£m
CRR leverage ratio
3.9%
3.9%
T1 capital
32,172
28,600
CRR leverage exposure
826,371
731,715
Notes
a Capital, RWAs and leverage are calculated applying the transitional arrangements of the CRR as amended by CRR II. This includes IFRS 9 transitional arrangements and
the grandfathering of CRR and CRR II non -compliant capital instruments.
b The fully loaded CET1 ratio was 13.6%, with £24.1bn of CET1 capital and £177 .3 bn of RWAs, calculated without applying the transitional arrangements of the CRR as
amended by CRR II.
Risk review
Risk performance
Treasury and Capital risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 85
c The Barclays PLC CET1 ratio, as is relevant for assessing against the conversion trigger in Barclays Bank PLC 7.625% Contingent Capital Notes, was 15.1%. For this
calculation CET1 capital and RWAs are calculated applying the transitional arrangements under the CRR, as amended by CRR II, 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.
d Barclays Bank PLC solo -consolidated is not subject to the UK leverage framework and discloses the CRR Leverage ratio which had no binding requirement as at 31
December 2020. Had the UK leverage rules been applied, which provides a similar exclusion on qualifying claims on central banks as under CRR II, the 31 December 2020
leverage exposure would have reduced to £731.4bn and the leverage ratio would have increased to 4.3%. The exclusion for qualifying claims on central banks under CRR II
is subject to PRA approval for all UK banks and as at 31 December 2020 this approval had not been given.
e The Financial Policy Committee intends to review the UK leverage framework in 2021.
Foreign exchange risk (audited)
The 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.
The Barclays Bank Group’s 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
The 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 shareholders’ equity.
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 2020
USD
24,262
(4,512)
(764)
18,986
(5,918)
13,068
EUR
5,174
(278)
(3)
4,893
(286)
4,607
JPY
582
-
-
582
-
582
Other
1,596
(42)
(24)
1,530
-
1,530
Total
31,614
(4,832)
(791)
25,991
(6,204)
19,787
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
Economic hedges relate to exposures arising on foreign currency denominated preference share and AT1 instruments. These instruments
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 2020, total structural currency exposure net of hedging instruments increased by £4.6bn to £19.8bn (2019: £15.2bn). Foreign currency
net investments increased by £0.7bn to £31.6bn (2019: £30.9bn) driven predominantly by a £2.2bn increase in Euro offset by a £1.4bn
decrease in US dollars and £0.1bn decrease in other currencies. The hedges associated with these foreign currency investments decreased by
£3.6bn to £5.6bn (2019: £9.2bn).
Risk review
Risk performance
Treasury and Capital risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 86
0.7%
4.7%
12.2%
23.9%
31.1%
27.5%
0-10 Years
11-20 Years
21-30 Years
31-40 Years
41-50 Years
51 Years +
Pension risk review
The UK Retirement Fund (UKRF) represents approximately 97% (2019: 97%) 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. This
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 relate to interest rates and equities. The split of scheme assets is shown within Note 31 to the
financial statements. The fair value of the UKRF assets was £33.9bn as at 31 December 2020 (2019: £31.4bn).
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):
◾
◾
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
2020 that takes account of the future inflation indexing of payments to beneficiaries. The majority of the cash flows (approximately 95%) 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 valuation assumptions see Note 31
to the financial statements.
Proportion of liability cash flows
Risk review
Risk performance
Treasury and Capital risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 87
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 2020 the reduction in the IAS 19
position was driven by the net effect of bank contributions and a structured transaction agreed between the Barclays Bank Group and the
Trustee which deferred the regulatory capital impact of the contributions until 2023-2025. 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 the
discount rate methodology and demographic assumptions.
Refer to Note 31 to the financial statements for the sensitivity of the UKRF to changes in key assumptions and further information on the
structured transaction.
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 investments 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 Board Risk Committee, the Barclays Group Risk Committee, the Pensions Management
Group and the Pension Executive Board. The VaR model takes into account the valuation of the liabilities on an IAS 19 basis (see Note 31 to
the financial statements). The Trustee receives quarterly Va R measures on a funding basis.
The pension liability is also sensitive to post-retirement mortality assumptions which are reviewed regularly (see Note 31 to the financial
statements for more details). To mitigate part of this risk the UKRF has entered into a longevity swap hedging approximately a quarter of current
pensioner liabilities.
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 shareholders’ equity in two ways:
◾
IAS19 position due to remeasurements, including actuarial losses, are recognised immediately through Other Comprehensive Income and as
such impact shareholders’ equity.
◾
respectively.
Interest rate risk in the banking book
All disclosures in this section (pages 87 to 89) 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 Board Risk Committee as part of the limit monitoring
framework.
Risk review
Risk performance
Treasury and Capital risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 88
Summary of performance in the period
◾
cuts and growth in customer deposit balances through the year. The increase in margin compression exposure is partially mitigated by
hedging and potential margin decompression benefit on variable rate loans.
Key metrics
-£263m
AEaR across the Barclays Bank Group from a negative 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 recognise 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
(audited)
2020
2019
+25 basis
points
-25 basis
points
+25 basis
points
-25 basis
points
Barclays Bank Group
£m
£m
£m
£m
GBP
32
(169)
19
(34)
USD
47
(61)
29
(32)
EUR
9
(32)
(14)
(16)
Other currencies
(2)
(1)
(9)
8
Total
86
(263)
25
(74)
NII sensitivity asymmetry arises due to the current low interest rate levels as some customer products have embedded floors. NII sensitivity to a
-25bp shock to rates has increased year on year due to additional margin compression exposure driven by central bank rate cuts and growth in
customer deposit balances through the year. NII Sensitivity to a +25bps shock has increased year on year primarily driven by the growth in
customer deposit balances.
Analysis of equity sensitivity
The analysis of equity sensitivity table measures the overall impact of a +/- 25bps movement in interest rates on profit after tax, the FVOCI
reserve and the cash flow hedging reserve; encompassing pension obligations. 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.
Risk review
Risk performance
Treasury and Capital risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 89
Analysis of equity sensitivity (audited)
31 December 2020
31 December 2019
+25 basis
points
-25 basis
points
+25 basis
points
-25 basis
points
Barclays Bank Group
£m
£m
£m
£m
Net interest income
86
(263)
25
(74)
Taxation effects on the above
(21)
63
(6)
18
Effect on profit for the year
65
(200)
19
(56)
As percentage of net profit after tax
2.7%
(8.2%)
0.7%
(2.0%)
Effect on profit for the year (per above)
65
(200)
19
(56)
Fair value through other comprehensive income reserve
(417)
433
(295)
303
Cash flow hedging reserve
(554)
554
(497)
497
Taxation effects on the above
262
(266)
198
(200)
Effect on equity
(644)
521
(575)
544
As percentage of equity
(1.2%)
1.0%
(1.1%)
1.1%
Movements in the FVOCI reserve impact CET1 capital. However, movements in the pensions remeasurement reserve recognised in FVOCI
only affect CET1 capital if there is an IAS 19 pension deficit. Movements in the cash flow hedge reserve do not affect CET1 capital.
Volatility of the FVOCI portfolio in the liquidity pool
Changes in value of FVOCI exposures directly impact through capital via the FVOCI reserve. The volatility in the value of the FVOCI investments
in the liquidity pool is captured and managed through a value 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
2020
2019
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%)
47
59
31
42
49
34
Daily VaR trended upwards in H1 2020 due to an increase in time series volatility caused by the COVID-19 pandemic stress. Risk in the liquidity
pool was reduced at the start of Q320, which caused a downward trend in daily VaR, and daily VaR was stable in Q420.
Risk review
Risk performance
Operational risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 90
All disclosures in this section on pages 90 to 92 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 following risks: Data Management Risk; Financial Reporting Risk; Fraud Risk; Information
Security Risk, Operational Resilience Planning Risk, Payments Process Risk; People Risk; Physical Security Risk; Premises Risk; Supplier
Risk; Tax Risk; Technology Risk and Transaction Operations Risk. The operational risk profile is also informed by a number of risk themes:
Cyber; Data; and Resilience. These themes 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 refer to pages 121 to 122 of the Barclays PLC Pillar 3 Report 2020. In order to provide complete coverage of the
potential adverse impacts on the Barclays Bank Group arising from operational risk, the operational risk taxonomy extends 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 threshold, which have had a financial impact in 2020. 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, Transacti on Operations, Information Security and Technology continue to be highlighted as key operational risk exposures.
For information on conduct risk events, see the conduct risk section.
Summary of performance in the period
During 2020, total operational risk losses
a
from 1,044 events recorded during the prior year. The total operational risk losses for the year were mainly driven by events falling within the
Execution, Delivery & Process Management category, which tend to be high volume but low impact events.
Key metrics
70%
of the Barclays Bank Group’s net reportable operational risk events had a loss value of £50,000 or less
56%
of events by number are due to Execution, Delivery and Process Management
86%
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 value risk events. In 2020, 70% (2019: 79%) 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
11% (2019: 12%) of the Barclays Bank Group’s total net operational risk losses. A small proportion 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:
Risk review
Risk performance
Operational risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 91
Note
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, data for prior year losses are updated.
◾
higher proportion, 86% of total operational risk losses (2019: 69%). 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 in 2020 to 56% of total events by volume (2019: 41%).
◾
526 in the previous 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 dropped to 8% of total 2020 losses (2019: 21%).
◾
to £6m (2019: £11m) and volume of events fell down to 39 (2019: 76).
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 fraud 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 and has been a key area of focus for the Barclays Bank Group. The COVID-19 pandemic is the most severe global
health emergency the World Health Organization (WHO) has ever declared. Whilst overall the Barclays Bank Group proved to be resilient, the
COVID-19 pandemic has caused disruption to the Barclays Bank Group’s customers, suppliers, and staff globally. The COVID-19 pandemic has
reinforced our continued focus on resilience risk.
Due to the COVID-19 pandemic, the Barclays Bank Group experienced operational disruptions primarily during the Barclays Bank Group’s and
its suppliers’ transition to a Work -from-Home environment and in response to high market volatility. Further, the prolonged nature of the event
identified the need to enhance our resilience planning programme to improve our response to similar events with an extreme and prolonged
impact. Despite these issues, the early activation of our Crisis Leadership Team facilitated swift and decisive actions to limit and manage the
impacts which resulted in normal risk exposures as reported above. For additional information on the risk exposure due to the COVID-19
pandemic, see the operational risk management section.
Likewise, operational risk associated with cyber-security remains a top focus for the Barclays Bank Group. The sophistication of threat actors
continues to grow as noted by multiple external risk events observed throughout the year. Multiple ransomware attacks across the global
Barclays supplier base were observed and we worked closely with the affected suppliers to manage potential impacts to the Barclays Bank
Risk review
Risk performance
Operational risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 92
Group and its clients and customers. The Barclays Bank Group’s cyber-security events were managed within its risk tolerances and there were
limited to no loss events associated with cyber-security recorded within the event categories above. For additional information on the Barclays
Bank Group’s cyber-security risk exposure, see the operational risk management section.
For further information, refer to the operational risk management section.
Risk review
Risk performance
Model risk, Conduct risk, Reputation risk, Legal risk
Barclays Bank PLC 2020 Annual Report on Form 20 -F 93
All disclosures in these model risk, conduct risk, reputation risk and
legal risk sections on page 93 are unaudited unless otherwise
stated.
Model risk
Since the inception of model risk as a principal risk, key
achievements to date include creating a Barclays Group-wide
model inventory, design and roll out of a robust Model Risk
Management (MRM) framework and the validation of high
materiality models. In 2020 the framework and governance of
model risk was further improved by:
◾
infrastructure by moving onto a new strategic technology
platform, which will enable future enhancements and
automation of controls;
◾
achieve 95% target for models under governance; and
◾
establishment of dedicated MRM forums which bring
together model developers, model owners and model
validators.
In 2021 MRM will continue to focus on the validation of low
materiality models, further embedding of validation and
governance activities and on expanding the coverage of the MRM
framework to new model types.
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,
governance and management information in decision-making
processes. Focus on management of conduct risk is ongoing and,
alongside other relevant business and control management
information, the Barclays Bank Group Conduct Risk Dashboards are
a key component of this.
The Barclays Bank Group continues to review the role and impact of
conduct risk events and issues in remuneration decisions at both the
individual and business level.
During 2020, the COVID-19 pandemic created new risks and
heightened existing ones. To date, the Barclays Bank Group has
focused on managing the heightened inherent conduct risks and
continues to monitor these as the pandemic continues.
Businesses have continued to assess the potential customer, client
and market impacts of strategic change. As part of the 2020
Medium-Term Planning Process and associated Strategic Risk
Assessment, material conduct risks associated with strategic and
financial plans were assessed.
Throughout 2020, conduct risks were raised by each business area
for consideration by the Barclays PLC and Barclays Bank PLC
Board Risk Committees. The Committees reviewed the risks raised
and whether management’s proposed actions were appropriate to
mitigate the risks effectively.
The Barclays Bank Group continued to incur costs in relation to
litigation and conduct matters, please refer to Note 25 to the financial
statements (Legal, competition and regulatory matters) and Note 23
to the financial statements (Provisions), for further details. Related
costs include customer redress and remediation, as well as fines and
settlements. Resolution of these litigation and conduct matters
remains a necessary and important part of delivering the Barclays
Bank Group’s strategy and an ongoing commitment to improve
oversight of culture and conduct.
The Barclays Bank PLC Board Risk Committee and senior
management received Conduct Risk Dashboards setting out key
indicators in relation to Conduct, Financial Crime, Culture and
Complaints. These continue to be evolved and enhanced to allow
effective oversight and decision-making. The Barclays Bank Group
has operated at the overall set tolerance for conduct risk throughout
2020. The tolerance adherence is assessed by the business through
key indicators which are aggregated to provide an overall risk profile
rating and reported to the Barclays Bank PLC Board Risk Committee
as part of the Conduct Risk Dashboard.
The Barclays Bank Group remains focused on continuous
improvements being made to manage risk effectively with an
emphasis on enhancing governance and management information
to identify risk at earlier stages.
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 management 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.
The Barclays Bank Group continued to incur costs in relation to
litigation and conduct matters, please refer to Note 25 to the financial
statements (Legal, competition and regulatory matters) and Note 23
to the financial statements (Provisions), for further details. Related
costs include customer redress and remediation, as well as fines and
settlements.
Resolution of these litigation and conduct matters is an
ongoing commitment to improve oversight of culture and conduct
and management of reputation risks arising.
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
Summary of performance in the period
The Barclays Bank Group remains committed to continuous
improvements to manage legal risk effectively. A number of
enhancements have been implemented during 2020, including a
refresh of the Barclays Group-wide legal risk management
framework and a review and update of the supporting legal risk
policies, legal risk tolerances and risk appetite. Legal risk reporting
has been enhanced both in terms of format and content. There has
also been a re-write of the Barclays Group-wide legal risk
mandatory training, reinforced by ongoing engagement with and
education of the Barclays Group’s businesses and functions by
Legal Function colleagues.
Throughout 2020, the Barclays Bank Group has operated within
set tolerances for legal risk. Tolerance adherence is assessed
through key indicators, which are also used to evaluate the legal
risk profile and are reviewed, at least annually, through the
relevant risk and control committees. Minimum mandatory controls
to manage legal risks are set out in the legal risk standards and
are subject to ongoing monitoring.
Risk review
Supervision and regulation
Barclays Bank PLC 2020 Annual Report on Form 20 -F 94
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 certain activities, conduct of business regulations and many
others.
Regulatory developments impact the Barclays Bank Group globally. We focus particularly on UK, US and EU 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 Barclays Bank Group, including regulatory change, see the material existing and emerging risk entitled ‘Regulatory Change
agenda and impact on Business Model’ in the Material existing and emerging risks section.
Supervision in the UK
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 prudential supervision by the PRA 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 Execution Services Limited is an appointed representative of Barclays Bank PLC, Barclays Bank UK PLC and
Clydesdale Financial Services Limited.
The Barclays 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 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 and directors to discuss issues such as strategy, governance, financial resilience, operational resilience, risk management, and
recovery and resolution.
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’s supervision of the UK firms in the Barclays 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.
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.
FCA supervision has focused on conduct risk and customer/client outcomes, including product design, customer behaviour, market operations,
LIBOR transition, fair pricing, affordability, access to cash, and fair treatment of vulnerable customers.
PRA supervision has focused on capital management, credit risk management, Board effectiveness, operational resilience and resolvability.
Both the PRA and the FCA have assessed the impact of COVID-19 and Brexit on UK financial markets and customers.
Supervision in the EU
The Barclays Bank Group’s operations in Europe are authorised and regulated by a combination of its home regulators and host regulators in
the European countries where the Barclays Bank Group operates.
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) for prudential purposes. 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. Barclays Bank Ireland PLC is also subject to supervision by the CBI as home state or competent
authority under various EU financial services directives and regulations.
Brexit
The EU-UK Trade and Cooperation Agreement (TCA), which provides a new economic and social partnership between the EU and UK, came
into force provisionally on 1 January 2021. The TCA does not cover the provision of financial services into the EU and there is no agreement on
passporting, equivalence or regulatory cooperation. Therefore, UK-based entities within the Barclays Group (such as Barclays Bank PLC and
Barclays Bank UK PLC) are no longer able to rely on the EU passporting framework for the provision of financial services to EU clients.
Accordingly, Barclays Bank PLC and Barclays Capital Securities Limited have put in place new arrangements in the provision of cross-border
banking and investment services to customers and counterparties in the EEA, including by servicing EEA clients through the Barclays Group’s
EEA hub (Barclays Bank Ireland PLC).
The EU and the UK have agreed to establish structured regulatory cooperation on financial services, with the aim of establishing a durable and
stable relationship, based on a shared commitment to preserve financial stability, market integrity, and the protection of investors and
consumers. The EU and the UK have committed to agreeing a Memorandum of Understanding setting out a “framework” for regulatory
cooperation in financial services by March 2021. We anticipate that consideration will be given to equivalence determinations as part of the
discussions.
Mutual equivalence decisions between the UK and EU relating to market access would allow UK-based entities within the Barclays Group to
offer a restricted number of financial products and services to customers and clients based in the EEA, including permanent access to EU
Risk review
Supervision and regulation
Barclays Bank PLC 2020 Annual Report on Form 20 -F 95
trading venues as well as allowing EEA based clients to access some UK originated products and services, including permanent access to UK
trading venues. However, the EU equivalence regime is very different to benefiting from passporting rights; the equivalence regimes that
facilitate access to customers and clients based in the EEA under EU law differ significantly in their scope, operation and impact. Equivalence
decisions do not cover services to retail customers, for example. Under the current framework, equivalence decisions can be revoked at any
time. To date, the EU and UK have only agreed a temporary position on mutual equivalence in relation to clearing and settlement (CCPs). In
addition, HM Treasury has made certain unilateral equivalence decisions, including under the Capital Requirements Regulation (CRR) and
European Market Infrastructure Regulation (EMIR).
‘Onshoring’ was the process of amending EU legislation and regulatory requirements in the UK so that they work in a UK-only context, including
directly applicable EU legislation such as EU regulations and decisions that form part of UK law by virtue of the European Union (Withdrawal)
Act 2018, now that the Brexit transition period has ended.
The onshoring process means that there are some areas where the requirements on UK firms and other regulated persons have changed. To
help UK firms adapt to their new requirements, HM Treasury gave UK financial regulators the power to make transitional provisions to financial
services legislation for a temporary period. This is known as the Temporary Transitional Power (TTP).
The FCA has applied the TTP on a broad basis from the end of the transition period until 31 March 2022. This means UK firms and other
regulated persons do not generally need to adjust to the changes to their UK regulatory obligations brought about by onshoring straight away,
although there are some exceptions to this and obligations which have changed and which took effect from 1 January 2021 include reporting
obligations under various EU financial services directives and regulations, certain requirements under the Market Abuse Regulation, issuer
rules, contractual recognition of bail-in, securitisation, use of credit ratings, mortgage lending after the transition period against land in the EEA,
payments services and certain other matters.
On 31 December, the FCA published a statement on its use of the TTP to modify the UK’s derivatives trading obligation (the UK DTO). Without
mutual equivalence, some firms and EEA clients will be caught by a conflict of law between the EU DTO and the UK DTO. The FCA is therefore
using the TTP to modify the application of the UK DTO. Where firms that are subject to the UK DTO trade with, or on behalf of, EU clients that
are subject to the EU DTO, they will be able to transact or execute those trades on EU venues providing that: (i) firms take reasonable steps to
be satisfied the client does not have arrangements in place to execute the trade on a trading venue to which both the UK and EU have granted
equivalence (for example, a US venue such as a swap execution facility); and (ii) the EU venue has the necessary regulatory status to do
business in the UK (such venues include those that are a Recognised Overseas Investment Exchange, have been granted the relevant
temporary permission, or are certain that they benefit from the Overseas Person Exclusion). This modification of the application of the UK DTO
applies to UK firms, EU firms using the UK’s temporary permissions regime, and branches of overseas firms in the UK. Transactions concluded
by an EEA UCITS fund or an EEA AIF are currently outside the scope of the UK DTO. The relief under the TTP does not apply to trades with
non-EU clients, proprietary trading conducted, for example, to hedge a firm’s own risk exposure, and trades between UK branches of EU firms.
These trades remain subject to the UK DTO and firms are required to take reasonable steps to ensure compliance during Q1 2021. The FCA
will consider by 31 March 2021 whether market or regulatory developments warrant a review of its approach.
On 28 December 2020, the PRA published a policy statement (PS30/20) on changes to its rules, as well as the use of temporary transitional
directions. The PRA’s transitional direction and the majority of the provisions in the rulebook instrument came into force at the end of the
transition period on 31 December 2020. The transitional direction delays onshoring changes that fall within the PRA's remit. The PRA TTP will
apply until 31 March 2022, unless otherwise stated in the direction or it is varied or revoked before then.
As a result of the onshoring of EU legislation in the UK and the exercise of the TTPs, UK firms in the Barclays Group are currently subject to
substantially the same rules and regulations as before Brexit. The UK intends to recast onshored EU legislation into PRA and FCA rules and to
complete UK implementation of the remaining Basel III reforms. The regulatory regimes for EU and UK financial services may change further,
and temporary permissions and equivalence decisions may expire, and not be replaced, which would result in further adjustments to the UK
regulatory landscape.
Supervision in the US
Barclays PLC, Barclays Bank PLC and its New York branch, and Barclays Bank PLC’s US subsidiaries are subject to a comprehensive
regulatory framework involving numerous statutes, rules and regulations in the US. For example, the Barclays Bank Group’s US activities and
operations are subject to supervision and regulation 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). 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, Barclays US Holdings Limited (BUSHL), Barclays US LLC (BUSL) and Barclays Group US Inc. (BGUS) 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). BUSL 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 PLC’s New York branch is also subject to enhanced
prudential standards relating to, among other things, liquidity and risk management.
Barclays PLC, Barclays Bank PLC, BUSHL and BUSL have elected to be treated as financial holding companies (FHCs) under 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 oversight by the FRB, Barclays Bank PLC’s New York branch and many of the Barclays Bank Group’s subsidiaries are regulated
by additional authorities based on the location or activities of those entities. The New York branch of Barclays Bank PLC is subject to
supervision and regulation by the New York State Department of Financial Services (NYSDFS). Barclays Bank Delaware, a Delaware chartered
bank, is subject to supervision and regulation by the Delaware Office of the State Bank Commissioner, the Federal Deposit Insurance
Corporation (FDIC), the Federal Reserve Bank of New York and the Consumer Financial Protection Bureau (CFPB). The deposits of Barclays
Bank Delaware are insured by the FDIC. Barclays PLC, Barclays Bank PLC, BUSHL, BUSL, and BGUS are required to act as a source of
strength for 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.
Risk review
Supervision and regulation
Barclays Bank PLC 2020 Annual Report on Form 20 -F 96
The Barclays Bank Group’s US securities broker/dealer and investment banking operations, are conducted primarily through Barclays Capital
Inc., and 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 futures, options and swaps-related activities, including 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.
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), as amended by CRR II and CRD V. Under the terms of the EU-UK Withdrawal Agreement of 24 January 2020, Barclays
Bank PLC plus certain additional subsidiaries remained subject to the EU regulatory framework until the end of the transition period on 31
December 2020. Beyond the minimum standards required by CRR, 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 2020, 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. In March 2020, the FPC cut the UK CCyB rate to 0% with immediate effect in order to support the supply of credit
expected as a result of the COVID-19 pandemic.
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 cover 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 must be met fully with CET1 capital.
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.
BUSL is a “Category III” IHC. BUSL (and Barclays Bank Delaware) is therefore subject to reduced (calibrated at 85%) standardised liquidity
requirements, including the liquidity coverage ratio, which has been implemented by the US regulatory agencies, and the NSFR, which will
become effective on 1 July 2021.
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 separate 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, 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 home country regulation.
Barclays Bank PLC is not required to comply with the CUSO requirement until 1 July 2021.
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.
Recovery and Resolution
Stabilisation and resolution framework
The UK framework for recovery and resolution was established by the Banking Act 2009, as amended. The EU framework was established by
the 2014 Bank Recovery and Resolution Directive (BRRD), as amended by BRRD II.
The BoE, as the UK resolution authority, has the power to resolve a UK financial institution that is failing or likely to fail by exercising several
stabilisation options, including transferring such institution’s business or securities to a commercial purchaser or a ‘bridge bank’ owned by the
BoE or transferring the 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 priority 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). HM Treasury may
also amend the law for the purpose of enabling it to use its powers under this regime effectively, potentially with retrospective effect.
Risk review
Supervision and regulation
Barclays Bank PLC 2020 Annual Report on Form 20 -F 97
In addition, the BoE has the power to permanently write-down, or convert into equity, tier 1 capital instruments, tier 2 capital instruments and
internal eligible liabilities at the point of non-viability of the bank.
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 capital instruments and 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 under CRD IV and otherwise
respecting the hierarchy of claims in an ordinary insolvency. Accordingly, the more subordinated the claim, the more likely losses will be
suffered by owners of the claim.
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 enhance 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. Firms are required to develop capabilities by 1 January
2022 covering three resolvability outcomes: (i) adequate financial resources; (ii) being able to continue to do business through resolution and
restructuring; and (iii) being able to communicate and co-ordinate within the firm and with authorities. The first self-assessment report on these
capabilities is expected to be submitted to the PRA/BoE by October 2021 with public disclosures by both firms and the PRA/BoE in June 2022
(and every two years thereafter).
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.
In the US, BUSL is subject to the Orderly Liquidation Authority established by Title II of the Dodd-Frank Act (DFA), 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
addition, the licensing authorities of Barclays Bank PLC New York branch 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 a “targeted plan” due on 17 December 2021.
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 Ireland 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 develop a resolution plan for Barclays Bank Ireland PLC.
TLAC and MREL
The Barclays Group is subject to a Minimum Requirement for own funds and Eligible Liabilities (MREL), which includes a component reflecting
the FSB’s standards on total loss absorbency capacity (TLAC).
The MREL requirements will be fully implemented by 1 January 2022, at which time G-SIBs with resolution entities incorporated in the UK will
be required 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. Internal MREL for operating subsidiaries is subject to a scalar in the 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 is 90% for ring-
fenced bank sub-groups.
Barclays Bank Ireland PLC is subject to the SRB’s MREL policy, as issued in May 2020, in respect of the internal MREL that it will be required to
issue to Barclays Bank Group. The SRB’s current calibration of internal MREL for non-resolution entities is expressed as two ratios that have to
be met in parallel: (a) two times the sum of: (i) the firm’s Pillar 1 requirement; (ii) its Pillar 2 requirement; and (b) two times the leverage ratio.
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 non-resolution entity, from issuing TLAC to entities other than those within the Barclays Group.
Bank Levy and FSCS
The BRRD established a requirement for EU member states to set up 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 on
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 authorised financial services firms.
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. 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 permitted to undertake a range of activities.
Risk review
Supervision and regulation
Barclays Bank PLC 2020 Annual Report on Form 20 -F 98
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).
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 risks 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-trade information.
The European Market Infrastructure Regulation (EMIR) has introduced requirements designed to improve transparency and reduce the risks
associated with the derivatives market. EMIR has potential operational and financial impacts on the Barclays Group, including by imposing new
collateral requirements. Over the coming months alterations to the existing derivative margin rules are expected to be finalised.
The Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation (collectively referred to as MiFID II) have
affected many of the 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, including as part of the EU’s ongoing focus on the
development of a stronger Capital Markets Union.
The EU Regulation on Sustainability-Related Disclosures introduces disclosure obligations requiring financial institutions to explain how they
integrate environmental, social and governance factors in their investment decisions for certain financial products. In addition, the EU Taxonomy
Regulation provides for a general framework for the development of an EU-wide classification system for environmentally sustainable economic
activities. Finally, the UK and EU regulators are consulting on, amongst other things, proposals for regulatory measures to enhance climate and
environmental disclosures and climate risk assessments, which will have an impact on the Barclays Bank Group’s existing practices in these
areas.
The EU Benchmarks Regulation applies to the administration, contribution 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 (or 31 December 2022 under the UK onshored Benchmarks Regulation). Amendments to
extend these provisions are underway for both the EU and UK Benchmarks Regulations. The FCA has stated that it does not intend to support
LIBOR after the end of 2021. International initiatives in conjunction with global regulators are therefore underway to develop alternative
benchmarks and risk-free rate fallback arrangements, including updates to existing, as well as new, applicable legislation.
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 have finalised certain aspects of 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 November 2020, the CFTC extended temporary relief that would permit trading venues and market participants located in the UK
to continue to rely on this mutual recognition framework following the 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, beginning
in November 2021, with the SEC as ‘security-based swap dealers’ or ‘major security-based swap participants’. Such registrants are subject to
CFTC, and will be subject to SEC, regulation and oversight. Entities required to register as swap dealers are subject to business conduct,
record-keeping and reporting requirements under CFTC rules. Barclays Bank PLC is subject to regulation by the FRB, and has provisionally
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 determinations 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 dealer and a non-US counterparty, whereas entity-level determinations generally apply on an entity-wide
basis regardless of counterparty status. In November 2020, the CFTC extended temporary relief that would permit swap dealers located in the
UK to continue to rely 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 rules 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 July 2020 the CFTC adopted rules that, for certain CFTC requirements, codify on a permanent basis, the
temporary no-action relief for transactions that are arranged, negotiated or executed in the US. The final rules 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 rules addressing the application of the cross-border framework to 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 has finalised the rules governing security based swap dealer registration in 2015, and registration of security-based swap dealers, as
well as compliance with applicable security based swap dealer requirements, is expected to begin in November 2021.
It is anticipated that Barclays Bank PLC and/or one or more of its affiliates will be required to register as a security-based swap dealer and will
be required to comply with the SEC’s rules for security-based swap dealers. These rules may impose costs and other requirements or
restrictions that could impact our business. As with similar CFTC rules, it is expected that substituted compliance will be available for certain
security-based swap dealer requirements; however, the SEC is currently considering applications for substituted compliance but has only issued
a final comparability determination for Germany, and the ultimate scope and applicability of other determinations, including in respect of the UK,
remains unclear.
Risk review
Supervision and regulation
Barclays Bank PLC 2020 Annual Report on Form 20 -F 99
Other regulation
Culture
Our regulators have enhanced their focus on the promotion of cultural values as a key area for banks, although they generally view the
responsibility for reforming culture as primarily sitting with the industry.
Data protection and PSD2
Most countries where Barclays Group operates have comprehensive laws requiring openness and transparency about the collection and use of
personal information, and protection against loss and unauthorised or improper access. The EU’s General Data Protection Regulation (GDPR)
created a broadly harmonised privacy regime across EU member states, introducing mandatory breach notification, enhanced individual rights,
a need to openly demonstrate compliance, and significant penalties for breaches. The extraterritorial effect of the GDPR means entities
established outside the EU may fall within the Regulation’s ambit when offering goods or services to European based customers or clients.
Following the UK’s withdrawal from the EU, the UK continues to apply the GDPR framework (as onshored into UK law and hence now referred
to as the ‘UK GDPR’ - this sits alongside an amended version of the UK Data Protection Act 2018). Two years after its introduction the GDPR
has become the global touchstone as countries around the world either usher in or contemplate similar data privacy laws, or align their existing
legislation. During 2020 new privacy laws have been passed in Switzerland, took effect in Brazil and Dubai, and were proposed in India and
China.
In the US, Barclays US Consumer Bank is subject to the US Federal Gramm-Leach-Bliley Act (GLBA) and the California Consumer Privacy Act
of 2018, which came into effect on 1 January 2020 (CCPA). The GLBA limits the use and disclosure of non-public personal information to non-
affiliated third parties and requires financial institutions to provide written notice of their privacy policies and practices. Any violations of the
GLBA could subject the US Consumer Bank to additional reporting requirements or regulatory investigation or audits by the financial regulators.
The CCPA only applies to personal information that is not collected, processed, sold or disclosed pursuant to the GLBA, and it requires the US
Consumer Bank to provide California consumers with additional disclosures regarding the collection, use and sharing of personal information,
and grants California consumers access, deletion, and other rights with respect to their personal information. The CCPA subjects the US
Consumer Bank to enforcement penalties by the Attorney General of the State of California, and grants a private right of action with respect to
certain data breaches.
From 14 September 2019, new rules apply under the revised Payment Services Directive (PSD2) that affect the way banks and other payment
services providers check that the person requesting access to an account or trying to make a payment is permitted to do so. This is referred to
as strong customer authentication (SCA). In April 2020, the FCA provided an additional six months (to 14 September 2021) for the industry to
implement SCA for e-commerce.
Cyber security and operational resilience
Regulators in the UK, the EU and the US continue to focus on cyber security risk management, 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 is evidenced by the publication of a number of proposed laws and changes to regulatory frameworks. For example, the UK regulators
published for consultation a new framework for operational resilience that focuses on the identification of important business services, setting
impact tolerances for them, and then testing against them. The European Commission has proposed legislation on cyber security and
operational resilience for the financial services sector, including oversight of third party service providers. The regulatory focus has been further
heightened by the COVID-19 pandemic. The existing and anticipated requirements for increased controls will serve to improve industry
standardisation and resilience capabilities, enhancing our ability to deliver services during periods of potential disruption. However, 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 bribery 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 extraterritorial impact on entities, persons or
activities located outside the UK, including Barclays PLC’s subsidiaries outside the UK. The UK Bribery Act requires the Barclays Bank Group to
have adequate procedures to prevent bribery which, due to the extraterritorial 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. On 6 July 2020, the UK Government announced the first sanctions that
have been implemented independently by the UK outside the auspices of the UN and EU. The autonomous UK sanctions regime came into
force on 1 January 2021. Those sanctions apply within the UK and in relation to the conduct of all UK persons wherever they are in the world;
they also apply to overseas branches of UK companies.
In the US, the Bank Secrecy Act, the USA PATRIOT Act 2001, the Anti-Money Laundering Act of 2020 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 Practices Act, which prohibits, among other things, corrupt payments to foreign government officials. It is also
subject to various economic sanctions laws, regulations and executive orders administered by the US government, which prohibit or restrict
some or all business activities and other dealings with or involving 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 or undertaken outside the US, including Barclays PLC and its subsidiaries. US government authorities have
aggressively enforced these laws against financial institutions in recent years. Failure of a financial institution to ensure compliance with such
laws could have serious legal, financial and reputational consequences for the institution.
Financial statements
Contents
Barclays Bank PLC 2020 Annual Report on Form 20 -F 100
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
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101
n/a
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105
n/a
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106
n/a
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107
n/a
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108
n/a
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110
n/a
Notes to the financial statements
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112
1
Performance/return
◾
116
2
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117
3
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118
4
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120
5
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121
6
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121
7
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125
8
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125
9
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128
10
Assets and liabilities held at fair
value
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130
11
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130
12
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131
13
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139
14
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140
15
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140
16
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151
17
Assets at amortised cost and other
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153
18
investments
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153
19
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154
20
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156
21
Accruals, provisions, contingent
◾
160
22
liabilities and legal proceedings
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160
23
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160
24
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161
25
Capital instruments, equity and
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166
26
reserves
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169
27
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171
28
Employee benefits
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173
29
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173
30
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175
31
Scope of consolidation
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181
32
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182
33
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185
34
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185
35
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186
36
Other disclosure matters
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189
37
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191
38
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192
39
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193
40
Report of Independent Registered Public Accounting Firm
Barclays Bank PLC 2020 Annual Report on Form 20 -F 101
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 Company) as of December 31,
2020 and 2019, the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of
changes in equity, and consolidated cash flows statements for each of the years in the three-year period ended December 31, 2020 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 Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each
of the years in the three-year period ended December 31, 2020, in conformity with International Financial Reporting Standards, as issued by the
International Accounting Standards Board.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility 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 with respect to the Company 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
Company 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 Company’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 used 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.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that
were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to
the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matters below, providing separate opinions on the critical audit m atters or on the accounts or disclosures to
which they relate.
Impairment allowance for loans and advances at amortized cost, including off-balance sheet elements of the allowance
As discussed in the credit risk disclosures on pages 47 to 75, the Company’s impairment allowance for loans and advances, including off-
balance sheet elements at amortized cost was £5.8bn as at 31 December 2020.
We identified the assessment of impairment allowance for loans and advances at amortized cost, including off -balance sheet elements as a
critical audit matter. A high degree of audit effort, including specialized skills and knowledge, was required because it involved significant
measurement uncertainty. Specifically, complex and subjective auditor judgement was required to assess the following:
◾
Credit Losses (“ECL”) due to the inherently judgmental nature of the underlying models, namely the IFRS 9 Probability of Default (“PD”), the
Loss Given Default (“LGD”), the Probability of Survival (“PS”) and the Exposure at Default (“EAD”). The IFRS 9 PD and revolving PS models
Report of Independent Registered Public Accounting Firm
Barclays Bank PLC 2020 Annual Report on Form 20 -F 102
are the key drivers of complexity in the Company’s calculation of impairment allowance for loans and advances at amortized cost, including
off -balance sheet elements, and also impact the staging of assets;
◾
the Company and the probability weightings applied to them, especially when considering the uncertain economic environment; and,
◾
balance sheet elements are raised by the Company to address known model limitations or emerging trends as well as risks not captured by
models. These adjustments represent approximately 16.0% of the impairment allowance for loans and advances at amortized cost,
including off-balance sheet elements. Complex and subjective auditor judgement was applied in assessing qualitative adjustments to the
model-driven impairment allowance due to the inherent estimation uncertainty associated with these adjustments, especially in relation to
adjustments introduced to respond to the impact of economic uncertainty.
In addition, auditor judgement was required to evaluate the sufficiency of audit evidence obtained.
The following are the primary procedures we performed to address this critical audit matter.
◾
impairment allowance for loans and advances at amortized cost, including off -balance sheet elements. This included controls relating to the
(1) application of the staging criteria, (2) model validation, implementation and monitoring, (3) authorization and calculation of qualitative
adjustments and management overlays, and (4) selection and implementation of economic variables and the controls over the economic
scenario selection and probabilities.
◾
o
o
assess its consistency with the Company’s approved staging criteria and the output of the model;
o
model code) were appropriate by assessing the updated model methodology against the applicable accounting standard;
o
evaluating the model output for a selection of models by inspecting the corresponding model functionality and independently
implementing the model by rebuilding the model code and comparing our independent output with management’s output; and
o
results and evaluating the resulting differences.
◾
o
weightings applied to them;
o
o
and
o
calculation based on external sources.
We evaluated the collective results of the procedures performed to assess the sufficiency of the audit evidence obtained related to the
Company’s impairment allowance for loans and advances at amortized cost, including off-balance sheet elements of the allowance.
Valuation of certain difficult-to-value financial instruments recorded at fair value
As discussed in Note 16 to the Company’s consolidated financial statements, the balance of financial assets and liabilities recorded at fair value
as at December 31, 2020 was £654.0bn and £596.3bn, respectively. Of these amounts, Level 3 assets (£10.9bn) and liabilities (£6.6bn)
represented 1.7% of the Company’s financial assets carried at fair value and 1.1% of the Company’s financial liabilities carried at fair value. The
Report of Independent Registered Public Accounting Firm
Barclays Bank PLC 2020 Annual Report on Form 20 -F 103
Company has Level 2 financial assets at fair value of £556.8bn and financial liabilities at fair value of £557.5bn. Included in these amounts are
certain difficult-to-value fair value financial instruments for which the Company is required to apply valuation techniques which often involve the
exercise of significant judgment and the use of assumptions and valuation models.
We identified the valuation of certain difficult -to-value financial instruments recorded at fair value as a critical audit matter. This is because there
was significant measurement uncertainty associated with the fair value estimates of these instruments and subjective auditor judgment was
required to evaluate pricing data inputs, valuation models and fair value adjustments (“FVA”), including portfolio-level FVAs related to credit and
funding (commonly referred to as “XVAs”).
The following are the primary procedures we performed to address this critical audit matter:
◾
value of these portfolios. This included controls related to (1) the independent price verification (‘IPV’) of certain market pricing data inputs,
(2) the determination or calculation of FVAs, including exit adjustments (to mark the portfolio to bid or offer prices), model shortcoming
reserves to address model limitations and XVAs and (3) the validation, implementation and usage of valuation models including assessment
of the impact of model limitations and assumptions;
◾
significant fair value differences were observable through comparison with the market participant’s valuation on the other side of the trade;
◾
that are subject to collateral disputes, developed an independent estimate of fair value for those trades based on external datasets;
◾
restructurings and evaluated whether these data points indicated elements of fair value not incorporated in the current valuation
methodologies;
◾
accounting standards;
◾
o
calculating FVAs; and
o
their valuations were outside our tolerance.
Valuation of the defined benefit pension obligation and certain difficult-to-value pension assets in respect of UK Retirement Fund
(‘UKRF’)
As discussed in Note 31 to the consolidated financial statements, the Company operates defined benefit pension plans and the majority of the
balance relates to the UKRF. The total fair value of the defined benefit pension obligation and the associated assets offsetting these obligations
as of 31 December 2020 was £33.2bn and £34.7bn, respectively. Of these amounts, £32.1bn of the obligation and £33.9bn of the asset related
to UKRF. The determination of the Company’s defined benefit pension asset with respect to these plans is dependent on the selection of certain
actuarial assumptions, including the discount rate used. In addition,
the UKRF is invested in a diverse portfolio which includes certain difficult-to-
value pension plan assets, including property and private equity investments.
We identified the valuation of the defined benefit pension obligation in respect of UKRF as a critical audit matter. Subjective and complex auditor
judgement, including specialized skills and knowledge, was required in evaluating the discount rates, retail price index (‘RPI’) volatility impact on
pension increases and mortality assumptions used, as well as the methodology used by Company to determine these assumptions, as small
changes would have a significant impact on the measurement of the defined benefit pension obligation. In addition, specialized skills and
knowledge were required in assessing the valuation of certain difficult-to-value pension plan assets, specifically property and private equity
investments, due to the subjective nature of judgements required of management and the measurement uncertainty associated with the use of
lagged prices.
The following are the primary procedures we performed to address this critical audit matter.
Report of Independent Registered Public Accounting Firm
Barclays Bank PLC 2020 Annual Report on Form 20 -F 104
◾
obligation process. This included controls related to (1) management’s review of IAS19 assumptions including discount rate, RPI volatility
impact on pension increases and mortality assumptions as well as the methodology used, (2) investment controls including over property
valuation and (3) private equity retrospective review controls.
◾
used, as well as the following for the discount rate, pension increases, and mortality rates used by the Company:
o
actuarial methods; and
o
◾
o
o
of specific properties within the portfolio on the basis of equivalent yields observed in the applicable property market.
◾
of the net asset value (‘NAV’) to the NAVs audited by third parties to assess the Company’s ability to accurately estimate fair value.
◾
independent estimate of market movement based on the Company’s specific portfolio and its associated market exposure and equivalent
indices.
We have served as the Company’s auditor since 2017.
London, United Kingdom
February 17, 2021
Consolidated financial statements
Consolidated income statement
Barclays Bank PLC 2020 Annual Report on Form 20 -F 105
2020
2019
2018
For the year ended 31 December
Notes
£m
£m
£m
Continuing operations
Interest and similar income
3
6,006
8,085
7,459
Interest and similar expense
3
(2,846)
(4,178)
(4,329)
Net interest income
3,160
3,907
3,130
Fee and commission income
4
7,417
7,664
7,392
Fee and commission expense
4
(1,758)
(1,992)
(1,785)
Net fee and commission income
5,659
5,672
5,607
Net trading income
5
7,076
4,073
4,364
Net investment (expense)/income
6
(121)
420
394
Other income
4
79
105
Total income
15,778
14,151
13,600
Credit impairment charges
7
(3,377)
(1,202)
(643)
Net operating income
12,401
12,949
12,957
Staff costs
29
(4,365)
(4,565)
(4,874)
Infrastructure costs
8
(816)
(835)
(935)
Administration and general expenses
8
(4,202)
(4,318)
(4,224)
Litigation and conduct
8
(76)
(264)
(1,706)
Operating expenses
8
(9,459)
(9,982)
(11,739)
Share of post-tax results of associates and joint ventures
7
57
68
Profit on disposal of subsidiaries, associates and joint ventures
126
88
-
Profit before tax
3,075
3,112
1,286
Taxation
9
(624)
(332)
(229)
Profit after tax in respect of continuing operations
2,451
2,780
1,057
Loss after tax in respect of discontinued operations
38
-
-
(47)
Profit after tax
2,451
2,780
1,010
Attributable to:
Equity holders of the parent
1,774
2,120
363
Other equity instrument holders
677
660
647
Total equity holders of the parent
2,451
2,780
1,010
Profit after tax
2,451
2,780
1,010
Consolidated financial statements
Consolidated statement of comprehensive income
Barclays Bank PLC 2020 Annual Report on Form 20 -F 106
2020
2019
2018
For the year ended 31 December
£m
£m
£m
Profit after tax
2,451
2,780
1,010
Profit after tax in respect of continuing operations
2,451
2,780
1,057
Loss after tax in respect of discontinuing operations
-
-
(47)
Other comprehensive income/(loss) that may be recycled to profit or loss from continuing
operations:
Currency translation reserve
Currency translation differences
a
(647)
(544)
844
Fair value through other comprehensive income reserve movement relating to debt securities
Net gains/(losses) from changes in fair value
2,402
2,465
(475)
Net (gains)/losses transferred to net profit on disposal
(251)
(454)
74
Net losses transferred to net profit due to impairment
1
1
4
Net (losses)/gains due to fair value hedging
(1,640)
(1,782)
165
Other movements
-
(8)
(25)
Tax
(130)
(63)
53
Cash flow hedging reserve
Net gains/(losses) from changes in fair value
1,366
823
(197)
Net gains transferred to net profit
(282)
(141)
(213)
Tax
(291)
(171)
103
Other
3
16
27
Other comprehensive income that may be recycled to profit or loss from continuing operations
531
142
360
Other comprehensive (loss)/income not recycled to profit or loss from continuing operations:
Retirement benefit remeasurements
(77)
(280)
412
Fair value through other comprehensive income reserve movements relating to equity instruments
1
-
(141)
Own credit
(810)
(316)
77
Tax
198
150
(118)
Other comprehensive (loss)/income not recycled to profit or loss from continuing operations
(688)
(446)
230
Other comprehensive (loss)/income for the year from continuing operations
(157)
(304)
590
Other comprehensive loss for the year from discontinued operation
-
-
(3)
Total comprehensive income/(loss) for the year
Total comprehensive income for the year, net of tax from continuing operations
2,294
2,476
1,647
Total comprehensive loss for the year, net of tax from discontinued operation
-
-
(50)
Total comprehensive income for the year
2,294
2,476
1,597
Attributable to:
Equity holders of the parent
2,294
2,476
1,597
Total comprehensive income for the year
2,294
2,476
1,597
Note
a Includes £8m loss (2019: £15m profit; 2018: £41m loss) on recycling of currency translation differences.
Consolidated financial statements
Consolidated balance sheet
Barclays Bank PLC 2020 Annual Report on Form 20 -F 107
2020
2019
As at 31 December
Notes
£m
£m
Assets
Cash and balances at central banks
155,902
125,940
Cash collateral and settlement balances
97,616
79,486
Loans and advances at amortised cost
18
134,267
141,636
Reverse repurchase agreements and other similar secured lending
8,981
1,731
Trading portfolio assets
11
127,664
113,337
Financial assets at fair value through the income statement
12
171,761
129,470
Derivative financial instruments
13
302,693
229,641
Financial assets at fair value through other comprehensive income
14
51,902
45,406
Investments in associates and joint ventures
34
24
295
Goodwill and intangible assets
21
1,154
1,212
Property, plant and equipment
19
1,537
1,631
Current tax assets
424
898
Deferred tax assets
9
2,552
2,460
Retirement benefit assets
31
1,814
2,108
Other assets
1,440
1,421
Total assets
1,059,731
876,672
Liabilities
Deposits at amortised cost
18
244,696
213,881
Cash collateral and settlement balances
85,549
67,682
Repurchase agreements and other similar secured borrowing
10,443
2,032
Debt securities in issue
29,423
33,536
Subordinated liabilities
26
32,005
33,425
Trading portfolio liabilities
11
46,139
35,212
Financial liabilities designated at fair value
15
249,626
204,446
Derivative financial instruments
13
300,580
228,940
Current tax liabilities
644
320
Deferred tax liabilities
9
225
80
Retirement benefit liabilities
31
232
313
Other liabilities
22
5,251
5,239
Provisions
23
1,208
951
Total liabilities
1,006,021
826,057
Equity
Called up share capital and share premium
27
2,348
2,348
Other equity instruments
27
8,621
8,323
Other reserves
28
3,183
3,235
Retained earnings
39,558
36,709
Total equity
53,710
50,615
Total liabilities and equity
1,059,731
876,672
The Board of Directors approved the financial statements on pages
105 to 196
on 17
February 2021
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 2020 Annual Report on Form 20 -F 108
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 2020
2,348
8,323
3,235
36,709
50,615
-
50,615
Profit after tax
-
677
-
1,774
2,451
-
2,451
Currency translation movements
-
-
(647)
-
(647)
-
(647)
Fair value through other comprehensive
income reserve
-
-
383
-
383
-
383
Cash flow hedges
-
-
793
-
793
-
793
Retirement benefit remeasurement
-
-
-
(108)
(108)
-
(108)
Own credit reserve
-
-
(581)
-
(581)
-
(581)
Other
-
-
-
3
3
-
3
Total comprehensive income for the
year
-
677
(52)
1,669
2,294
-
2,294
Issue and exchange of other equity
instruments
-
298
-
(53)
245
-
245
Other equity instruments coupons paid
-
(677)
-
-
(677)
-
(677)
Equity settled share schemes
-
-
-
349
349
-
349
Vesting of Barclays PLC shares under
share-based payment schemes
-
-
-
(300)
(300)
-
(300)
Dividends on ordinary shares
-
-
-
(263)
(263)
-
(263)
Dividends on preference shares and
other shareholders equity
-
-
-
(42)
(42)
-
(42)
Capital contribution from Barclays Plc
-
-
-
1,500
1,500
-
1,500
Other reserve movements
-
-
-
(11)
(11)
-
(11)
Balance as at 31 December 2020
2,348
8,621
3,183
39,558
53,710
-
53,710
Consolidated financial statements
Consolidated statement of changes in equity
Barclays Bank PLC 2020 Annual Report on Form 20 -F 109
Called up
share
capital
and share
premiuma
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 cash flow statement
Barclays Bank PLC 2020 Annual Report on Form 20 -F 110
2020
2019
a
2018
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
3,075
3,112
1,286
Adjustment for non -cash items:
Credit impairment charges
3,377
1,202
643
Depreciation, amortisation and impairment of property, plant and equipment and intangibles
441
459
397
Other provisions, including pensions
634
417
2,274
Net profit on disposal of investments and property, plant and equipment
(119)
(84)
-
Other non-cash movements including exchange rate movements
c
(2,362)
(742)
(4,097)
Changes in operating assets and liabilities
Net decrease/(increase) in cash collateral and settlement balances
b
4,098
(5,762)
(4,862)
Net decrease/(increase) in loans and advances at amortised cost
c
7,142
3,937
(7,215)
Net increase in reverse repurchase agreements and other similar secured lending
(7,250)
(118)
(434)
Net increase in deposits
31,148
14,544
16,316
Net (decrease)/increase debt securities in issue
(4,113)
(5,762)
14
Net increase/(decrease) in repurchase agreements and other similar secured borrowing
8,411
(5,346)
2
Net (increase)/decrease in derivative financial instruments
(1,604)
2,390
(6,419)
Net (increase)/decrease in trading assets
(14,327)
(9,299)
10,102
Net increase/(decrease) in trading liabilities
10,927
(1,402)
1,688
Net decrease/(increase) in financial assets and liabilities designated at fair value
2,889
2,485
(6,284)
Net (increase)/decrease in other assets
(93)
(44)
949
Net increase/(decrease) in other liabilities
13
(991)
(6,099)
Corporate income tax (paid)/received
(12)
894
(409)
Net cash from operating activities
42,275
(110)
(2,148)
Purchase of debt securities at amortised cost
c
(7,890)
(8,565)
(1,564)
Proceeds from sale or redemption of debt securities at amortised cost
c
3,527
1,305
5,109
Purchase of financial assets at fair value through other comprehensive income
(57,640)
(67,056)
(106,330)
Proceeds from sale or redemption of financial assets at fair value through other comprehensive income
53,367
67,743
108,038
Purchase of property, plant and equipment and intangibles
(303)
(610)
(422)
Proceeds from sale of property, plant and equipment and intangibles
-
-
35
Disposal of discontinued operation, net of cash disposed
-
-
(39,703)
Disposal of subsidiaries and associates, net of cash disposed
736
617
-
Other cash flows associated with investing activities
11
95
1,191
Net cash from investing activities
(8,192)
(6,471)
(33,646)
Dividends paid and coupon payments on other equity instruments
(982)
(934)
(1,142)
Issuance of subordinated debt
26
3,856
6,785
221
Redemption of subordinated debt
(4,746)
(6,574)
(3,246)
Issue of shares and other equity instruments
1,134
2,292
1,925
Redemption of shares and other equity instruments
(903)
(1,970)
(3,588)
Capital contribution from Barclays PLC
-
-
2,000
Vesting of shares under employee share schemes
(300)
(349)
(418)
Net cash from financing activities
(1,941)
(750)
(4,248)
Effect of exchange rates on cash and cash equivalents
1,669
(3,345)
4,159
Net increase/(decrease) in cash and cash equivalents from continuing operations
33,811
(10,676)
(35,883)
Net cash from discontinued operation
38
-
-
(468)
Net increase/(decrease) in cash and cash equivalents
33,811
(10,676)
(36,351)
Cash and cash equivalents at beginning of year
139,314
149,990
186,341
Cash and cash equivalents at end of year
173,125
139,314
149,990
Cash and cash equivalents comprise:
Cash and balances at central banks
155,902
125,940
136,359
Loans and advances to banks with original maturity less than three months
7,281
8,158
7,404
Cash collateral balances with central banks with original maturity less than three months
b
9,086
4,736
5,310
Treasury and other eligible bills with original maturity less than three months
856
480
917
173,125
139,314
149,990
Notes
a 2019 and 2018 comparative figures have been restated to make the cash flow statement more relevant following a review of the disclosure and the accounting policies
applied. Amendments have been made to the classification of cash collateral reported within cash and cash equivalents and to the presentation of items within net cash flows
from operating and investing activities. Footnotes b and c below quantify the impact of the changes to the respective cash flow categories in prior periods and provide further
detail.
b “Cash collateral balances with central banks with original maturity less than three months” was previously labelled “Cash collateral and settlement balances with banks with
original maturity less than three months”.
schemes. Previously, cash collateral and settlement balances with non-central bank counterparties were also classified as cash equivalents and included within this balance.
Comparatives have been restated. The effect of this change decreased cash equivalents by £16,702m as at 31 December 2019 , £17,367m as at 31 December 2018 and
£18,111m as at 31 December 2017. As a result, net cash from operating activi ties increased by £665m in 2019 and £744m in 2018 representing the net decrease/(increase) in
the cash collateral and settlement balances line item in those periods .
c
Movements in cash and cash equivalents relating to debt securities at amortised cost were previously shown within loans and advances to banks and customers in operating
activities. These debt securities holdings are now considered to be part of the investing activity performed by the Barclays Bank Group following a change in accounting policy
and have been presented within investing activities in 2020. Comparatives have been restated. The effect of this change was to reclassify £7,260m of net cash outflows from
operating activities to investing activities in 2019 and inflows of £3,544m i n 2018.
Interest received by the Barclays Bank Group was £12,860m (2019: £26,637m) and interest paid by the Barclays Bank Group was £8,653m
(2019: £21,314m).
Consolidated financial statements
Consolidated cash flow statement
Barclays Bank PLC 2020 Annual Report on Form 20 -F 111
The Barclays Bank Group is required to maintain balances with central banks and other regulatory authorities and these amounted to £3,119 m
(2019: £4,505m).
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 2020
Barclays Bank PLC 2020 Annual Report on Form 20 -F 112
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 accounting 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,
investment 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, and the separate financial statements of Barclays Bank PLC, have been
prepared in accordance with international accounting standards in conformity with the requirements of the Company Act 2006 and in
accordance with International Financial Reporting Standards (IFRS) and interpretations (IFRICs) as issued by the IASB and adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union. These standards have also been endorsed by the UK. The principal
accounting policies applied in the preparation of the consolidated and separate financial statements are set out below, and in the relevant notes
to the financial statements. These policies have been consistently applied with the exception of the early adoption of
Interest Rate Benchmark
Reform – Phase 2
which was applied from 1 January 2020.
3. Basis of preparation
The consolidated and separate financial statements have been prepared under the historical cost convention modified to include the fair
valuation of investment property, and particular financial instruments, to the extent required or permitted under IFRS as set out in the relevant
accounting policies. They are stated in millions of pounds Sterling (£m), the functional currency of Barclays 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. The financial statements are prepared on a going concern basis, as the Board is satisfied that the Barclays Bank Group
and parent company have the resources to continue in business for a period of at least 12 months from approval of the financial statements. In
making this assessment, the Board has considered a wide range of information relating to present and future conditions.
This involved a review of a working capital report (WCR) for the Barclays Bank Group. The WCR is used by the Barclays Bank Group and the
Board to assess the future performance of the business and that it has the resources in place that are required to meet its ongoing regulatory
requirements. The assessment is based upon business plans which contain future forecasts of profitability taken from the Barclays Bank
Group’s three-year medium term plan as well as projections of future regulatory capital requirements and business funding needs. The WCR
also includes details of the impact of internally generated stress testing scenarios on the liquidity and capital requirement forecasts. The stress
tests used were based an assessment of reasonably possible downside economic scenarios that the Barclays Bank Group could experience.
The WCR showed that the Barclays Bank Group had sufficient capital in place to support its future business requirements and remained above
its regulatory minimum requirements in the stress scenarios. It also showed that the Barclays Bank Group has an expectation that it can
continue to meet its funding requirements during the scenarios. Accordingly, the Board concluded that there was a reasonable expectation that
the Barclays Bank Group has adequate resources to continue as a going concern for a period of at least 12 months from the date of approval of
the financial statements.
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
The 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 control 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 purposes of the consolidation.
Changes in ownership interests in subsidiaries are accounted for as equity transactions if they occur after control has already been obtained
and they do not result in loss of control.
As the consolidated financial statements include partnerships where the 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 32.
Notes to the financial statements
For the year ended 31 December 2020
Barclays Bank PLC 2020 Annual Report on Form 20 -F 113
(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 currency balances in
relation to items measured in terms of historical cost are carried at historical transaction date exchange rates. Non-monetary foreign currency
balances in relation to items measured at fair value are translated using the exchange rate at the date when the fair value was measured.
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.
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 included 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
financial assets and financial liabilities and the impairment of financial assets. The Barclays Bank Group applies the requirements 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. Information 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 SPPI. 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 considered, including: (i) contingent and leverage features, (ii) non-recourse
arrangements and (iii) features that could modify the time value of money.
Financial assets are 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 are 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 rewards, 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
recognition 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 transfer.
A cash flow analysis of this nature may require judgement. In particular, it is necessary to estimate the asset’s expected future cash flows as
well as potential variability around this expectation. The method of estimating expected future cash flows depends on the nature of the asset,
with market and market-implied data used to the greatest extent possible. The potential variability around this expectation is typically determined
Notes to the financial statements
For the year ended 31 December 2020
Barclays Bank PLC 2020 Annual Report on Form 20 -F 114
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.
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 loan or cash collateral in exchange for the transfer of collateral, generally in the form of marketable securities subject to an
agreement to transfer the securities back at a fixed price in the future. Repurchase agreements are where the 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 from equity.
Where issued financial instruments contain both liability and equity components, these are accounted for separately. The fair value of the debt is
estimated first and the balance of the proceeds is included within equity.
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 early adoption of
Interest Rate
Benchmark Reform – Phase 2
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 – Amendments relating to Interest Rate Benchmark Reform (Phase 2 amendments)
IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 were amended in August 2020, which are effective for periods beginning on or after 1 January
2021 with earlier adoption permitted. The Barclays Bank Group elected to early adopt the amendments with effect from 1 January 2020. The
amendments have been endorsed by the EU and by the UK.
IFRS 9 allows companies when they first apply IFRS 9, to make an accounting policy choice 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 in respect of hedge accounting have been adopted by the Barclays Bank Group.
The objective of the amendments is to provide certain reliefs to companies when changes are made to the contractual cash flows or hedging
relationships resulting from interest rate benchmark reform. The reliefs adopted by the Barclays Bank Group have been described below.
Changes in the basis for determining contractual cash flows
A change in the basis of determining the contractual cash flows of a financial instrument that are required by the reform is accounted for by
updating the effective interest rate, without the recognition of an immediate gain or loss. This practical expedient is only applied where (1) the
change to the contractual cash flows is necessary as a direct consequence of the reform and (2) the new basis for determining the contractual
cash flows is economically equivalent to the previous basis. For changes made in addition to those required by the reform, the practical
expedient is applied first, after which the normal IFRS 9 requirements for modifications of financial instruments is applied.
Hedge accounting
The IAS 39 requirements in respect of hedge accounting have been amended in two phases. The Phase 1 amendments, which were adopted
by the Barclays Bank Group in 2019, provide relief to the hedge accounting requirements prior to changing a hedge relationship due to the
interest rate benchmark reform (refer to Note 13). The Phase 2 amendments provide relief when changes are made to hedge relationships as a
result of the interest rate benchmark reform. The Phase 2 amendments adopted by the Barclays Bank Group are described below.
◾
not constitute the discontinuation of the hedge relationship nor the designation of a new hedging relationship.
◾
cumulative fair value changes to zero when the exception to the retrospective assessment ends (Phase 1 relief). Any hedge ineffectiveness
will continue to be measured and recognised in full in profit or loss.
◾
future cash flows are determined) when there is a change in basis for determining the contractual cash flows.
◾
within a designated group of items that are amended for changes directly required by the reform.
◾
this requirement when an alternative risk free rate (RFR) financial instrument is designated as a risk component. These amendments allow
entities upon designation of the hedge to assume that the separately identifiable requirement is met if the entity reasonably expects the RFR
risk will become separately identifiable within the next 24 months. This relief applies to each RFR on a rate-by-rate basis and starts when the
entity first designates the RFR as a non-contractually specified risk component.
Notes to the financial statements
For the year ended 31 December 2020
Barclays Bank PLC 2020 Annual Report on Form 20 -F 115
The amendments to IFRS 7 require certain disclosures to be made to enable users of financial statements to understand the effect of interest
rate benchmark reform on an entity’s financial instruments and risk management strategy. Refer to Note 40 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
2005.
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 2020, the IASB published amendments to IFRS 17. The amendments that are relevant to the Barclays Bank Group are the scope
exclusion for credit card contracts and similar contracts that provide insurance coverage, the optional scope exclusion for loan contracts that
transfer significant insurance risk, and clarification that only financial guarantees issued are in scope of IFRS 9.
The amendments also defer the effective date of IFRS 17, including the above amendments, to annual reporting periods beginning on or after 1
January 2023.
IFRS 17, including the amendments to IFRS 17, has not yet been endorsed by the EU as of the date that the financial statements are authorised
for issue.
Following the UK’s withdrawal from the EU on 31 December 2020, the UK-adopted international accounting standards will be applicable. IFRS
17, including the amendments to IFRS 17, has not yet been endorsed by the UK. 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:
◾
◾
◾
◾
◾
7. Other disclosures
To improve transparency and ease of reference, by concentrating related information in one place, certain disclosures required under IFRS
have been included within the Risk review section as follows:
◾
◾
◾
◾
These disclosures are covered by the Audit opinion (included on pages 101 to 104) where referenced as audited.
Notes to the financial statements
Financial performance and returns
Barclays Bank PLC 2020 Annual Report on Form 20 -F 116
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 Segmental 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 resources and assessing
performance of the operating segments, and has been identified as the chief operating decision maker. All transactions between business
segments are conducted on an arm’s-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.
The 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
Bank.
The below table also includes Head Office which
comprises head office and certain central support functions including the Barclays Bank Group
service company full time equivalent employees.
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 2020
Total income
12,607
3,490
(319)
15,778
Credit impairment charges
(1,565)
(1,720)
(92)
(3,377)
Net operating income/(expenses)
11,042
1,770
(411)
12,401
Operating expenses
(7,125)
(2,132)
(126)
(9,383)
Litigation and conduct
(4)
(44)
(28)
(76)
Total operating expenses
(7,129)
(2,176)
(154)
(9,459)
Other net income/(expenses)
a
16
114
3
133
Profit/(loss) before tax
3,929
(292)
(562)
3,075
Total assets (£bn)
990.9
57.8
11.0
1,059.7
Number of employees (full time equivalent)
7,800
3,000
10,100
20,900
Average number of employees (full time equivalent)
20,145
Corporate and
Investment Bank
Consumer, Cards
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 (£bn)
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
Note
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.
Notes to the financial statements
Financial performance and returns
Barclays Bank PLC 2020 Annual Report on Form 20 -F 117
Corporate and
Investment Bank
Consumer, Card s
and Payments
Head
Barclays Bank
Group
£m
£m
£m
£m
For the year ended 31 December 2018
Total income
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 (£bn)
792.5
71.6
13.6
877.7
Number of employees (full time equivalent)
9,100
3,300
10,000
22,400
Note
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 acquisitio ns.
Income by geographic region
a
2020
2019
2018
For the year ended 31 December
£m
£m
£m
United Kingdom
4,954
4,084
4,007
Europe
2,119
1,752
1,615
Americas
7,590
7,251
7,048
Africa and Middle East
37
62
44
Asia
1,078
1,002
886
Total
15,778
14,151
13,600
Income from individual countries which represent more than 5% of total income
a
2020
2019
2018
For the year ended 31 December
£m
£m
£m
United Kingdom
4,954
4,084
4,007
United States
7,471
7,121
6,916
Note
a The geographical analysis is based on the location of the office where the transactions are recorded.
3 Net interest income
Accounting for interest income and expenses
Interest income on loans and advances at amortised cost and financial assets at fair value through other comprehensive income, and interest
expense on financial liabilities held at amortised cost, are calculated using the effective interest method which allocates interest, and direct and
incremental fees and costs, over the expected lives of the assets and liabilities.
The effective interest method requires the Barclays Bank Group to estimate future cash flows, in some cases based on its experience of
customers’ behaviour, considering all contractual terms of the financial instrument, as well as the expected lives of the assets and liabilities.
The 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) and incremental to the origination of
credit card balances, they are capitalised 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
balances 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
Financial performance and returns
Barclays Bank PLC 2020 Annual Report on Form 20 -F 118
2020
2019
a
2018
a
£m
£m
£m
Cash and balances at central banks
226
919
919
Loans and advances at amortised cost
4,510
5,514
5,554
Fair value through other comprehensive income
604
831
662
Negative interest on liabilities
68
13
35
Other
598
808
289
Interest and similar income
6,006
8,085
7,459
Deposits at amortised cost
(644)
(1,778)
(1,591)
Debt securities in issue
b
(424)
(873)
(493)
Subordinated liabilities
(1,112)
(1,096)
(1,397)
Negative interest on assets
(325)
(250)
(228)
Other
(341)
(181)
(620)
Interest and similar expense
(2,846)
(4,178)
(4,329)
Net interest income
3,160
3,907
3,130
Notes
a
Comparatives for negative interest income on liabilities and negative interest expense on assets have been re-presented from Other interest income and Other interest
expense.
b Barclays Bank Group has amended the presentation of the premium paid for purchased financial guarantees which are embedded in notes it issues directly to the market. From
2020 onwards, the full note coupon (£99m) is presented as interest and similar expense within net interest income. The financial guarantee element of the coupon had previously
been recognised in net investment income (2019: £24m, 2018: £1m). The comparatives have not been restated.
Interest and similar income presented above represents interest revenue calculated using the effective interest method. Costs to originate credit
card balances of £687m (2019: £684m; 2018: £585m) have been amortised to interest and similar income during the period. Interest and similar
income includes £9m (2019: £9m; 2018: £9m) accrued on impaired loans. Other interest expense includes £23m (2019: £25m) relating to IFRS
16 lease interest expenses.
4 Net fee and commission income
Accounting for net fee and commission income
The Barclays Bank Group applies IFRS 15 Revenue from Contracts with Customers. IFRS 15 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 commission income charged for services provided by the Barclays Bank Group as the services
are provided, for example, on completion of the underlying transaction. Where the contractual arrangements also result in the Barclays Bank
Group recognising financial instruments in scope of IFRS 9, such financial instruments are initially recognised at fair value in accordance with
IFRS 9 before applying the provisions of IFRS 15.
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. The below table includes a total for fees in scope of IFRS 15. Refer to Note 2 for more
detailed information about operating segments.
2020
Corporate and
Investment Bank
Consumer, Cards and
Payments
Head Office
Total
£m
£m
£m
£m
Fee type
Transactional
357
1,973
-
2,330
Advisory
593
100
-
693
Brokerage and execution
1,116
57
-
1,173
Underwriting and syndication
2,867
-
-
2,867
Other
54
152
29
235
Total revenue from contracts with customers
4,987
2,282
29
7,298
Other non-contract fee income
5
-
119
Fee and commission income
5,101
2,287
29
7,417
Fee and commission expense
(768)
(988)
(2)
(1,758)
Net fee and commission income
4,333
1,299
27
5,659
Notes to the financial statements
Financial performance and returns
Barclays Bank PLC 2020 Annual Report on Form 20 -F 119
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
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
Fee types
Transactional
Transactional fees are service charges on deposit accounts, cash management services and transactional processing fees. These include
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. Interchange and merchant fees are recognised upon settlement of the card transaction
payment.
The Barclays Bank Group incurs certain card related costs including those related to cardholder reward programmes and payments to co-brand
partners. Cardholder reward programmes costs related to customers that settle their outstanding balance each period (transactors) are
expensed when incurred and presented in fee and commission expense while costs related to customers that 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 related to transactor accounts are deferred as costs to obtain a contract under IFRS 15, while costs related to revolver
accounts are included in the effective interest rate of the receivable (refer to Note 3). Those costs deferred under IFRS 15 are capitalised and
amortised over the estimated life of the customer 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 presented 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 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 are 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
Financial performance and returns
Barclays Bank PLC 2020 Annual Report on Form 20 -F 120
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 recognised 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 contingencies have been resolved and therefore the fee revenue is deferred until the uncertainty is
resolved.
Included in underwriting and syndication fees are loan commitment fees which are not presented as part of the carrying value of the loan in
accordance with IFRS 9. 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 2020 (2019: nil; 2018: nil).
Impairment of fee receivables and contract assets
During 2020, there have been no material impairments recognised in relation to fees receivable and contract assets (2019: nil; 2018: nil). Fees
in relation to transactional business can be added to outstanding customer balances. These amounts may be subsequently impaired as part 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 contract costs in the amount of £135m at 31 December 2020 (2019: £153m; 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 2020, the amount of amortisation was £35m (2019: £29m; 2018: £30m) and there was no impairment loss recognised
in connection with the capitalised contract costs (2019: nil; 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 other 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.
2020
2019
2018
£m
£m
£m
Net gains from financial instruments held for trading
5,392
2,795
3,101
Net gains from financial instruments designated at fair value
695
240
259
Net gains from financial instruments mandatorily at fair value
989
1,038
1,004
Net trading income
7,076
4,073
4,364
Notes to the financial statements
Financial performance and returns
Barclays Bank PLC 2020 Annual Report on Form 20 -F 121
6 Net investment (expense)/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.
2020
2019
2018
£m
£m
£m
Net (losses)/gains from financial assets mandatorily at fair value
(39)
218
172
Net gains from disposal of debt instruments at fair value through other comprehensive income
251
454
131
Net (losses)/gains from disposal of financial assets and liabilities measured at amortised cost
a
(128)
(38)
(20)
Dividend income
-
-
55
Net (losses)/gains on other investments
b
(205)
(214)
56
Net investment (expense)/income
(121)
420
394
Notes
a Included within the 2020 balance are losses of £115m relating to the partial redemption of contingent capital notes.
b Barclays has amended the presentation of the premium paid for purchased financial guarantees which are embedded in notes it issues directly to the market. From 2020
onwards, the full note coupon is presented as interest expense within net interest income. The financial guarantee element of the coupon had previously been recognised in
net investment income. The reclassification into interest expense is £99m for 2020 (2019: £25m, 2018: £1m). The comparatives have not been restated.
7 Credit impairment charges
Accounting for the impairment of financial assets
Impairment
In accordance with IFRS 9, 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 contracts. 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 recognised 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 portfolio’s 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 represent the use of the low credit risk exemption as exposures can
separately move into stage 2 via the qualitative route described below.
Wholesale assets apply a 100% increase in PD and 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 maximum 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:
◾
data start point no later than 1 January 2015); or
Notes to the financial statements
Financial performance and returns
Barclays Bank PLC 2020 Annual Report on Form 20 -F 122
◾
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 criteria 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 being
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, for 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-weighted 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 baseline 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 baseline (reflecting current
consensus outlook) has the highest weight and the weights of adverse and favourable scenarios depend on the deviation from the baseline; the
further from the baseline, 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 Bank
Group’s 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 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 credit impaired at the time when they are purchased or originated 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 future cash flows of the
financial asset. This comprises assets defined as defaulted and other individually assessed exposures where imminent default or actual loss is
Notes to the financial statements
Financial performance and returns
Barclays Bank PLC 2020 Annual Report on Form 20 -F 123
identified.
Uncollectible loans are written off against the related allowance for loan impairment 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.
Accounting for purchased financial guarantee contracts
The Barclays Bank Group may enter into a financial guarantee contract which requires the issuer of such contract to reimburse the Barclays
Bank Group for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.
For these separate financial guarantee contracts, the Barclays Bank Group recognises a reimbursement asset aligned with the recognition of
the underlying ECLs, if it is considered virtually certain that a reimbursement would be received if the specified debtor fails to make payment
when due in accordance with the terms of the debt instrument.
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. In respect of payment holidays granted to borrowers which are not due to forbearance, if the revised cash flows on a
present value basis (based on the original EIR) are not substantially different from the original cash flows, the loan is not considered to be
substantially modified.
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.
Note 1 sets out details for changes in the basis of determining the contractual cash flows of a financial instrument that are required by interest
rate benchmark reform.
Expected life
Lifetime ECLs must be measured over the expected life. This is restricted to the maximum contractual life and takes into account expected
prepayment, extension, call and similar options. The exceptions are certain revolver financial instruments, such as credit cards and bank
overdrafts, 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 revolving 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 default, 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. Potential 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 recognition. 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 rate 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 modelling but adjusted for key differences which
include:
◾
conditions at the reporting date and multiple forecasts of the future economic conditions over the expected lives;
◾
date at the original EIR rather than using the cost of capital to the date of default;
◾
not been considered in the modelling process, for example forecast economic scenarios for uncertain political events; and
◾
characteristics are grouped together, with apportionment to individual financial instruments, is used where effects can only be seen at a
collective level, for example for forward-looking information.
For the IFRS 9 impairment assessment, the Barclays Bank Group’s 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,
Notes to the financial statements
Financial performance and returns
Barclays Bank PLC 2020 Annual Report on Form 20 -F 124
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 have 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.
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.
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 considered 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 economic scenarios are taken into account. These considerations can be
particularly 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.
Temporary adjustments to calculated IFRS9 impairment allowances may be applied in limited circumstances to account for situations where
known or expected risk factors or information have not been considered in the ECL assessment or modelling process. For further information
please see page 56 in credit risk performance.
2020
2019
2018
Impairment
Charges
Recoveries
and
Reimbursements
a
Total
Impairment
Charges
Recoveries and
Reimbursements
Total
Impairment
Charges
Recoveries
and
Reimbursements
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
Loans and advances
3,060
(368)
2,692
1,214
(73)
1,141
774
(86)
688
Provision for undrawn contractually
committed facilities and guarantees provided
547
-
547
55
-
55
(48)
-
(48)
Loans impairment
3,607
(368)
3,239
1,269
(73)
1,196
726
(86)
640
Cash collateral and settlement balances
2
-
2
1
-
1
(1)
-
(1)
Financial instruments at fair value through
OCI
-
-
-
-
-
-
4
-
4
Other financial assets measured at cost
136
-
136
5
-
5
-
-
-
Credit impairment charges
b
3,745
(368)
3,377
1,275
(73)
1,202
729
(86)
643
Notes
a Recoveries and reimbursements includes £364m for reimbursements expected to be received under the arrangement where Group has entered into financial guarantee
contracts which provide credit protection over certain loans assets with third parties. Cash recoveries of previously written off amounts to £4m.
b 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) have been repo rted 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 2020 and that are still
subject to enforcement activity is £816m (2019: £1,119 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.
Modification of financial assets
Financial assets of £3,781m (2019: £1,311 m) were subject to non-substantial modification during the period, with a resulting loss of £21m
(2019: £20m). The gross carrying amount at 31 December 2020 of financial assets for which the loss allowance has changed to a 12 month
ECL during the year amounts to £1,194m (2019: £401m).
Notes to the financial statements
Financial performance and returns
Barclays Bank PLC 2020 Annual Report on Form 20 -F 125
8 Operating expenses
2020
2019
2018
£m
£m
£m
Infrastructure costs
Property and equipment
373
368
380
Depreciation and amortisation
a
421
457
395
Lease payments
a
1
7
158
Impairment of property, equipment and intangible assets
21
3
2
Total infrastructure costs
816
835
935
Administration and general expenses
Consultancy, legal and professional fees
345
362
400
Marketing and advertising
176
258
316
UK bank levy
249
185
223
Other administration and general expenses
3,432
3,513
3,285
Total administration and general expenses
4,202
4,318
4,224
Staff costs
4,365
4,565
4,874
Litigation and conduct
76
264
1,706
Operating expenses
9,459
9,982
11,739
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
and 2020.
For further details on staff costs including accounting policies, refer to Note 29.
9 Tax
Accounting for income taxes
The 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 recoverable 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 profit 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.
The Barclays Bank Group considers an uncertain tax position to exist when it considers that ultimately, in the future, the amount of profit subject
to tax may be greater than the amount initially reflected in the 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 recognised when it is considered probable that the outcome of a review by a tax authority of an uncertain tax position
will alter the amount of cash tax due to, or from, a tax authority in the future. From recognition, the current tax provision is then measured at the
amount the Barclays Bank Group ultimately expects to pay the tax authority 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 uncertain 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 periods 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 probable that the outcome of a review by a tax authority of an uncertain tax position will result in a
reduction in the carrying value of the deferred tax asset. From recognition of a provision, measurement of the underlying deferred tax asset is
adjusted to take into account the expected impact of resolving the uncertain tax position on the loss or temporary difference giving rise to the
deferred tax asset.
The approach taken to measurement takes account of whether the uncertain tax position is a discrete position that will be reviewed by the tax
authority in isolation from any other position, or one of a number of issues which are expected to be reviewed together concurrently and
resolved simultaneously with a tax authority. The Barclays Bank Group’s measurement of provisions is based upon its best estimate of the
additional profit that will become subject to tax. For a discrete position, consideration is given only to the merits of that position. Where a number
of issues are expected to be reviewed and resolved together, 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.
Notes to the financial statements
Financial performance and returns
Barclays Bank PLC 2020 Annual Report on Form 20 -F 126
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 Barclays 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 uncertain 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 subject to challenge by a tax authority over the next year.
Deferred tax assets have been recognised based on business profit forecasts. Details on the recognition of deferred tax assets are provided in
this note.
2020
2019
2018
£m
£m
£m
Current tax charge/(credit)
Current year
993
327
94
Adjustments in respect of prior years
3
(50)
(200)
996
277
(106)
Deferred tax charge/(credit)
Current year
(563)
157
372
Adjustments in respect of prior years
191
(102)
(37)
(372)
55
335
Tax charge
624
332
229
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 Barclays Bank Group’s profit before tax.
2020
2020
2019
2019
2018
2018
£m
%
£m
%
£m
%
Profit before tax from continuing operations
3,075
3,112
1,286
Tax charge based on the standard UK corporation tax rate of 19% (2019: 19%, 2018:
19%)
584
19.0%
593
19.0%
244
19.0%
Impact of profits/losses earned in territories with different statutory rates to the UK
(weighted average tax rate is 25.0% (2019: 26.0%, 2018: 27.1%))
183
6.0%
217
7.0%
104
8.1%
Recurring items:
Adjustments in respect of prior years
194
6.3%
(152)
(4.9%)
(237)
(18.4%)
Non-creditable taxes including withholding taxes
107
3.4%
146
4.7%
156
12.1%
Impact of UK bank levy being non-deductible
48
1.6%
35
1.1%
42
3.3%
Non-deductible expenses
28
0.9%
34
1.1%
67
5.2%
Impact of Barclays Bank PLC's overseas branches being taxed both locally and in
the UK
25
0.8%
15
0.5%
16
1.2%
Tax adjustments in respect of share-based payments
14
0.5%
(7)
(0.2%)
11
0.9%
Banking surcharge and other items
(70)
(2.3%)
(103)
(3.3%)
(69)
(5.4%)
Changes in recognition of deferred tax and effect of unrecognised tax losses
(123)
(4.0%)
(85)
(2.7%)
(104)
(8.1%)
AT1 tax credit
(124)
(4.0%)
(121)
(3.9%)
(123)
(9.6%)
Non-taxable gains and income
(200)
(6.5%)
(240)
(7.7%)
(232)
(18.0%)
Non-recurring items:
One off re-measurement of UK deferred tax assets due to cancellation of rate change
(43)
(1.4%)
-
-
-
-
Non-deductible provisions for UK customer redress
7
0.2%
-
-
8
0.6%
Non-deductible provisions for investigations and litigation
(6)
(0.2%)
-
-
346
26.9%
Total tax charge
624
20.3%
332
10.7%
229
17.8%
Factors driving the effective tax rate
The effective tax rate of 20.3% is higher than the UK corporation tax rate of 19% primarily due to profits earned outside the UK being taxed at
local statutory tax rates that are higher than the UK tax rate, adjustments in respect of prior years, non-creditable taxes and non-deductible
Notes to the financial statements
Financial performance and returns
Barclays Bank PLC 2020 Annual Report on Form 20 -F 127
expenses including UK bank levy. These factors, which have each increased the effective tax rate, are largely offset by the impact of non-
taxable gains and income, the use of unrecognised tax losses in the period and tax relief on payments made under AT1 instruments.
Barclays Bank Group’s future tax charge will be sensitive to the geographic mix of profits earned, the tax rates in force and changes to the tax
rules in the jurisdictions that the Group operates in.
Tax in the consolidated statement of comprehensive income
Tax relating to each component of other comprehensive income on page 106 can be found in the consolidated statement of comprehensive
income which includes within Other a tax credit of £3m (2019: £16m) on other items including share-based payments.
Deferred tax assets and
liabilities
The deferred tax amounts on the balance sheet were as follows:
Barclays Bank Group
2020
2019
£m
£m
US Intermediate Holding Company Tax Group ("IHC Tax Group")
1,001
1,037
US Branch Tax Group
1,048
1,015
Other (outside the UK and US tax groups)
503
408
Deferred tax asset
2,552
2,460
Deferred tax liability - UK Tax Group
(225)
(80)
Net deferred tax
2,327
2,380
US deferred tax assets in the IHC and the US Branch
The deferred tax asset in the IHC Tax Group of £1,001m (2019: £1,037m) relates entirely to temporary differences and includes £nil (2019:
£54m) relating to tax losses and the deferred tax asset in Barclays Bank PLC’s US Branch Tax Group of £1,048m (2019: £1,015m) also relates
entirely to temporary differences and includes £nil (2019: £84m) relating to tax losses.
The deferred tax asset in the IHC Tax Group of £1,001m (2019: £1,037m) also includes £330m (2019: £359m) arising from prior net operating
loss conversion. Under New York State and City tax rules the amounts can be carried forward and will expire in 2034. Business profit forecasts
indicate these amounts will be fully recovered before expiry. They are included within the other category in the table below.
UK Tax Group deferred tax assets/liabilities
The deferred tax liability in the UK Tax Group of £225m (2019: £80m) includes a deferred tax asset of £541m (2019: £268m) relating to tax
losses which is offset by a deferred tax liability of £766m (2019: £348m) 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 (outside the UK and US tax groups)
The deferred tax asset of £503m (2019: £408m) in other entities within the Barclays Bank Group includes £170m (2019: £117m) 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 those deferred tax assets will be fully recovered.
Of the deferred tax asset of £503m (2019: £408m), an amount of £8m (2019: £8m) relates to entities which have suffered a loss in either the
current or prior year and the utilisation of which is dependent upon future taxable profits. This has been taken into account 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.
Notes to the financial statements
Financial performance and returns
Barclays Bank PLC 2020 Annual Report on Form 20 -F 128
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
Share
based
payments
and
deferred
compensati
on
Other
temporary
differences
Tax
losses
carried
forward
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Assets
719
110
-
31
284
127
305
1,329
523
3,428
Liabilities
(29)
(18)
(139)
(640)
-
-
-
(222)
-
(1,048)
At 1 January 2020
690
92
(139)
(609)
284
127
305
1,107
523
2,380
Income statement
(39)
-
-
-
164
18
15
23
191
372
Other comprehensive
income and reserves
-
(112)
(291)
(191)
-
-
3
238
-
(353)
Other movements
(25)
(1)
(11)
4
7
(6)
(6)
(31)
(3)
(72)
626
(21)
(441)
(796)
455
139
317
1,337
711
2,327
Assets
659
-
-
30
455
139
317
1,377
711
3,688
Liabilities
(33)
(21)
(441)
(826)
-
-
-
(40)
-
(1,361)
At 31 December 2020
626
(21)
(441)
(796)
455
139
317
1,337
711
2,327
Assets
758
175
38
39
359
112
309
1,336
529
3,655
Liabilities
(16)
(35)
(2)
(434)
-
-
-
(198)
-
(685)
At 1 January 2019
742
140
36
(395)
359
112
309
1,138
529
2,970
Income statement
66
-
-
(5)
(55)
23
(7)
(94)
17
(55)
Other comprehensive
income and reserves
-
(46)
(175)
(205)
(10)
2
8
71
-
(355)
Other movements
(118)
(2)
-
(4)
(10)
(10)
(5)
(8)
(23)
(180)
690
92
(139)
(609)
284
127
305
1,107
523
2,380
Assets
719
110
-
31
284
127
305
1,329
523
3,428
Liabilities
(29)
(18)
(139)
(640)
-
-
-
(222)
-
(1,048)
At 31 December 2019
690
92
(139)
(609)
284
127
305
1,107
523
2,380
Other movements include the impact of changes in foreign exchange rates as well as deferred tax amounts relating to acquisitions and
disposals.
The amount of deferred tax asset expected to be recovered after more than 12 months for the Barclays Bank Group is £3,356m (2019:
£2,958m). The amount of deferred tax liability expected to be settled after more than 12 months for the Barclays Bank Group is £1,359m (2019:
£1,050m). These amounts are before offsetting asset and liability balances where there is a legal right to set-off and an intention to settle on a
net basis.
Unrecognised deferred tax
Tax losses and temporary differences
The Barclays Bank Group has deferred tax assets not recognised in respect of gross deductible temporary differences of £123m (2019: £208m),
unused tax credits of £236m (2019: £247m), and gross tax losses of £19,953m (2019: £18,582m). The tax losses include capital losses of
£2,987m (2019: £2,980m). Of these tax losses, £139m (2019: £41m) expire within five years, £236m (2019: £239m) expire within six to ten
years, £7,271m (2019: £5,178m) expire within 11 to 20 years and £12,307m (2019: £13,124m) can be carried forward indefinitely. Deferred tax
assets have not been recognised in respect of these items because it is not probable that future taxable profits and gains will be available
against which they can be utilised.
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
recognised was £0.8bn (2019: £0.7bn).
10 Dividends on ordinary shares and other equity instruments
The 2020 financial statements include £263m (2019: £233m) of dividend paid. This includes the final dividend declared in relation to the prior
year of £263m (2019: £nil) and half year dividends of £nil (2019: £233m). This results in a total dividend for the year of 0.11p
(2019: £0.10p) per
ordinary share. A dividend of £263m was paid on 25 March 2020 by Barclays Bank PLC to its parent Barclays PLC. This was prior to the
announcement made by the PRA on 31 March 2020 that capital be preserved for use in serving Barclays customers and clients through the
extraordinary challenges presented by the COVID-19 pandemic. As part of a response to this announcement, Barclays PLC took steps to
provide additional capital to Barclays Bank PLC as part of the £1.5bn of capital contributions made during H120.
Dividends paid on preference shares amounted to £42m (2019: £41m). Dividends paid on the 4.75% €100 preference shares amounted to
£439.21 per share (2019: £409.44). Dividends paid on the 6.278% US$100 preference shares amounted to £485.75 per share (2019: £485.94).
Notes to the financial statements
Financial performance and returns
Barclays Bank PLC 2020 Annual Report on Form 20 -F 129
Dividends paid on other equity instruments amounted to £677m (2019: £660m). For further detail on other equity instruments, please refer to
Note 27.
The Directors have approved a full year dividend in respect of 2020 of £174m. In addition, the Company will pay a £520m dividend to Barclays
PLC in order to partially fund a share buy-back. The aggregate dividend of £694m will be paid on 9 March 2021. The financial statements for the
year ended 31 December 2020 do not reflect this aggregate dividend, which will be accounted for in shareholders’ equity as an appropriation of
retained profits in the year ending 31 December 2021. Dividends are funded out of distributable reserves.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2020 Annual Report on Form 20 -F 130
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 orderly transaction between market
participants at the measurement date, which may be an observable market price or, where there is no quoted price for the instrument, may be
an estimate based on available market data. Detail regarding the 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
2020
2019
£m
£m
Debt securities and other eligible bills
56,196
51,881
Equity securities
62,192
56,000
Traded loans
8,348
5,378
Commodities
928
78
Trading portfolio assets
127,664
113,337
Debt securities and other eligible bills
(28,836)
(22,038)
Equity securities
(17,303)
(13,174)
Trading portfolio liabilities
(46,139)
(35,212)
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
2020
2019
£m
£m
Loans and advances
2,170
1,333
Debt securities
291
3,995
Reverse repurchase agreements and other similar secured lending
19
40
Financial assets designated at fair value
2,480
5,368
Loans and advances
25,279
17,804
Debt securities
1,406
1,225
Equity securities
3,742
6,548
Reverse repurchase agreements and other similar secured lending
138,539
97,783
Other financial assets
315
742
Financial assets mandatorily at fair value
169,281
124,102
Total
171,761
129,470
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2020 Annual Report on Form 20 -F 131
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
2020
2019
2020
2019
2020
2019
£m
£m
£m
£m
£m
£m
Loans and advances designated at
fair value, attributable to credit risk
2,170
1,333
(46)
2
(51)
(5)
Value mitigated by related credit
derivatives
795
-
3
-
3
-
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, 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 host), 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 and the combined instrument is not measured at fair value through profit or loss, then they are accounted
for in the same way as derivatives. For financial assets, the requirements are whether the financial assets 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
purposes. 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 derivatives 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 applied the ‘Amendments to IFRS 9, 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 relationships 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 Bank Group are:
◾
hedged items are based do not change as a result of IBOR Reform.
◾
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.
◾
retrospective effectiveness falls outside the required 80–125% range.
◾
◾
designates a hedged item in a fair value hedge and not on an ongoing basis.
The Barclays Bank Group has elected to early adopt the ‘Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate
Benchmark Reform – Phase 2’ issued in August 2020. The Phase 2 amendments provide relief when changes are made to hedge relationships
as a result of the interest rate benchmark reform.
The Phase 2 amendments adopted by the Barclays Bank Group are:
◾
to the interest rate benchmark reform would not constitute the discontinuation of the hedge relationship nor the designation of a new hedging
relationship.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2020 Annual Report on Form 20 -F 132
◾
cumulative fair value changes to zero when the exception to the retrospective assessment ends (Phase 1 relief). Any hedge ineffectiveness
will continue to be measured and recognised in full in profit or loss.
◾
rate (on which the hedge future cash flows are determined) when there is a change in basis for determining the contractual cash flows.
◾
within a designated group of items that are amended for changes directly required by the reform.
◾
this requirement when an alternative risk free rate (RFR) financial instrument is designated as a risk component. These amendments allow the
Barclays Bank Group upon designation of the hedge to assume that the separately identifiable requirement is met if the Barclays Bank Group
reasonably expects the RFR risk will become separately identifiable within the next 24 mo nths. The Barclays Bank Group applies this relief to
each RFR on a rate-by-rate basis and starts when the Barclays Bank Group first designates the RFR as a non-contractually specified risk
component.
Fair value hedge accounting
Changes in fair value of derivatives that qualify and are designated as fair value hedges are recorded in the income statement, together with
changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The fair value changes adjust the carrying value
of the hedged asset or liability held at amortised cost.
If hedge relationships no longer meet the criteria for hedge accounting, hedge accounting is discontinued. For fair value hedges of interest rate
risk, the fair value adjustment to the hedged item is amortised to the income statement over the period to maturity of the previously designated
hedge relationship using the effective interest method. If the hedged item is sold or repaid, the unamortised fair value adjustment is recognised
immediately in the income statement. 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 or loss. Any
ineffective portion of the gain or loss on the hedging instrument is recognised in the income statement immediately.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss
existing in equity at that time remains in equity and is recognised when the hedged item is ultimately recognised in the income statement. When
a forecast transaction is no longer expected to occur, the cumulative gain or loss that was recognised in equity is immediately transferred to the
income statement.
Hedges of net investments
The Barclays Bank Group’s net investments in foreign operations, including monetary items accounted for as part of the net investment, are
hedged for foreign currency risks using both derivatives and foreign currency borrowings. Hedges of net investments are accounted for similarly
to cash flow hedges; the effective portion of the gain or loss on the hedging instrument is being recognised directly in other comprehensive
income and the ineffective portion being recognised immediately in the income statement. The cumulative gain or loss recognised in other
comprehensive income is recognised in the income statement on the disposal or partial disposal of the foreign operation, or other reductions in
the Barclays Bank Group’s investment in the operation.
Barclays Bank Group
2020
2019
Notional
contract
amount
Fair value
Notional
contract
amount
Fair value
Assets
Liabilities
Assets
Liabilities
£m
£m
£m
£m
£m
£m
Total derivative assets/(liabilities) held for trading
42,515,577
302,429
(299,637)
41,778,195
229,459
(228,338)
Total derivative assets/(liabilities) held for risk management
110,028
264
(943)
109,762
182
(602)
Derivative assets/(liabilities)
42,625,605
302,693
(300,580)
41,887,957
229,641
(228,940)
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2020 Annual Report on Form 20 -F 133
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
2020
2019
Barclays Bank Group
Notional
contract
amount
Fair value
Notional
contract
amount
Fair value
Assets
Liabilities
Assets
Liabilities
£m
£m
£m
£m
£m
£m
Derivatives held for trading
Foreign exchange derivatives
OTC derivatives
5,463,632
84,518
(83,912)
4,910,084
56,535
(56,793)
Derivatives cleared by central counterparty
78,946
335
(335)
74,136
84
(145)
Exchange traded derivatives
14,034
3
(3)
18,520
12
(31)
Foreign exchange derivatives
5,556,612
84,856
(84,250)
5,002,740
56,631
(56,969)
Interest rate derivatives
OTC derivatives
13,551,506
171,244
(161,223)
12,631,723
140,553
(133,408)
Derivatives cleared by central counterparty
18,330,003
965
(795)
17,088,755
862
(859)
Exchange traded derivatives
2,971,966
371
(360)
5,041,948
1,251
(1,265)
Interest rate derivatives
34,853,475
172,580
(162,378)
34,762,426
142,666
(135,532)
Credit derivatives
OTC derivatives
384,900
3,674
(3,909)
399,386
5,253
(5,399)
Derivatives cleared by central counterparty
462,945
931
(1,095)
426,130
2,962
(2,687)
Credit derivatives
847,845
4,605
(5,004)
825,516
8,215
(8,086)
Equity and stock index derivatives
OTC derivatives
213,078
18,803
(26,091)
232,050
10,628
(15,785)
Exchange traded derivatives
927,114
20,165
(20,521)
841,994
10,178
(10,849)
Equity and stock index derivatives
1,140,192
38,968
(46,612)
1,074,044
20,806
(26,634)
Commodity derivatives
OTC derivatives
4,244
89
(110)
7,327
303
(256)
Exchange traded derivatives
113,209
1,331
(1,283)
106,142
838
(861)
Commodity derivatives
117,453
1,420
(1,393)
113,469
1,141
(1,117)
Derivative assets/(liabilities) held for trading
42,515,577
302,429
(299,637)
41,778,195
229,459
(228,338)
Total OTC derivatives
19,617,360
278,328
(275,245)
18,180,570
213,272
(211,641)
Total derivatives cleared by central counterparty
18,871,894
2,231
(2,225)
17,589,021
3,908
(3,691)
Total exchange traded derivatives
4,026,323
21,870
(22,167)
6,008,604
12,279
(13,006)
Derivative assets/(liabilities) held for trading
42,515,577
302,429
(299,637)
41,778,195
229,459
(228,338)
Derivatives held for risk management
Derivatives designated as cash flow hedges
Currency Swaps
1,000
67
-
-
-
-
Interest rate swaps
1,819
49
-
2,085
28
(1)
Interest rate derivatives cleared by central counterparty
43,499
-
-
43,594
-
-
Derivatives designated as cash flow hedges
46,318
116
-
45,679
28
(1)
Derivatives designated as fair value hedges
Interest rate swaps
7,986
123
(943)
7,619
124
(601)
Forward foreign exchange
-
-
-
-
-
-
Interest rate derivatives cleared by central counterparty
54,933
-
-
55,319
-
-
Derivatives designated as fair value hedges
62,919
123
(943)
62,938
124
(601)
Derivatives designated as hedges of net investments
Forward foreign exchange
791
25
-
1,145
30
-
Derivatives designated as hedges of net investments
791
25
-
1,145
30
-
Derivative assets/(liabilities) held for risk management
110,028
264
(943)
109,762
182
(602)
Total OTC derivatives
11,596
264
(943)
10,849
182
(602)
Total derivatives cleared by central counterparty
98,432
-
-
98,913
-
-
Derivative assets/(liabilities) held for risk management
110,028
264
(943)
109,762
182
(602)
Hedge accounting
Hedge accounting is applied predominantly for the following risks:
◾
inflation risk for certain types of investments.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2020 Annual Report on Form 20 -F 134
◾
At a consolidated level, currency risk also arises when the functional currency of subsidiaries are different from the parent.
◾
not hedge inflation risk that arises from other activities.
In order to hedge these risks, the Barclays Bank Group uses the following hedging instruments:
◾
◾
◾
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:
◾
◾
◾
◾
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 predominant 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 accounting 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 currency 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:
◾
◾
◾
period falls below the amount of the hedging instrument.
◾
◾
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 for 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 already applied within the financial reporting).
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2020 Annual Report on Form 20 -F 135
The following table summarises the significant hedge accounting exposures impacted by the IBOR reform as at 31 December 2020:
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)
20,796
20,621
USD LIBOR
Secured Overnight Financing Rate (SOFR)
23,618
22,151
Euro Overnight Index Average (EONIA)
Euro Short-Term Rate (€STR)
1,912
1,912
JPY LIBOR
Tokyo Overnight Average (TONA)
1,404
1,404
CHF LIBOR
Swiss Average Rate Overnight (SARON)
145
145
All Other IBORs
Various Other RFRs
111
111
Total IBOR Notionals
47,986
46,344
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2020 Annual Report on Form 20 -F 136
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
2020
Assets
Loans and advances at amortised cost
- Interest rate risk
835
99
2
55
-
- Inflation risk
545
345
-
25
3
Debt securities classified as amortised cost
- Interest rate risk
1,440
23
-
17
(7)
- Inflation risk
4,071
(43)
-
453
3
Financial assets at fair value through other comprehensive
income
- Interest rate risk
27,959
964
322
864
(33)
- Inflation risk
7,782
319
(9)
249
(9)
Total Assets
42,632
1,707
315
1,663
(43)
Liabilities
Debt securities in issue
- Interest rate risk
(26,978)
(1,477)
(414)
(797)
(6)
Total Liabilities
(26,978)
(1,477)
(414)
(797)
(6)
Total Hedged Items
15,654
230
(99)
866
(49)
2019
Assets
Loans and advances at amortised cost
- Interest rate risk
1,083
91
24
36
(1)
- Inflation risk
525
325
-
3
-
Debt securities classified as amortised cost
- Interest rate risk
600
-
-
-
-
- Inflation risk
2,258
(41)
-
(41)
1
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)
Total Assets
32,855
1,203
491
1,815
(28)
Liabilities
Debt securities in issue
- Interest rate risk
(32,304)
(782)
(460)
(938)
27
Total Liabilities
(32,304)
(782)
(460)
(938)
27
Total Hedged Items
551
421
31
877
(1)
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 2020 Annual Report on Form 20 -F 137
Amount, timing and uncertainty of future cash flows
The following table shows the fair value hedging instruments which are carried on the Barclays Bank Group’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 2020
Fair value
Interest rate risk
117
(164)
-
55,093
(185)
17,697
Inflation risk
6
(779)
-
7,826
(730)
1,487
Total
123
(943)
-
62,919
(915)
19,184
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
Total
124
(601)
-
62,938
(878)
39,150
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
2026 and later
As at 31 December 2020
£m
£m
£m
£m
£m
£m
£m
Barclays Bank Group
Fair value hedges of:
Interest rate risk (outstanding notional amount)
55,093
51,499
44,596
37,615
30,174
26,054
23,859
Inflation risk (outstanding notional amount)
7,826
7,020
6,368
5,524
4,525
3,536
2,910
For Barclays Bank Group, there are 586 (2019: 876) interest rate risk fair value hedges with an average fixed rate of 1.2% (2019: 1.6%) across the
relationships and 70 (2019: 82) inflation risk fair value hedges with an average rate of 0.52% (2019: 0.8%) across the relationships.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2020 Annual Report on Form 20 -F 138
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
comprehensi
ve income
Hedge
ineffectivene
ss
recognised
in the income
statement
a
Description of hedge relationship and hedged risk
£m
£m
£m
£m
£m
£m
£m
2020
Cash flow hedge of:
Interest rate risk
Loans and advances at amortised cost
(1,260)
(758)
-
(780)
-
(1,260)
40
Foreign exchange risk
Loans and advances at amortised cost
(70)
(15)
-
-
-
(70)
-
Inflation risk
Debt securities classified at amortised cost
(41)
(65)
-
-
-
(41)
1
Total cash flow hedges
(1,371)
(838)
-
(780)
-
(1,371)
41
Hedge of net investment in foreign
operations
USD foreign operations
(83)
-
1,097
-
-
(83)
-
EUR foreign operations
(2)
-
16
-
-
(2)
-
Other foreign operations
(9)
-
55
-
162
(9)
-
Total foreign operations
(94)
-
1,168
-
162
(94)
-
2019
Cash flow hedge of:
Interest rate risk
Loans and advances at amortised cost
(826)
(142)
-
(366)
-
(802)
(10)
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
-
Note
a Hedge ineffectiveness is recognised in net interest income.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2020 Annual Report on Form 20 -F 139
The following table shows the cash flow and net investment hedging instruments which are carried on the Barclays Bank Group’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 2020
Cash flow
Interest rate risk
47
-
-
42,520
1,300
27,160
Foreign exchange risk
67
-
-
1,000
70
-
Inflation risk
2
-
-
2,798
42
-
Total
116
-
-
46,318
1,412
27,160
Net investment
Foreign exchange risk
25
-
(4,832)
5,623
94
-
As at 31 December 2019
Cash flow
Interest rate risk
24
(1)
-
44,421
816
26,896
Inflation risk
4
-
-
1,258
31
-
Total
28
(1)
-
45,679
847
26,896
Net investment
Foreign exchange risk
30
-
(8,076)
9,221
(282)
-
For Barclays Bank Group, there is 1 (2019: 0) foreign exchange risk cash flow hedge with an average foreign exchange rate of JPY133.03: GBP
(2019: 0).
The Group’s risk 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. Further information on the group’s risk
exposure and response can be found in Note 40.
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
2020
2019
Amount recycled from
other comprehensive
income due to hedged
item affecting income
statement
Amount recycled from
other comprehensive
income due to sale of
investment, or cash flows
no longer expected to
occur
Amount recycled from other
comprehensive income due
to hedged item affecting
income statement
Amount recycled from other
comprehensive income due
to sale of investment, or
cash flows no longer
expected to occur
Description of hedge relationship and hedged risk
£m
£m
£m
£m
Cash flow hedge of interest rate risk
Recycled to net interest income
239
37
105
36
Cash flow hedge of foreign exchange risk
Recycled to net interest income
55
–
–
–
Hedge of net investment in foreign
operations
Recycled to other income
–
(4)
–
(15)
14 Financial assets at fair value through other comprehensive income
Accounting for financial assets at fair value through other comprehensive income (FVOCI)
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 comprehensive 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 included in net investment income (Note 6).
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.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2020 Annual Report on Form 20 -F 140
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 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 made
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.
Barclays Bank Group
2020
2019
£m
£m
Debt securities and other eligible bills
51,710
44,781
Equity securities
1
1
Loans and advances
191
624
Financial assets at fair value through other comprehensive income
51,902
45,406
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 investment income (Note 6).
Movements in own credit are reported through other comprehensive income,
unless the effects of changes in the liability's credit risk would create 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. The 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 Group 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 at for financial liabilities designated at fair value are described in Note 16.
Barclays Bank Group
2020
2019
Fair value
Contractual
amount due
on maturity
Fair value
Contractual
amount due
on maturity
£m
£m
£m
£m
Debt securities
50,216
57,650
49,559
56,891
Deposits
21,718
22,120
25,526
25,725
Repurchase agreements and other similar secured borrowing
177,455
177,513
128,686
128,845
Other financial liabilities
237
237
675
675
Financial liabilities designated at fair value
249,626
257,520
204,446
212,136
The cumulative own credit net loss recognised for Barclays Bank Group is £954m (2019: £373m).
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 value 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
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2020 Annual Report on Form 20 -F 141
technique whose inputs include only data from observable markets, then the instrument should be recognised at the fair value derived from such
observable market data.
For valuations that have made use of unobservable inputs, the difference between the model valuation and the initial transaction price (Day One
profit) is recognised in profit or loss either: on a straight-line basis over the term of the transaction; or over the period until all model inputs will
become observable where appropriate; or released in full when previously unobservable inputs become observable.
Various factors influence the availability of observable inputs and these may vary from product to product and change over time. Factors include
the depth of activity in the relevant market, the type of product, whether the product is new and not widely traded in the marketplace, the
maturity of market modelling and the nature of the transaction (bespoke or generic). To the extent that valuation is based on models or inputs
that are not observable in the market, the determination of fair value can be more subjective, dependent on the significance of the unobservable
input to the overall valuation. Unobservable inputs are determined based on the best information available, for example by reference to similar
assets, similar maturities or other analytical techniques.
The sensitivity of valuations used in the financial statements to possible changes in significant unobservable inputs is shown on page 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 where the quoted price is readily available, and the price represents
actual and regularly occurring market transactions. An active market is one in which transactions occur with sufficient volume and frequency to
provide pricing information on an ongoing basis.
Valuation technique using observable inputs – Level 2
Assets and liabilities classified as Level 2 have been valued using models whose inputs are observable 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.
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
2020
2019
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
60,619
65,182
1,863
127,664
59,968
51,105
2,264
113,337
Financial assets at fair value through the
income statement
4,439
162,930
4,392
171,761
10,300
115,008
4,162
129,470
Derivative financial assets
9,154
289,071
4,468
302,693
5,439
221,048
3,154
229,641
Financial assets at fair value through
other comprehensive income
12,150
39,599
153
51,902
11,577
33,400
429
45,406
Investment property
-
-
10
10
-
-
13
13
Total assets
86,362
556,782
10,886
654,030
87,284
420,561
10,022
517,867
Trading portfolio liabilities
(23,331)
(22,780)
(28)
(46,139)
(19,645)
(15,567)
-
(35,212)
Financial liabilities designated at fair
value
(159)
(249,126)
(341)
(249,626)
(82)
(204,021)
(343)
(204,446)
Derivative financial liabilities
(8,762)
(285,579)
(6,239)
(300,580)
(5,305)
(219,646)
(3,989)
(228,940)
Total liabilities
(32,252)
(557,485)
(6,608)
(596,345)
(25,032)
(439,234)
(4,332)
(468,598)
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2020 Annual Report on Form 20 -F 142
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
2020
2019
Assets
Liabilities
Assets
Liabilities
Barclays Bank Group
£m
£m
£m
£m
Interest rate derivatives
1,613
(1,615)
605
(812)
Foreign exchange derivatives
144
(143)
291
(298)
Credit derivatives
196
(351)
539
(342)
Equity derivatives
2,497
(4,112)
1,710
(2,528)
Commodity derivatives
18
(18)
9
(9)
Corporate debt
698
(3)
521
-
Reverse repurchase and repurchase agreements
-
(174)
-
(167)
Non-asset backed loans
3,093
-
3,280
-
Asset backed securities
767
(24)
756
-
Equity cash products
542
-
1,228
-
Private equity investments
84
-
112
-
Other
a
1,234
(168)
971
(176)
Total
10,886
(6,608)
10,022
(4,332)
Note
a Other includes commercial real estate loans, funds and fund -linked products, issued debt, government sponsored debt and investment property.
Valuation techniques and sensitivity analysis
Sensitivity analysis is performed on products with significant unobservable inputs (Level 3) to generate a range of reasonably possible
alternative valuations. The sensitivity methodologies applied take account of the nature of the valuation techniques used, as well as the
availability and reliability of observable proxy and historical data and the impact of using alternative models.
Sensitivities are dynamically calculated on a monthly basis. The calculation is based on range or spread data of a reliable reference source or a
scenario based on relevant market analysis alongside the impact of using alternative models. Sensitivities are calculated without reflecting the
impact of any diversification in the portfolio.
The valuation techniques used, observability and sensitivity analysis for material products within Level 3, are described below.
Interest rate derivatives
Description:
caps, 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:
underlying. Unobservable inputs are generally set by referencing liquid market instruments and applying extrapolation techniques or inferred via
another reasonable method.
Foreign exchange derivatives
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:
rates, 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 tec hniques, or inferred
via another reasonable method.
Credit derivatives
Description:
(e.g. a securitised product). The category includes single name and index credit default swaps (CDS) and total return swaps (TRS).
Valuation:
directly from broker data, third party vendors or priced to proxies.
Observability:
considered 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.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2020 Annual Report on Form 20 -F 143
Equity derivatives
Description
: Exchange traded or OTC derivatives linked to equity indices and single names. The category includes vanilla and exotic equity
products.
Valuation:
rates, equity repurchase curves and, for multi-asset products, correlations.
Observability:
Unobservable inputs are set by referencing liquid market instruments and applying extrapolation techniques, or inferred via another reasonable
method.
Commodity derivatives
Description:
agricultural, power and natural gas.
Valuation:
modelling techniques. Valuation inputs include forward curves, volatilities implied from market observable inputs and correlations.
Observability:
for each input and underlying. Unobservable inputs are set with reference to similar observable products, or by applying extrapolation
techniques to observable inputs.
Corporate debt
Description:
Valuation:
sources.
Observability:
bond yields or CDS spreads for actively traded instruments issued by or referencing the same (or a similar) issuer.
Level 3 sensitivity:
the 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:
incorporating funding costs, the level of comparable assets such as gilts, issuer credit quality and other factors.
Asset backed securities
Description:
mortgage 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:
cash flow analysis, the instrument is considered unobservable.
Equity cash products
Description:
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2020 Annual Report on Form 20 -F 144
Valuation:
Observability:
by 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 participants and have been consistently
applied over time.
Observability:
Unobservable inputs include earnings estimates, multiples of comparative companies, marketability discounts and discount rates.
Other
Description:
investment property.
Assets and liabilities reclassified between Level 1 and Level 2
During the period, there were no material transfers between Level 1 to Level 2. (2019: 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 2020 Annual Report on Form 20 -F 145
Analysis of movements in Level 3 assets and liabilities
As at 1
January
2020
Total gains and
losses in the period
recognised in the
income statement
Total gains
or losses
recognised
in OCI
Transfers
As at 31
December
2020
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
120
77
(6)
(35)
12
(17)
151
Non-asset backed loans
974
1,955
(2,182)
(12)
(10)
39
(55)
709
Asset backed securities
656
458
(428)
(40)
(25)
99
(34)
686
Equity cash products
392
5
(149)
(41)
11
(4)
214
Other
122
(21)
2
103
Trading portfolio assets
2,264
2,495
(2,765)
(52)
(132)
163
(110)
1,863
Non-asset backed loans
1,964
1,102
(283)
(293)
142
(352)
2,280
Equity cash products
835
9
(404)
(93)
(36)
9
320
Private equity investments
113
2
(20)
(1)
(9)
15
(12)
88
Other
1,250
3,716
(3,606)
(26)
32
(48)
386
1,704
Financial assets at fair value
through the income statement
4,162
4,829
(4,313)
(320)
81
(93)
410
(364)
4,392
Non-asset backed loans
343
(237)
106
Asset backed securities
86
(35)
(4)
47
Financial assets at fair value
through other comprehensive
income
429
(35)
(237)
(4)
153
Investment property
13
(2)
(1)
10
Trading portfolio liabilities
(27)
(1)
(28)
Financial liabilities designated
at fair value
(343)
1
(21)
1
21
(38)
38
(341)
Interest rate derivatives
(206)
17
(12)
85
109
(18)
23
(2)
Foreign exchange derivatives
(7)
21
(16)
(19)
22
1
Credit derivatives
198
(125)
24
(371)
24
(21)
116
(155)
Equity derivatives
(820)
(699)
(43)
105
(101)
(13)
(44)
(1,615)
Net derivative financial
instruments
a
(835)
(807)
(31)
(160)
16
(71)
117
(1,771)
Total
5,690
6,490
(7,145)
(21)
(768)
(15)
(94)
(4)
464
(319)
4,278
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2020 Annual Report on Form 20 -F 146
Analysis of movements in Level 3 assets and liabilities
As at 1
January
2019
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
2019
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
Note
a The derivative financial instruments are represented on a net basis. On a gross basis, derivative financial assets are £4,468m (2019: £3,154m) and derivative financial
liabilit ies are £6,239m (2019: £3,989m).
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2020 Annual Report on Form 20 -F 147
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
2020
2019
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
(114)
-
-
(114)
(57)
-
-
(57)
Financial assets at fair value through the income
statement
115
(89)
-
26
101
199
-
300
Fair value through other comprehensive income
-
-
(1)
(1)
-
-
60
60
Investment property
-
(1)
-
(1)
-
(1)
-
(1)
Trading portfolio liabilities
-
-
-
-
-
-
-
-
Financial liabilities designated at fair value
20
(1)
-
19
64
-
-
64
Net derivative financial instruments
(91)
-
-
(91)
(459)
-
-
(459)
Total
(70)
(91)
(1)
(162)
(351)
198
60
(93)
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
2020
Range
2019
Range
Min
Max
Min
Max
Units
b
Derivative financial
instruments
c
Interest rate derivatives
Discounted cash flows
Inflation forwards
1
3
1
3
%
Credit spread
17
1,831
41
1,620
bps
Comparable pricing
Price
-
84
-
37
points
Option model
Inflation volatility
31
227
47
190
bps vol
Interest rate volatility
6
489
8
431
bps vol
FX - IR correlation
(30)
78
(30)
78
%
IR - IR correlation
(20)
99
(30)
100
%
Credit derivatives
Discounted cash flows
Credit spread
5
480
72
200
bps
Comparable pricing
Price
-
100
-
155
points
Equity derivatives
Option model
Equity volatility
1
110
1
200
%
Equity - equity correlation
(45)
100
(20)
100
%
Discounted cash flow
Discounted margin
(225)
3,000
(500)
1,100
bps
Non-derivative financial
instruments
Non-asset backed loans
Discounted cash flows
Loan spread
32
477
31
624
bps
Credit spread
200
300
180
1,223
bps
Price
-
104
-
133
points
Yield
5
8
6
12
%
Comparable pricing
Price
-
137
-
123
points
Asset backed securities
Comparable pricing
Price
-
112
-
99
points
Corporate debt
Comparable pricing
Price
-
127
-
100
points
Other
d
Discounted cash flows
Credit spread
146
483
126
649
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 i nput into the calculation of the Credit Valuation Adjustment for the instruments. The
range of significant unobservable credit spreads is between 17-1,831bps (2019: 41-1,620bps).
d Other includes commercial real estate loans.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2020 Annual Report on Form 20 -F 148
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.
Credit spread
Credit spreads typically represent the difference in yield between an instrument and a benchmark security or reference rate. Credit spreads
reflect the additional yield that a market participant demands for taking on exposure to the credit risk of an instrument and form part of the yield
used in a discounted cash flow calculation.
In general, a significant increase in credit spread in isolation will result in a movement in 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. Correlation 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 change 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 32bps
to 477bps (2019: 31bps to 624bps), the vast majority of spreads are concentrated towards the bottom end of this range, with 98% 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 2020 Annual Report on Form 20 -F 149
Sensitivity analysis of valuations using unobservable inputs
2020
2019
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
82
-
(123)
-
44
-
(127)
-
Foreign exchange derivatives
6
-
(11)
-
5
-
(7)
-
Credit derivatives
55
-
(44)
-
73
-
(47)
-
Equity derivatives
174
-
(179)
-
114
-
(119)
-
Commodity derivatives
2
-
(2)
-
-
-
-
-
Corporate debt
16
-
(14)
-
11
-
(16)
-
Non asset backed loans
104
3
(190)
(3)
125
8
(228)
(8)
Equity cash products
158
-
(141)
-
123
-
(175)
-
Private equity investments
15
-
(15)
-
16
-
(25)
-
Other
a
21
-
(21)
-
1
-
(1)
-
Total
633
3
(740)
(3)
512
8
(745)
(8)
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 £636m (2019: £520m) or to decrease fair values by up to £743m (2019: £753m) with
substantially all the potential effect impacting profit and loss rather than reserves.
Fair value adjustments
Key balance sheet valuation adjustments are quantified below:
2020
2019
£m
£m
Exit price adjustments derived from market bid-offer spreads
(483)
(420)
Uncollateralised derivative funding
(115)
(57)
Derivative credit valuation adjustments
(268)
(135)
Derivative debit valuation adjustments
113
155
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, bid-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-offer spreads have increased by £63m to £483m
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 £115m is applied to account for the impact of incorporating the cost of funding into the valuation of uncollateralised
and partially collateralised derivative portfolios and collateralised derivatives where the terms of the agreement do not allow the
rehypothecation of collateral received. This adjustment is referred to as the Funding Fair Valu e Adjustment (FFVA). FFVA has increased by
£58m to £115m as a result of moves in input funding spreads and an update to methodology.
FFVA incorporates a scaling factor which is an estimate of the extent to which the cost of funding is incorporated into observed traded levels.
On calibrating the scaling factor, it is with the assumption that Credit Valuation Adjustments (CVA) and Debit Valuation Adjustments (DVA) are
retained as valuation components incorporated into such levels.
The effect of incorporating this scaling factor at 31 December 2020 was to
reduce FFVA by £115 m (2019: £170m).
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2020 Annual Report on Form 20 -F 150
Derivative credit and debit valuation adjustments
CVA and DVA are incorporated into derivative valuations to reflect the impact on fair value of counterparty 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.
Exposure 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 £32m (2019: £36m) increase in CVA.
CVA increased by £133m to £268m as a result of an increased uncollateralised and partially collateralised derivative asset and widening input
counterparty credit spreads. DVA decreased by £42m to £113m, as a result of an update to methodology partially offset by widening input own
credit spreads.
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.
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
and liabilities. Instruments are measured using the price that would be received to sell a net long position (i.e. an asset) for a particular risk
exposure or to transfer a net short position (i.e. a liability) for a particular risk exposure in an orderly transaction between market participants at
the balance sheet date under current market conditions. Accordingly, 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 m easurement date.
Unrecognised gains as a result of the use of valuation models using unobservable inputs
The amount that has yet to be recognised in income that relates to the difference between the transaction price (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 £103m (2019: £100m) for financial instruments measured at fair value and £30m (2019: £31m) for
financial instruments carried at amortised cost. The increase in financial instruments measured at fair value of £3m (2019: £27m decrease) was
driven by additions of £26m (2019: £40m) and £23m (2019: £67m) of amortisation and releases. The decrease of £1m (2019: £nil) in financial
instruments carried at amortised cost was driven by £2m (2019: £2m) of amortisation and releases offset by additions of £1m (2019: £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 £1,494m (2019: £3,218m).
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 balance
sheet:
Barclays Bank Group
2020
2019
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
134,267
134,537
8,824
65,267
60,446
141,636
141,251
6,827
69,289
63,133
Reverse repurchase
agreements and other similar
secured lending
8,981
8,981
-
8,981
-
1,731
1,731
-
1,731
-
Financial liabilities
Deposits at amortised cost
(244,696)
(244,738)
(165,909)
(78,769)
(60)
(213,881)
(213,897)
(135,398)
(78,494)
(5)
Repurchase agreements and
other similar secured borrowing
(10,443)
(10,443)
-
(10,443)
-
(2,032)
(2,032)
-
(2,032)
-
Debt securities in issue
(29,423)
(29,486)
-
(27,630)
(1,856)
(33,536)
(33,529)
-
(31,652)
(1,877)
Subordinated liabilities
(32,005)
(33,356)
-
(33,356)
-
(33,425)
(34,861)
-
(34,861)
-
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
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2020 Annual Report on Form 20 -F 151
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 rates.
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 value 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.
Repurchase 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.
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:
◾
◾
agreements that are subject to enforceable master netting arrangements or similar agreements, but do not qualify for balance 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 arrangements.
Notes to the financial statements
Assets and liabilities held at fair value
Barclays Bank PLC 2020 Annual Report on Form 20 -F 152
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 2020
£m
£m
£m
£m
£m
£m
£m
£m
Derivative financial assets
342,896
(44,305)
298,591
(233,088)
(47,820)
17,683
4,102
302,693
Reverse repurchase agreements
and other similar secured lending
e
448,377
(305,749)
142,628
-
(142,244)
384
4,911
147,539
Total assets
791,273
(350,054)
441,219
(233,088)
(190,064)
18,067
9,013
450,232
Derivative financial liabilities
(333,748)
41,982
(291,766)
233,088
46,592
(12,086)
(8,814)
(300,580)
Repurchase agreements and
other similar secured borrowing
e
(475,616)
305,749
(169,867)
-
169,867
-
(18,031)
(187,898)
Total liabilities
(809,364)
347,731
(461,633)
233,088
216,459
(12,086)
(26,845)
(488,478)
As at 31 December 2019
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)
Notes
a Amounts offset for derivative financial assets additionally includes cash collateral netted of £4,990m (2019: £4,099m). Amounts offset for derivative financial liabilities
additionally includes cash collateral netted of £7,313m (2019: £5,465 m). Settlements assets and liabilities have been offset amounting to £18,143 m (2019: £14,079 m).
b Financial collateral of £47,820m (2019: £38,872m) was received in respect of derivative assets, including £43,164 m (2019: £33,469 m) of cash collateral and £4,656m (2019:
£5,403m) of non-cash collateral. Financial collateral of £46,592m (2019: £38,343 m) was placed in respect of derivat ive liabilities, including £42,518 m (2019: £35,423 m) of
cash collateral and £4,074 m (2019: £ 2,920 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 £147,539m (2019: £99,554 m) is split by fair value £138,558m (2019: £97,823 m) and amortised cost
£8,981m (2019: £1,731m). Repurchase agreements and other similar secured borrowing of £187,898 m (2019: £130,718 m) is split by fair value £177,455m (2019: £128,686 m)
and amortised cost £10,443m (2019: £ 2,032 m).
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 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 pages 38 and 39.
Notes to the financial statements
Assets at amortised cost and other investments
Barclays Bank PLC 2020 Annual Report on Form 20 -F 153
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 76 to 85.
18 Loans and advances and deposits at amortised cost
Accounting for loans and advances and deposits held at amortised cost
Loans and advances to customers and banks, customer accounts, debt securities and most financial liabilities, are held at amortised cost. That
is, the initial fair value (which is normally the amount advanced or borrowed) is adjusted for repayments and the amortisation of coupon, fees
and expenses to represent the effective interest rate of the asset or liability. 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.
Loans and advances and deposits at amortised cost
Barclays Bank Group
2020
2019
As at 31 December
£m
£m
Loans and advances at amortised cost to banks
9,003
9,722
Loans and advances at amortised cost to customers
110,101
121,015
Debt securities at amortised cost
15,163
10,899
Total loans and advances at amortised cost
134,267
141,636
Deposits at amortised cost from banks
17,348
18,144
Deposits at amortised cost from customers
227,348
195,737
Total deposits at amortised cost
244,696
213,881
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 impairment, 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 following 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%
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.
Notes to the financial statements
Assets at amortised cost and other investments
Barclays Bank PLC 2020 Annual Report on Form 20 -F 154
Barclays Bank Group
Investment
property
Property
Equipment
Leased assets
Right of use
assets
a
Total
£m
£m
£m
£m
£m
£m
Cost
As at 1 January 2020
13
1,635
1,071
9
621
3,349
Additions
-
39
35
-
28
102
Disposals
(1)
(25)
(88)
(9)
(6)
(129)
Exchange and other movements
(2)
(30)
(31)
-
45
(18)
As at 31 December 2020
10
1,619
987
-
688
3,304
Accumulated depreciation and impairment
As at 1 January 2020
-
(697)
(866)
(9)
(146)
(1,718)
Depreciation charge
-
(72)
(61)
-
(77)
(210)
Impairment charge
-
-
-
-
(2)
(2)
Disposals
-
22
84
9
1
116
Exchange and other movements
-
17
22
-
8
47
As at 31 December 2020
-
(730)
(821)
-
(216)
(1,767)
Net book value
10
889
166
-
472
1,537
Cost
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 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
Note
a Right of use (ROU) asset balances relate to Property Leases under IFRS 16. Refer to Note 20 for further details.
Property rentals of £8m (2019: £10m) have been included in other income within The 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 appropriately qualified independent valuers. Refer to
Note 16 for further details.
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 agreement within the scope of IAS 38
Intangible Assets,
Agriculture
oil, 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:
◾
◾
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 change in the one of the following:
◾
◾
◾
When the lease liability is remeasured a corresponding adjustment is made to the carrying amount of the ROU asset, or is recorded in the
income statement if the carrying amount of the ROU asset has been reduced to nil.
Notes to the financial statements
Assets at amortised cost and other investments
Barclays Bank PLC 2020 Annual Report on Form 20 -F 155
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
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
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 Group 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 another 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.
The following table sets out a maturity analysis of lease receivables, showing the lease payments to be received after the reporting date:
2020
2019
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
One to two year
-
-
-
-
909
(76)
833
53
Two to three year
-
-
-
-
593
(49)
544
45
Three to four year
-
-
-
-
354
(28)
326
43
Four to five year
-
-
-
-
123
(8)
115
19
Over five years
-
-
-
-
115
(17)
98
22
Total
-
-
-
-
3,497
(293)
3,204
259
investment in finance lease receivables. The remaining balance was transferred to the Barclays Group during the year. The Barclays Bank
Group does not have any material operating leases as a lessor.
There is no impairment allowance for finance lease receivables in current year (2019: £55m).
Finance lease income
Finance lease income is included within interest income. The following table shows amounts recognised in the income statement during the
year.
Notes to the financial statements
Assets at amortised cost and other investments
Barclays Bank PLC 2020 Annual Report on Form 20 -F 156
2020
2019
£m
£m
Finance income from net investment in lease
10
141
(Loss)/Profit on sales
(27)
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, the Barclays Bank Group will sublease property to third parties when it is no longer
needed to meet business requirements. Currently, the 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 has not recognised any expense related to short term leases during the year (2019: £3m). The portfolio of short term
leases to which the Barclays Bank Group is exposed at the end of the year is not dissimilar to the expenses recognised in the year.
Lease liabilities
2020
2019
£m
£m
As at 1 January
529
569
Interest expense
23
25
New leases
27
43
Disposals
(5)
(7)
Cash payments
(114)
(106)
Exchange and other movements
55
5
As at 31 December (see Note 22)
515
529
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
2020
2019
£m
£m
Not more than one year
91
112
One to two years
70
86
Two to three years
60
66
Three to four years
58
57
Four to five years
55
52
Five to ten years
227
199
Greater than ten years
68
84
Total undiscounted lease liabilities as at 31 December
629
656
In addition to the cash flows identified above, the Barclays Bank Group is exposed to:
◾
Currently, the Barclays Bank Group has 59 leases (2019: 71 leases) out of the total 121 leases (2019: 143 leases) which have variable lease
payment terms based on market based pricing adjustments. Of the gross cash flows identified above, £121m (2019: £403m) is attributable to
leases with some degree of variability predominately linked to market based pricing adjustments.
◾
including assumptions regarding the exercising of contractual extension and termination options. The above gross cash flows have been
reduced by £395m (2019: £408m) for leases where the Barclays Bank Group are highly expected to exercise an early termination option.
However, there is no significant impact where the 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.
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.
Notes to the financial statements
Assets at amortised cost and other investments
Barclays Bank PLC 2020 Annual Report on Form 20 -F 157
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 inherent risks, of the CGU to which the goodwill relates, or the CGU’s fair value if this is higher.
Intangible assets
Intangible assets other than goodwill are accounted for in accordance with IAS 38
Intangible Assets
.
Intangible assets are initially recognised when they are separable or arise from contractual or other legal rights, the cost can be measured
reliably and, in the case of intangible assets not acquired in a business combination, where it is probable that future economic benefits
attributable to the assets will flow from their use.
For internally generated intangible assets, only costs incurred during the development phase are capitalised. Expenditures in the research
phase are expensed when it is incurred.
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
12 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. Intangible assets not yet available
for use are reviewed annually for impairment.
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 2020
Additions and disposals
(77)
-
Exchange and other movements
(5)
(60)
(46)
(21)
(128)
As at 31 December 2020
Accumulated amortisation and impairment
As at 1 January 2020
(111)
(870)
(54)
(1,159)
(340)
(2,534)
Disposals
-
Amortisation charge
-
(132)
(8)
(40)
(31)
(211)
Impairment charge
-
(18)
-
-
-
(18)
Exchange and other movements
-
(2)
As at 31 December 2020
(68)
(964)
(55)
(1,158)
(352)
(2,597)
Net book value
Notes to the financial statements
Assets at amortised cost and other investments
Barclays Bank PLC 2020 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 2019
445
1,342
100
1,540
532
3,959
Additions and disposals
(33)
133
(15)
(128)
(39)
(82)
Exchange and other movements
(6)
(45)
(4)
(41)
(35)
(131)
As at 31 December 2019
406
1,430
81
1,371
458
3,746
Accumulated amortisation and impairment
As at 1 January 2019
(111)
(812)
(78)
(1,277)
(354)
(2,632)
Disposals
-
63
31
128
36
258
Amortisation charge
-
(154)
(13)
(44)
(34)
(245)
Impairment charge
-
(2)
-
-
-
(2)
Exchange and other movements
-
35
6
34
12
87
As at 31 December 2019
(111)
(870)
(54)
(1,159)
(340)
(2,534)
Net book value
295
560
27
212
118
1,212
Goodwill
Goodwill is allocated to business operations according to business segments as follows:
Barclays Bank Group
2020
2019
£m
£m
Consumer, Cards and Payments
256
295
Total net book value of goodwill
256
295
2020 impairment review
The 2020 impairment review was performed during Q4 2020. Given the change in the macroeconomic and interest rate outlook, this review was
performed across all material CGUs. A detailed assessment has been performed, with the approach and results of this analysis set out below.
Determining the carrying value of CGUs
The Carrying Value for each CGU is the sum of the tangible equity, goodwill and intangible balances associated with that CGU.
The Barclays Bank Group manages the assets and liabilities of its CGUs with reference to tangible equity of the respective businesses. That
tangible equity is derived from the level of risk weighted assets (RWAs) and capital required to be deployed in the CGU and therefore reflects its
relative risk, as well as the level of capital management consider a market participant would require to hold and retain to support business
growth.
The goodwill held across the Barclays Bank Group has been allocated to the CGU where it originated, based upon historical records. The
intangible balances are allocated to the CGUs based upon their expected usage of these assets.
Cash flows
The 5-year cash flows used in the calculation are based on the formally agreed medium term plans approved by the Board. These are prepared
using macroeconomic assumptions which management consider reasonable and supportable, and reflect business agreed initiatives for the
forecast period.
Discount rates
IAS 36 requires that the discount rate used in a value in use calculation reflects the pre-tax rate an investor would require if they were to choose
an investment that would generate similar cash flows to those that the entity expects to generate from the asset. In determining the discount
rate, management have identified the cost of equity associated with market participants that closely resemble our cash generating units and
adjusted them for tax to arrive at the pre-tax equivalent rate. A range of discount rates have been used across the CGU’s ranging from 12% to
16.3% (2019: 11.0% to 13.2%).
Terminal growth rate
The terminal growth rate is used to estimate the effect of projecting cash flows to the end of an asset’s useful economic life. It is management’s
judgement that the cash flows associated with the CGUs will grow in line with the major economies in which we operate. In prior years, the
growth rate used had been based upon estimated economic growth rates (GDP). Given macroeconomic uncertainty, inflation rates are now
considered a better approximation of future growth rates and are therefore the basis of terminal growth rates applied. The terminal growth rate
used is 2.0% (2019:1.5%).
Outcome of goodwill and intangibles review
Based on management’s plans and assumptions the value in use exceeds the carrying value of the CGUs and no impairment has been indicated.
Notes to the financial statements
Assets at amortised cost and other investments
Barclays Bank PLC 2020 Annual Report on Form 20 -F 159
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 regularly bought and sold.
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
Barclays Bank PLC 2020 Annual Report on Form 20 -F 160
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 obligation, 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
2020
2019
£m
£m
Accruals and deferred income
2,428
2,419
Other creditors
2,250
2,116
Items in the course of collection due to other banks
58
175
Lease liabilities (refer to Note 20)
515
529
Other liabilities
5,251
5,239
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 valid expectations in those affected by the restructuring by announcing its main features or starting to
implement the plan.
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 appropriate provision level. See below for information on payment protection
redress and Note 25 for more detail of legal, competition and regulatory matters.
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 1 January 2020
20
63
252
71
374
171
951
Additions
3
66
575
29
63
57
793
Amounts utilised
(4)
(54)
-
(16)
(162)
(53)
(289)
Unused amounts reversed
(13)
(26)
(28)
(10)
(45)
(46)
(168)
Exchange and other movements
-
(5)
(30)
(30)
(8)
(6)
(79)
As at 31 December 2020
6
44
769
44
222
123
1,208
Note
a Undrawn contractually committed facilities and guarantees provisions are accounted for under IFRS 9.
Provisions expected to be recovered or settled within no more than 12 months after 31 December 2020 for Barclays Bank Group were £787m
(2019: £739m).
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
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
Barclays Bank PLC 2020 Annual Report on Form 20 -F 161
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. For further information, refer to Credit Risk section
for loan commitments and financial guarantees on pages 53 to 55.
Customer redress
Customer redress provisions comprise the estimated cost of making redress payments to customers, clients and counterparties for losses or
damages associated with inappropriate judgement in the execution of the Barclays Bank Group’s business activities. There are no significant
individual customer redress provisions at 31 December 2020.
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
.
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
2020
2019
£m
£m
Guarantees and letters of credit pledged as collateral security
15,138
17,006
Performance guarantees, acceptances and endorsements
5,794
6,771
Total contingent liabilities
20,932
23,777
229
43
Documentary credits and other short-term trade related transactions
1,086
1,291
Standby facilities, credit lines and other commitments
263,936
268,736
Total commitments
265,022
270,027
9,248
17,660
Expected credit losses held against contingent liabilities and commitments equal £769m (2019: £252m) for Barclays Bank Group are reported in
Note 23.
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 faces 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 policies 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.
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
Barclays Bank PLC 2020 Annual Report on Form 20 -F 162
Investigations into certain advisory services agreements and related 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) conducted an investigation 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. In 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. Following the conclusion of the Serious
Fraud Office (SFO) proceedings against certain former Barclays executives resulting in their acquittals, the FCA proceedings, which were
stayed, have resumed. All charges 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 up to approximately £819m 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. The trial took
place in 2020 and the High Court has indicated that judgment is imminent. The outcome of the judgment, and any financial impact on the
Barclays Bank Group, is unknown. Barclays Bank PLC is defending the claim.
Investigations into LIBOR and other benchmarks and related civil actions
Regulators and law enforcement agencies, including certain competition authorities, from a number of governments have conducted
investigations relating to Barclays Bank PLC’s involvement in allegedly manipulating certain financial benchmarks, such as LIBOR. The SFO
closed its investigation with no action to be taken against the Barclays Group. Various individuals and corporates in a range of jurisdictions have
threatened or brought civil actions against the Barclays Group and other banks in relation to the alleged manipulation of LIBOR and/or other
benchmarks.
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 unspecified damages with the exception of three lawsuits, in which the plaintiffs are seeking a
combined total of approximately $900m 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 Bank PLC has previously settled certain
claims. Two class action settlements where Barclays Bank PLC has respectively paid $7.1m and $20m have received final court approval.
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 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, and, in 2020, the court dismissed the plaintiff’s
remaining CEA claims. The plaintiff has appealed the lower court’s dismissal of such claims.
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. The plaintiffs filed an amended complaint in 2020, and the defendants have filed a motion to dismiss.
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 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 were 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
LIBOR through defendants’ submissions to ICE. These actions have been consolidated. The defendants’ motion to dismiss was granted in
2020. The plaintiffs have appealed the dismissal. In August 2020, an ICE LIBOR-related action was filed in the US District Court for the Northern
District of California on behalf of individual borrowers and consumers of loans and credit cards with variable interest rates linked to USD ICE
LIBOR.
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 PLC) in the UK in connection with alleged manipulation of
��
UKLIBOR, EURIBOR and other benchmarks. Proceedings have also been brought in a number of other jurisdictions in Europe and Israel.
Additional proceedings in other jurisdictions may be brought in the future.
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
Barclays Bank PLC 2020 Annual Report on Form 20 -F 163
Foreign Exchange investigations 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 received final court approval in January 2017, the Barclays Group agreed to a term of probation of three
years, which expired in January 2020. 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 Competition 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 financial position.
Various individuals and corporates in a range of jurisdictions have threatened or brought civil actions against the Barclays Group and other
banks in relation to alleged manipulation of Foreign Exchange markets.
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. Some of the plaintiff’s claims were dismissed in
2020.
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 Action. 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. Barclays Bank PLC and BCI have
settled the claim, which has received final court approval. The financial impact of the settlement is not material to the Barclays Bank Group’s
operating results, cash flows or financial position.
Non-US FX civil actions
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.
These include two purported class actions filed against Barclays PLC, Barclays Bank PLC, BX, BCI and other financial institutions in the UK
Competition Appeal Tribunal in 2019 following the settlements with the European Commission described above. Also in 2019, a separate claim
was filed in the UK in the High Court of Justice by various banks and asset management firms against Barclays Bank PLC and other financial
institutions alleging breaches of European and UK competition laws related to FX trading.
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 the Antitrust Act 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, 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 repurchase 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 had an original 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.
In 2020, a civil litigation claim was filed in the New Mexico First Judicial District Court by the State of New Mexico against seven banks,
including BCI, on behalf of two New Mexico state pension funds and the New Mexico State Investment Council relating to legacy RMBS
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
Barclays Bank PLC 2020 Annual Report on Form 20 -F 164
purchases. As to BCI, the complaint alleges that the funds purchased approximately $22m in RMBS underwritten by BCI. The plaintiffs have
asserted claims under New Mexico state law, which provides for the ability to claim treble damages and civil penalties.
Government and agency securities civil actions and related matters
Certain governmental authorities have conducted 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. In January 2021, the Mexican Competition
Authority concluded its investigation into activities relating to the trading of Mexican government bonds and granted Barclays Bank Mexico S.A.
immunity from fines.
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 market 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, 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, which the plaintiffs have
appealed. The plaintiffs have voluntarily dismissed the other SDNY action.
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 bonds 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 consolidated, have been filed in the SDNY. In the SDNY class action, certain
of the plaintiff’s claims were dismissed in November 2020.
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 agreed to a settlement of $87m, which received final court approval in
2020. Separately, various entities in Louisiana, including the Louisiana Attorney General and the City of Baton Rouge, have commenced
litigation against Barclays Bank PLC and other financial institutions making similar allegations as the SDNY 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 Barclays Bank Group 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 for
$5.7m, which is subject to final court approval.
Odd-lot corporate bonds antitrust class action
In 2020, BCI, together with other financial institutions, were named as defendants in a putative class action. The complaint alleges a conspiracy
to boycott developing electronic trading platforms for odd-lots and price fixing. Plaintiffs demand unspecified money damages. The defendants
have filed a motion to dismiss.
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 Bank
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 2018 and 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.
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, the court ruled in 2018 that Barclays Bank PLC was not a defaulting party, which was affirmed on appeal. In
October 2020, the trial court granted Barclays Bank PLC’s motion for summary judgment on its counterclaims against BDC. BDC has appealed.
In 2011, BDC’s investment advisor, BDCM Fund Adviser, L.L.C. and its parent company, Black Diamond Capital L.L.C. also sued
��
Holdings,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.
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
Barclays Bank PLC 2020 Annual Report on Form 20 -F 165
Civil actions in respect 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
Iranian 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 three actions in the EDNY. Plaintiffs have appealed in one action. The court also granted
the defendants’ motion to dismiss another action in the SDNY. The remaining actions are stayed pending decisions in these cases.
Shareholder derivative action
A purported Barclays shareholder filed a putative derivative action in New York state court against BCI and a number of current and former
members of the Board of Directors of Barclays PLC and senior executives or employees of the Barclays Group. The shareholder filed the claim
on behalf of Barclays PLC, alleging that the individual defendants harmed the company through breaches of their duties under the Companies
Act 2006. The plaintiff seeks damages for the losses that Barclays PLC allegedly suffered.
Investigation into collections and recoveries relating to unsecured lending
Since 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. In December 2020, Barclays Bank UK
PLC and Barclays Bank PLC settled with the FCA and agreed to pay a total penalty of £26m.
Investigation into UK cards’ affordability
The FCA is investigating certain aspects of the affordability assessment processes used by Barclays Bank UK PLC and Barclays Bank PLC for
credit card applications ma de to Barclays’ UK credit card business. Barclays is providing information in cooperation with the investigation.
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 Tribu nal (Tax Chamber).
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 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 Bank PLC and Barclays Bank UK PLC have 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, intellectual property, 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 information, audits, investigations and legal and other
proceedings by regulators, governmental and other public bodies in connection with (but not limited to) consumer protection measures,
compliance with legislation and regulation, wholesale trading activity and other areas of banking and business activities in which the 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 matters 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 2020 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-controlling interests). For more
information on capital management and how the Barclays Bank Group maintains sufficient capital to meet our regulatory requirements refer to
page 42.
26 Subordinated liabilities
Accounting for subordinated liabilities
Subordinated liabilities are measured at amortised cost using the effective interest method under IFRS 9, unless they are irrevocably designated
at fair value through profit or loss at initial recognition because such designation eliminates or significantly reduces an accounting mismatch.
Refer to Note 15 for details about accounting for liabilities designated at fair value through profit or loss.
Barclays Bank Group
2020
2019
£m
£m
As at 1 January
33,425
35,327
Issuances
3,856
6,785
Redemptions
(5,954)
(7,804)
Other
678
(883)
As at 31 December
32,005
33,425
Issuances of £3,856m comprise £3,700m intra-group loans from Barclays PLC and £156m USD Floating Rate Notes issued externally by a
Barclays Bank PLC subsidiary.
Redemptions of £5,954m comprise £3,456m intra-group loans from Barclays PLC and £2,498m externally issued notes comprising a £1,126m
partial redemption of USD 7.625% Contingent Capital Notes and the redemption of £842m USD 5.14% Lower Tier 2 Notes and £158m 7.125%
Undated Subordinated Notes. Barclays Bank PLC subsidiaries redeemed £342m USD Floating Rate Notes and £30m USD Fixed Rate Notes.
Other movements predominantly include fair value hedge adjustments, partially offset by amortisation and foreign exchange movements.
Subordinated liabilities include accrued interest and comprise undated and dated subordinated liabilities as follows:
Barclays Bank Group
2020
2019
£m
£m
Undated subordinated liabilities
905
1,073
Dated subordinated liabilities
31,100
32,352
Total subordinated liabilities
32,005
33,425
None of the Barclays Bank Group’s subordinated liabilities are secured.
Notes to the financial statements
Capital instruments, equity and reserves
Barclays Bank PLC 2020 Annual Report on Form 20 -F 167
Undated subordinated liabilities
a
Barclays Bank Group
2020
2019
Initial call date
£m
£m
Barclays Bank PLC externally issued subordinated liabilities
Tier One Notes (TONs)
6% Callable Perpetual Core Tier One Notes
2032
17
16
6.86% Callable Perpetual Core Tier One Notes (USD 179m)
2032
205
203
Reserve Capital Instruments (RCIs)
5.3304% Step-up Callable Perpetual Reserve Capital Instruments
2036
56
53
Undated Notes
7.125% Undated Subordinated Notes
2020
-
165
6.125% Undated Subordinated Notes
2027
43
42
Junior Undated Floating Rate Notes (USD 38m)
Any interest payment
date
28
29
Undated Floating Rate Primary Capital Notes Series 1 (USD 167m)
Any interest payment
date
89
92
Undated Floating Rate Primary Capital Notes Series 2 (USD 295m)
Any interest payment
date
186
191
Undated Floating Rate Primary Capital Notes Series 3
Any interest payment
date
21
21
Bonds
9.25% Perpetual Subordinated Bonds (ex-Woolwich Plc)
2021
78
81
9% Permanent Interest Bearing Capital Bonds(GBP 40m)
At any time
44
44
Loans
5.03% Reverse Dual Currency Undated Subordinated Loan (JPY 8,000m)
2028
57
55
5% Reverse Dual Currency Undated Subordinated Loan (JPY 12,000m)
2028
83
81
Total undated subordinated liabilities
905
1,073
Note
a Instrument values are disclosed to the nearest million
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 behind 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 pari 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 market rate.
After the initial call date, in the event that they are not redeemed, the 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 market rates.
Payment of interest
Apart from the Junior Undated Floating Rate Notes, 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 immediately 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, During the year, Barclays Bank PLC paid interest on each of its Undated Notes, Bonds and Loans.
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 date of deferral of
such payment. Whilst such deferral is continuing, (i) neither Barclays Bank PLC nor Barclays PLC may declare or pay a dividend, subject to
certain exceptions, on any of its ordinary 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 being, 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, (i) neither Barclays Bank PLC
nor Barclays PLC may declare or pay a dividend, subject to certain exceptions, on any of their respective ordinary shares or preference shares,
Notes to the financial statements
Capital instruments, equity and reserves
Barclays Bank PLC 2020 Annual Report on Form 20 -F 168
or make payments of interest in respect of Barclays Bank PLC’s Reserve Capital Instruments and (ii) certain restrictions on the redemption,
purchase or reduction of their respective share capital and certain other securities also apply.
Repayment
All undated subordinated liabilities are repayable, at the option of Barclays Bank PLC generally in whole at the initial call date and on any
subsequent coupon or interest payment date or in the case of the 6.125% Undated Notes and the 9.25% Bonds on any fifth anniversary after
the initial call date. In addition, each issue of undated subordinated 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 consent of the PRA.
Other
All issues of undated subordinated liabilities are non-convertible.
Dated subordinated liabilities
a
Barclays Bank Group
2020
2019
Initial call date
Maturity date
£m
£m
Barclays Bank PLC externally issued subordinated liabilities
5.14% Lower Tier 2 Notes (USD 1,094m)
2020
-
832
6% Fixed Rate Subordinated Notes (EUR 1,500m)
2021
1,427
1,375
9.5% Subordinated Bonds (ex-Woolwich Plc)
2021
221
239
Subordinated Floating Rate Notes (EUR 100m)
2021
90
85
10% Fixed Rate Subordinated Notes
2021
2,108
2,157
10.179% Fixed Rate Subordinated Notes (USD 1,521m)
2021
1,101
1,123
Subordinated Floating Rate Notes (EUR 50m)
2022
45
43
6.625% Fixed Rate Subordinated Notes (EUR 1,000m)
2022
982
957
7.625% Contingent Capital Notes (USD 3,000m)
2022
1,189
2,453
Subordinated Floating Rate Notes (EUR 50m)
2023
45
42
5.75% Fixed Rate Subordinated Notes
2026
351
350
5.4% Reverse Dual Currency Subordinated Loan (JPY 15,000m)
2027
108
105
6.33% Subordinated Notes
2032
64
62
Subordinated Floating Rate Notes (EUR 68m)
2040
61
58
External issuances by other subsidiaries
2025
146
358
Barclays Bank PLC notes issued intra-group to Barclays PLC
2% Fixed Rate Subordinated Callable Notes (EUR 1,500m)
2023
2028
1,388
1,309
3.75% Fixed Rate Resetting Subordinated Callable Notes (SGD 200m)
2025
2030
119
116
5.20% Fixed Rate Subordinated Notes (USD 1,367m)
2026
1,069
1,036
4.836% Fixed Rate Subordinated Callable Notes (USD 1,200m)
2027
2028
973
944
5.088% Fixed-to-Floating Rate Subordinated Callable Notes (USD 1,300m)
2029
2030
1,049
994
5.25% Fixed Rate Subordinated Notes (USD 827m)
2045
660
651
4.95% Fixed Rate Subordinated Notes (USD 1,250m)
2047
960
849
Floating Rate Subordinated Notes (USD 456m)
2047
337
350
Barclays Bank PLC intra-group loans from Barclays PLC
Various Fixed Rate Subordinated Loans
9,563
7,548
Various Subordinated Floating Rate Loans
489
1,094
Various Fixed Rate Subordinated Callable Loans
5,838
5,225
Various Subordinated Floating Rate Callable Loans
500
1,997
Zero Coupon Callable Loans
2050
221
-
Total dated subordinated liabilities
31,100
32,352
Notes
a Instrument values are disclosed to the nearest million
Dated subordinated liabilities
Dated subordinated liabilities are issued by Barclays Bank PLC and its 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 described below:
Currency and maturity
In addition to the individual dated subordinated liabilities listed in the table, the £16,607m (2019: £15,864m) of intra-group loans is made up of
various fixed, fixed to floating floating rate and zero coupon loans from Barclays PLC with notional amounts denominated in USD 14,409m, EUR
5,024m, GBP 1,250m, JPY 233,600m, AUD 1,715m, SEK 500m, NOK 970m and CHF 175m, with maturities ranging from 2021to 2050. Certain
intra-group loans have a call date one year prior to their maturity.
Notes to the financial statements
Capital instruments, equity and reserves
Barclays Bank PLC 2020 Annual Report on Form 20 -F 169
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
Barclays Bank PLC 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 subordinated 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 reference to market rates at the time of issuance and fixed periodically in advance, based on
the related market rates.
Interest on fixed rate notes and loans is set by reference to market rates at the time of issuance and fixed until maturity.
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.
No interest is paid on zero coupon notes.
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 2020 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 certain changes in legislation or regulations.
Any repayments prior to maturity may require, in the case of Barclays Bank PLC, the prior consent of the PRA or BoE, or in the case of the
overseas issues, the consent 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 transitional CET1 ratio falls below 7.0%.
27 Ordinary shares, preference shares and other equity
Called up share capital, allotted and fully paid and other equity
instruments
Ordinary share
capital
Preference share
capital
Total share capital
Other equity
instruments
£m
£m
£m
£m
As at 1 January 2020
2,342
6
2,348
8,323
AT1 securities issuance
-
-
-
1,134
AT1 securities redemption
-
-
-
(836)
As at 31 December 2020
2,342
6
2,348
8,621
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
Capital reorganisation
The share premium account of Barclays Bank PLC was cancelled in 2018, following the confirmation of the High Court of Justice in England and
Wales. The balance of £12,092m was credited to retained earnings.
Ordinary shares
The issued ordinary share capital of Barclays Bank PLC, as at 31 December 2020, comprised 2,342m (2019: 2,342m) ordinary shares of £1
each.
Preference shares
The issued preference share capital of Barclays Bank PLC, as at 31 December 2020, comprised 1,000 Sterling Preference Shares of £1 each
(2019: 1,000); 31,856 Euro Preference Shares of €100 each (2019: 31,856); and 58,133 US Dollar Preference Shares of $100 each (2019:
58,133).
Ordinary share capital and preference share capital constitutes 100% (2019: 100%) of total share capital issued.
Notes to the financial statements
Capital instruments, equity and reserves
Barclays Bank PLC 2020 Annual Report on Form 20 -F 170
Sterling £1 Preference Shares
1,000 Sterling cumulative callable preference shares of £1 each (the £1 Preference Shares) were issued on 31 December 2004 at nil premium.
The £1 Preference Shares entitle the holders thereof to receive Sterling cumulative cash dividends out of distributable profits of Barclays Bank
PLC, semi-annually at a rate reset semi-annually equal to the Sterling interbank offered rate for six-month sterling deposits.
Barclays Bank PLC shall be obliged to pay such dividends if: (1) it has profits available for the purpose of distribution under the Companies Act
2006 as at each dividend payment date; and (2) it is solvent on the relevant dividend payment date, provided that a capital regulations condition
is satisfied on such dividend payment date. The dividends shall not be due and payable on the relevant dividend payment date except to the
extent that Barclays Bank PLC could make such payment and still be solvent immediately thereafter. Barclays Bank PLC shall be considered
solvent on any date if: (1) it is able to pay its debts to senior creditors as they fall due; and (2) its auditors have reported within the previous six
months that its assets exceed its liabilities. If Barclays Bank PLC shall not pay, or shall pay only in part, a dividend for a period of seven days or
more after the due date for payment, the holders of the £1 Preference Shares may institute proceedings for the winding-up of Barclays Bank
PLC. No remedy against Barclays Bank PLC shall be available to the holder of any £1 Preference Shares for the recovery of amounts owing in
respect of £1 Preference Shares other than the institution of proceedings for the winding-up of Barclays Bank PLC and/or proving in such
winding-up.
On a winding-up or other return of capital (other than a redemption or purchase by Barclays Bank PLC of any of its issued shares, or a reduction
of share capital, permitted by the Articles of Barclays Bank PLC and under applicable law), the assets of Barclays Bank PLC available to
shareholders shall be applied in priority to any payment to the holders of ordinary shares and any other class of shares in the capital of Barclays
Bank PLC then in issue ranking junior to the £1 Preference Shares on such a return of capital and pari passu on such a return of capital with the
holders of any other class of shares in the capital of Barclays Bank PLC then in issue (other than any class of shares in the capital of Barclays
Bank PLC then in issue ranking in priority to the £1 Preference Shares on a winding-up or other such return of capital), in payment to the
holders of the £1 Preference Shares of a sum equal to the aggregate of: (1) an amount equal to the dividends accrued thereon for the then
current dividend period (and any accumulated arrears thereof) to the date of the commencement of the winding-up or other such return of
capital; and (2) an amount equal to £1 per £1 Preference Share. After payment of the full amount of the liquidating distributions to which they
are entitled, the holders of the £1 Preference Shares will have no right or claim to any of the remaining assets of Barclays Bank PLC and will not
be entitled to any further participation in such return of capital.
The £1 Preference Shares are redeemable at the option of Barclays Bank PLC, in whole but not in part only, subject to the Companies Act 2006
and its Articles. Holders of the £1 Preference Shares are not entitled to receive notice of, or to attend, or vote at, any general meeting of
Barclays Bank PLC.
Euro Preference Shares
140,000 Euro non-cumulative callable preference shares of €100 each (the Euro Preference Shares) were issu ed 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 Euro Preference Shares
entitled 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 since 15 March 2020 quarterly at a rate reset
quarterly equal to 0.71% per annum above the Euro interbank offered rate for three-month Euro deposits. The board of directors of Barclays
Bank PLC may resolve, in its absolute discretion, not to pay in full, or at all, the dividend on the Euro Preference Shares in respect of a particular
dividend period.
The Euro Preference Shares are redeemable at the option of Barclays Bank PLC, in whole but not in part only, on each dividend payment date
at
€10,000 per share plus any dividends accrued for the then current dividend period to the date fixed for redemption.
US Dollar Preference Shares
100,000 US Dollar non-cumulative callable preference shares of $100 each (the US Dollar 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 US Dollar 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 board of directors of Barclays Bank PLC may resolve, for any reason and in its
absolute discretion, not to declare or pay in full or in part any dividends on the US Dollar Preference Shares in respect of a particular dividend
period.
The US Dollar 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.
No redemption or purchase of any Euro Preference Shares and US Dollar Preference Shares (together, the Preference Shares) may be made
by Barclays Bank PLC without the prior consent of the 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 Preference Shares will rank in the application of assets of Barclays Bank PLC available to shareholders:
(1) junior to the holder of any shares of Barclays Bank PLC in issue ranking in priority to the Preference Shares; (2) equally in all respects with
holders of other preference shares and any other shares of Barclays Bank PLC in issue ranking pari passu with the Preference Shares; and (3)
in priority to the holders of ordinary shares and any other shares of Barclays Bank PLC in issue ranking junior to the Preference Shares.
The holders of the £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 of Barclays
Bank PLC (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 2020 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 preference shares then in issue in the capital of Barclays Bank PLC. Accordingly, the holders of the preference
shares would rank equally with the holders of such TONs and RCIs on such a winding-up of Barclays Bank PLC (unless one or more classes of
shares of Barclays Bank PLC ranking in priority to the preference shares are in issue at the time of such winding-up, in which event the holders
of such TONs and RCIs would rank equally with the holders of such shares and in priority to the holders of the preference shares).
Subject to such ranking, in such event, holders of the preference shares will be entitled to receive out of assets of Barclays Bank PLC available
for distributions to shareholders, liquidating distributions in the amount of €10,000 per Euro Preference Share and $10,000 per US Dollar
Preference Share, plus, in each case, an amount equal to the accrued dividend for the then current dividend period to the date of the
commencement of the winding-up or other such return of capital.
If a dividend is not paid in full on any preference shares on any dividend payment date, then a dividend restriction shall apply. This dividend
restriction will mean that neither Barclays Bank PLC nor Barclays PLC may (a) declare or pay a dividend (other than payment by Barclays PLC
of a final dividend declared by its shareholders prior to the relevant dividend payment date, or a dividend paid by Barclays Bank PLC to Barclays
PLC) on any of their respective ordinary shares, other preference shares or other share capital or (b) redeem, purchase, reduce or otherwise
acquire any of their respective share capital, other than shares of Barclays Bank PLC held by Barclays PLC or a wholly owned subsidiary, until
the earlier of: (1) the date on which Barclays Bank PLC next declares and pays in full a preference share dividend; and (2) the date on or by
which all the preference shares are redeemed in full or purchased by Barclays Bank PLC.
Holders of the preference shares are not entitled to receive notice of, or to attend, or vote at, any general meeting of Barclays Bank PLC.
Barclays Bank PLC is not permitted to create a class of shares ranking as regards participation in the profits or assets of Barclays Bank PLC in
priority to the preference shares, save with the sanction of a special resolution of a separate general meeting of the holders of the preference
shares (requiring a majority of not less than three-fourths of the holders of the preference shares voting at the separate general meeting) or with
the consent in writing of the holders of three-fourths of the preference shares.
Except as described above, the holders of the preference shares have no right to participate in the surplus assets of Barclays Bank PLC.
Other equity instruments
Other equity instruments of £8,621m (2019: £8,323m) include AT1 securities issued to Barclays PLC. Barclays PLC uses funds from its own
market issuance of AT1 securities to purchase AT1 securities from the Barclays Bank Group. The AT1 securities are perpetual securities with
no fixed maturity and are structured to qualify as AT1 instruments under prevailing capital rules applicable as at the relevant issue date.
In 2020, there was one issuance of AT1 instruments, in the form of Fixed Rate Resetting Perpetual Subordinated Contingent Convertible
Securities (2019: three issuances) totalling £1,134m (2019: £2,302m). There was also one redemption in 2020 (2019: two redemptions) totalling
£836m (2019: £1,574m).
AT1 equity instruments
2020
2019
Initial call date
£m
£m
AT1 equity instruments - Barclays Bank Group
8.0% Perpetual Subordinated Contingent Convertible Securities (EUR 1,000m)
2020
-
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
1,509
7.125% Perpetual Subordinated Contingent Convertible Securities
2025
299
299
6.375% Perpetual Subordinated Contingent Convertible Securities
2025
495
495
6.125% Perpetual Subordinated Contingent Convertible Securities (USD 1,500m)
2025
1,134
-
Total AT1 equity instruments
8,621
8,323
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.
Fair value through other comprehensive income reserve
The fair value through other comprehensive income reserve represents 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.
Notes to the financial statements
Capital instruments, equity and reserves
Barclays Bank PLC 2020 Annual Report on Form 20 -F 172
Own credit reserve
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. Barclays 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
2020
2019
£m
£m
Currency translation reserve
2,736
3,383
Fair value through other comprehensive income reserve
244
(139)
Cash flow hedging reserve
1,181
388
Own credit reserve
(954)
(373)
Other reserves and other shareholders' equity
(24)
(24)
Total
3,183
3,235
Notes to the financial statements
Employee benefits
Barclays Bank PLC 2020 Annual Report on Form 20 -F 173
The notes included in this section focus on the costs and commitments associated with employing our staff.
29 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
reliably and are recognised over the period of service that employees are required to work to qualify for the payments.
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
relation to awards granted from 2017, the Barclays 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 30 and Note 31
respectively.
2020
2019
2018
£m
£m
£m
Performance costs
1,145
1,104
1,300
Salaries
a
2,285
2,373
2,269
Social security costs
295
269
263
Post-retirement benefits
b
176
184
302
Other compensation costs
208
237
246
Total compensation costs
4,109
4,167
4,380
Other resourcing costs
Outsourcing
142
211
287
Redundancy and restructuring
47
69
87
Temporary staff costs
14
48
54
Other
53
70
66
Total other resourcing costs
256
398
494
Total staff costs
4,365
4,565
4,874
Notes
a £156m (2019: £ 123m; 2018 : £54m) of compensation was capitalised as internally generated software.
b Post-retirem ent benefits charge includes £127m (2019: £126m; 2018 : £99m) in respect of defined contribution schemes and £49 m (2019: £57 m; 2018: £ 203m) in respect of
defined benefit schemes.
30 Share-based payments
Accounting for share-based payments
The Barclays Bank 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 employee services received in respect of the shares or share options granted is recognised in the income
statement over the period that employees provide services. The overall cost of the award is calculated using the number of shares and options
expected to vest and the fair value of the shares or options at the date of grant.
The number of shares and options expected to vest takes into account the likelihood that performance and service conditions included in the
terms of the awards will be met. Failure to meet 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 interest rate, the expected volatility of the share price over the life of the option
and other relevant factors. Market conditions that must be met in order for the award to vest are also reflected in the fair value of the award, as
are any other non-vesting conditions – 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:
Notes to the financial statements
Employee benefits
Barclays Bank PLC 2020 Annual Report on Form 20 -F 174
Charge for the year
2020
2019
2018
£m
£m
£m
Deferred Share Value Plan / Share Value Plan
220
244
235
Others
129
148
131
Total equity settled
349
392
366
Cash settled
2
3
1
Total share based payments
351
395
367
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 December 2017, the grantor
may also make a dividend equivalent payment to participants on release of a SVP award. SVP awards are also made to eligible employees for
recruitment purposes. All awards are subject to potential forfeiture in certain leaver scenarios.
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 over market purchase shares only.
Other schemes
In addition to the SVP and DSVP, the Barclays Group operates 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 made 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:
2020
2019
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)
£
£
£
£
DSVP / SVP
a,b
1.04
1.24
1
370,006
1.43
1.60
1
297,149
Others
a
0.24-1.24
1.19-1.67
0-4
53,767
0.40-1.60
1.57-1.70
0-3
37,481
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.
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:
Notes to the financial statements
Employee benefits
Barclays Bank PLC 2020 Annual Report on Form 20 -F 175
DSVP / SVP
a,b
Others
a,c
Number (000s)
Number (000s)
Weighted average
ex. price (£)
2020
2019
2020
2019
2020
2019
Outstanding at beginning of year/acquisition date
297,149
242,332
37,481
38,092
1.27
1.39
Transfers in the year
d
953
2,934
140
(3,042)
-
-
Granted in the year
203,157
198,884
136,227
101,881
0.84
1.19
Exercised/released in the year
(117,355)
(130,695)
(99,465)
(91,337)
1.21
1.21
Less: forfeited in the year
(13,898)
(16,306)
(18,285)
(7,081)
1.23
1.51
Less: expired in the year
-
-
(2,331)
(1,032)
1.33
2.00
Outstanding at end of year
370,006
297,149
53,767
37,481
0.95
1.27
Of which exercisable:
-
-
4,746
5,499
1.64
1.31
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 1,673,362) . The weighted
average exercise price relates to Sharesave.
d Awards of employees transferred between the Barclays Bank Group and the rest of the Barclays PLC Group.
Awards and options granted to employees and former employees of the Barclays Bank Group under the Barclays PLC 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 the 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 2020 and 2019.
As at 31 December 2020, the total liability arising from cash-settled share based payments transactions was £2m (2019: £3m).
31 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
statement. Any contributions unpaid at the balance sheet date are included as a liability.
Defined benefit schemes
of the scheme assets after applying the asset ceiling test.
Each scheme’s obligations are calculated using the projected unit credit method. Scheme assets are stated at fair value as at the period end.
Changes in pension scheme liabilities or assets (remeasurements) that do not arise from regular pension cost, net interest on net defined
benefit liabilities or assets, past service costs, settlements or contributions to the scheme, are recognised in other comprehensive income.
Remeasurements comprise experience adjustments (differences between previous actuarial assumptions and what has actually occurred), the
effects of changes in actuarial assumptions, return on scheme assets (excluding amounts included in the interest on the assets) and any
changes in the effect of the asset ceiling restriction (excluding amounts included in the interest on the restriction).
Post-employment benefit schemes
statements over the period that the employees provide services to the Barclays Bank Group, using a methodology similar to that for defined
benefit pension schemes.
Pension schemes
UK Retirement Fund (UKRF)
The UKRF is the Barclays Bank Group’s main scheme, representing 97% of the 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:
◾
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 Bank PLC’s discretion. The costs of ill-health
retirements and death in service benefits for Afterwork members are borne by the UKRF. The main risks that the Barclays Bank Group runs in
relation to Afterwork are limited although additional contributions are required if pre-retirement investment returns are not sufficient to provide
for the benefits.
◾
respect of service up to 31 March 2010. Pensions were calculated by reference to service and pensionable salary. From 1 April 2010,
members became eligible to accrue future service benefits in either Afterwork or the Pension Investment Plan (PIP), a historic defined
contribution section which is now closed to future contributions. The risks that the Barclays Bank Group runs in relation to the 1964 section are
typical of final salary pension schemes, principally that investment returns fall short of expectations, that inflation exceeds expectations, and
that retirees live longer than expected.
Barclays Pension Savings Plan (BPSP)
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 the Barclays Bank Group that defined benefit schemes are. Members’ benefits reflect
contributions paid and the level of investment returns achieved.
Notes to the financial statements
Employee benefits
Barclays Bank PLC 2020 Annual Report on Form 20 -F 176
Other
Apart from the UKRF and the BPSP, the Barclays Bank Group 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 the Barclays Bank Group.
The Trustee Board comprises six Management Directors selected by Barclays Bank PLC, of whom three are independent Directors with no
relationship with the Barclays Bank Group (and who are not members of the UKRF), plus three Member Nominated Directors selected from
eligible active members of the UKRF, deferred members or pensioner members who apply for the role.
The BPSP is a Group Personal Pension arrangement which operates as a collection of personal pension plans. Each personal pension plan is a
direct contract between the employee and the BPSP provider (Legal & General Assurance Society Limited), and is regulated by the FCA.
Similar principles of pension governance apply to the Barclays Bank Group’s other pension schemes, depending on local legislation.
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
2020
2019
£m
£m
Current service cost
53
58
Net finance cost
(40)
(48)
Past service cost
(4)
–
Other movements
–
1
Total
9
11
The Barclays Bank PLC 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 participating employers in
the UKRF and their share of the UKRF service cost is borne by them. Of the £232m current service cost in the table on the next page, £93m
relates to Barclays Bank UK Plc and £86m relates to Barclays 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.
Notes to the financial statements
Employee benefits
Barclays Bank PLC 2020 Annual Report on Form 20 -F 177
Balance sheet reconciliation
2020
2019
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
(30,298)
(29,304)
(28,237)
(27,301)
Current service cost
(232)
(217)
(226)
(210)
Interest costs on scheme liabilities
(573)
(549)
(747)
(718)
Past service cost
4
Remeasurement (loss)/gain - financial
(3,439)
(3,358)
(3,087)
(2,964)
Remeasurement (loss)/gain - demographic
(281)
(286)
223
214
Remeasurement (loss)/gain - experience
243
237
277
266
Employee contributions
(5)
(1)
(5)
(1)
Benefits paid
1,406
1,370
1,459
1,410
Exchange and other movements
44
45
Benefit obligation at end of the year
(33,131)
(32,108)
(30,298)
(29,304)
Fair value of scheme assets at beginning of the
year
32,093
31,362
29,722
29,036
Interest income on scheme assets
613
595
795
774
Employer contribution
265
248
755
731
Settlements
(2)
Remeasurement - return on plan assets greater
than discount rate
3,411
3,328
2,312
2,230
Employee contributions
5
1
5
1
Benefits paid
(1,406)
(1,370)
(1,459)
(1,410)
Exchange and other movements
(268)
(249)
(35)
Fair value of scheme assets at the end of the
year
34,713
33,915
32,093
31,362
Net surplus/(deficit)
1,582
1,807
1,795
2,058
Retirement benefit assets
1,814
1,807
2,108
2,058
Retirement benefit liabilities
(232)
(313)
Net retirement benefit assets/(liabilities)
1,582
1,807
1,795
2,058
Included within the Barclays Bank Group’s benefit obligation was £866m (2019: £760m) relating to overseas pensions and £157m (2019:
£166m) relating to other post-employment benefits.
As at 31 December 2020, the UKRF’s scheme assets were in surplus versus IAS 19 obligations by £1,807m (2019: £2,058m). The movement
for the UKRF was driven by a net decrease in the discount rate and changes to pension increase assumptions, offset partially by higher than
assumed asset returns. During the year the UKRF invested in non-transferable listed senior gilt-backed notes for £750m, partially financed by
£500m deficit contributions (the “Heron 2” transaction). The net impact of £250m on plan assets is shown as an outflow under “Exchange and
other movements”; further details of Heron 2 can be found on page 180.
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 £1,370m (2019: £1,410m) UKRF benefits paid out, £520m (2019: £580m) 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 contributions (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 UKRF Trustee does not have a substantive right to augment benefits, nor does it
have the right to wind up the plan except in the dissolution of Barclays Bank PLC or termination of contributions by Barclays Bank PLC. 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
2020
2019
% p.a.
% p.a.
Discount rate
1.29
1.92
Inflation rate (RPI)
2.99
3.02
Notes to the financial statements
Employee benefits
Barclays Bank PLC 2020 Annual Report on Form 20 -F 178
The UKRF discount rate assumption for 2020 was based on a standard Willis Towers Watson RATE Link model. The UKRF discount rate
assumption for 2019 was based on a variant of the standard Willis Towers Watson RATE Link model that included all bonds rated AA by at least
one of the four major ratings agencies, and assumed that forward rates after year 30 were flat. The change in discount rate methodology as at
31 December 2020 led to a remeasurement gain of £1.2bn. The RPI inflation assumption for 2020 was set by reference to the Bank of
England’s implied inflation curve. The inflation assumption incorporates a deduction of 20 basis points as an allowance for an inflation risk
premium. The methodology used to derive the inflation assumptions is consistent with that used at the prior year end.
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 allowance has been made
for future mortality improvements based on the 2019 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
2018 core projection model was used at 2019. The table below shows how the assumed life expectancy at 60, for members of the UKRF, has
varied over the past three years.
Assumed life expectancy
2020
2019
2018
Life expectancy at 60 for current pensioners (years)
– Males
27.2
27.1
27.7
– Females
29.4
29.3
29.4
Life expectancy at 60 for future pensioners currently aged 40 (years)
– Males
29.0
28.9
29.2
– Females
31.2
31.1
31.0
On 11 December 2020, the UKRF entered into a £5bn longevity swap to hedge around a quarter of current pensioner liabilities against
unexpected increases in life expectancy. The swap will form part of the UKRF’s investment portfolio and provide income in the event that
pensions are paid out for longer than expected. The UKRF Trustee established a Guernsey based captive insurer (Barclays UKRF No.1 IC
Limited) to act as an insurance intermediary between the UKRF and swap provider. The swap is not included directly within the balance sheet of
Barclays Bank Group as it is an asset of the UKRF. At 31 December 2020, the swap is valued at nil fair value as it is considered to remain at fair
market value for both parties over the very limited period from 11 December 2020 to 31 December 2020.
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 should not be interpreted
as Barclays Bank Group expressing any specific view
of the probability of such movements happening.
Change in key assumptions
2020
2019
(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
(2.5)
(2.3)
0.25% p.a. increase
(1.3)
(1.2)
0.25% p.a. decrease
1.4
1.2
0.50% p.a. decrease
2.9
2.6
Assumed RPI
0.50% p.a. increase
1.8
1.5
0.25% p.a. increase
0.9
0.8
0.25% p.a. decrease
(0.9)
(0.7)
0.50% p.a. decrease
(1.8)
(1.4)
Life expectancy at 60
One year increase
1.2
1.0
One year decrease
(1.2)
(1.0)
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 returns 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 schemes, with any derivative holdings reflected on a fair value basis.
Notes to the financial statements
Employee benefits
Barclays Bank PLC 2020 Annual Report on Form 20 -F 179
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
Quoted
a
Unquoted
a
Value
% of total
fair value of
scheme
assets
Quoted
a
Unquoted
a
Value
% of total
fair value of
scheme
assets
£m
£m
£m
%
£m
£m
£m
%
As at 31 December 2020
Equities
567
1,498
2,065
5.9
378
1,498
1,876
5.5
Private equities
-
2,233
2,233
6.4
-
2,233
2,233
6.6
Bonds - fixed government
4,205
110
4,315
12.4
3,932
110
4,042
11.9
Bonds - index-linked government
10,706
1,014
11,720
33.8
10,697
1,014
11,711
34.6
Bonds - corporate and other
7,439
1,678
9,117
26.3
7,214
1,678
8,892
26.2
Property
10
1,416
1,426
4.1
-
1,416
1,416
4.2
Infrastructure
-
1,812
1,812
5.2
-
1,812
1,812
5.3
Cash and liquid assets
64
1,830
1,894
5.5
46
1,830
1,876
5.5
Mixed investment funds
9
-
9
–
-
-
-
-
Other
14
108
122
0.4
-
57
57
0.2
Fair value of scheme assets
23,014
11,699
34,713
100.0
22,267
11,648
33,915
100.0
As at 31 December 2019
b
Equities
942
1,568
2,510
7.8
768
1,568
2,336
7.4
Private equities
-
2,083
2,083
6.5
-
2,083
2,083
6.6
Bonds - fixed government
3,574
300
3,874
12.1
3,303
299
3,602
11.5
Bonds - index-linked government
10,355
681
11,036
34.4
10,345
682
11,027
35.2
Bonds - corporate and other
6,260
2,297
8,557
26.6
6,069
2,295
8,364
26.7
Property
11
1,633
1,644
5.1
-
1,633
1,633
5.2
Infrastructure
-
1,558
1,558
4.9
-
1,558
1,558
5.0
Cash and liquid assets
596
170
766
2.4
576
169
745
2.4
Other
-
65
65
0.2
-
14
14
–
Fair value of scheme assets
21,738
10,355
32,093
100.0
21,061
10,301
31,362
100.0
Notes
a Valuations on unquoted assets are provided by the underlying managers or qualified independent valuers. Valuations on complex instruments are based on UKRF custodian
valuations. All valuations are determined in accordance with relevant industry guidance.
b Analysis of scheme assets for 2019 is restated with a quoted/unquoted split.
Included within the fair value of scheme assets were nil (2019: nil) relating to shares in Barclays PLC and nil (2019: nil) relating to bonds issued
by Barclays PLC or Barclays Bank Group. 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 instruments and not recognised under IAS19.
Approximately 45% of the UKRF assets are invested in liability-driven investment strategies; primarily UK gilts as well as interest rate and
inflation swaps. These are used to better match the assets to its liabilities. The swaps are used to reduce the scheme’s inflation and duration
risks against its liabilities.
Triennial Valuation
The latest annual update as at 30 September 2020 showed the funding deficit had improved to £0.9bn from the £2.3bn shown at the 30
September 2019 triennial valuation. The improvement was mainly due to £1.0bn of deficit contributions paid over the year.
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 reduction contributions agreed with the UKRF Trustee as part of the 30 September 2019 triennial valuation recovery plan are shown
in the table below.
Notes to the financial statements
Employee benefits
Barclays Bank PLC 2020 Annual Report on Form 20 -F 180
Deficit reduction
contributions under the
30 September 2019
valuation
Year
£m
Cash paid:
2020
500
Future commitments:
2021
700
2022
294
2023
286
2024 - 2026
-
On 12 June 2020, Barclays Bank PLC paid the £500m deficit reduction contribution agreed for 2020 and at the same time the UKRF subscribed
for non-transferrable listed senior fixed rate notes for £750m, backed by UK gilts (the Senior Notes). These Senior Notes entitle the UKRF to
semi-annual coupon payments for five years, and full repayment in cash in three equal tranches in 2023, 2024, and at final maturity in 2025. The
Senior Notes were issued by Heron Issuer Number 2 Limited (Heron 2), an entity that is consolidated within the Barclays Bank Group under
IFRS 10. As a result of the investment in Senior Notes, the regulatory capital impact of the £500m deficit reduction contribution paid on 12 June
2020 takes effect in 2023, 2024 and 2025 on maturity of the notes. As the UKRF's investment in the Senior Notes does not qualify as a plan
asset under IAS 19, the £500m deficit reduction contribution does not appear in the IAS19 plan assets nor as an employer contribution as at 31
December 2020, and the additional £250m scheme investment appears as an outflow in the balance sheet reconciliation under 'Exchange and
other movements’. The £250m additional investment by the UKRF in the Senior Notes has a positive capital impact in 2020 which is reduced
equally in 2023, 2024 and 2025 on the maturity of the notes. Heron 2 acquired a total of £750m of gilts from Barclays Bank PLC for cash to
support payments on the senior notes. A transaction with a similar structure was agreed as part of the 2019 triennial actuarial valuation. On 11
December 2019, Barclays Bank PLC paid the £500m deficit reduction contribution agreed for 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). These Senior Notes entitle the UKRF to
semi-annual coupon payments for five years, and full repayment in cash at maturity in 2024. As the UKRF's investment in these Senior Notes
does not qualify as a plan asset under IAS 19, the 2019 £500m deficit reduction contribution also does not appear in the IAS19 plan assets. No
liability is recognised under IAS19 for the obligation to make deficit reduction contributions or to repay the Senior Notes, as settlement gives rise
to both a reduction in cash and a corresponding increase 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 2023 with an effective date of 30 September 2022.
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 at least 100% of the funding deficit with an overall cap of £9bn. 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 Barclays 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.
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 triggered by the insolvency (the debt would be calculated after
allowing for the payment to the UKRF of the collateral above).
Defined benefit contributions paid with respect to the UKRF were as follows:
Contributions paid
£m
2020
748
2019
1,231
2018
741
There were nil (2019: nil) Section 75 contributions included within the Barclays Bank Group’s contributions paid as no participating employers
left the UKRF in 2020.
The Barclays Bank Group’s expected contribution to the UKRF in respect of defined benefits in 2021 is £783m (2020: £560m). In addition, the
expected contributions to UK defined contribution schemes in 2021 is £9m (2020: £7m) to the UKRF and £47m (2020: £41m) to the BPSP.
Notes to the financial statements
Scope of consolidation
Barclays Bank PLC 2020 Annual Report on Form 20 -F 181
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.
32 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 control. 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.
Investments 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 2020 the historical cost of investments in subsidiaries was £18,059m (2019: £16,606m), and impairment
allowances recognised against these investments totalled £279m (2019: £501m). The increase in historical cost is predominantly due to capital
injections into Barclays Bank Ireland PLC. The reduction in impairment is predominantly due to the liquidation of subsidiaries which had been
previously impaired.
At the end of each reporting period an impairment review is undertaken in respect of investment in subsidiaries. Impairment is indicated where
the investment exceeds the recoverable amount.
The recoverable amount is an estimate of fair value less costs to sell.
The investment in
Barclays Investment Management Limited of £704m showed a recoverable amount of £688m resulting in an impairment being recognised of
£16m. Also, the investment in BNC Brazil Consultoria Empresarial Limitada of £35m showed a recoverable amount of £24m resulting in an
impairment being recognised of £11m. The recoverable amount was higher than the carrying value of all other investments in subsidiaries.
Principal subsidiaries of 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
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.
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 Barclays 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.
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.
Notes to the financial statements
Scope of consolidation
Barclays Bank PLC 2020 Annual Report on Form 20 -F 182
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 33.
Significant restrictions
As is typical for a group 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 £417bn (2019:
£307bn) and £393bn (2019: £285bn) respectively. Certain of these assets and liabilities are subject to prudential regulation and regulatory
capital requirements in the countries in which they are regulated. These require entities to maintain minimum capital levels which cannot be
returned to the parent company, Barclays 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 Barclays Bank Delaware Inc. See
pages 55 to 57 for further details of liquidity requirements, including those of the Barclays Bank 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 m ost cases the regulatory restrictions referred to above exceed the
statutory restrictions.
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 to 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 36.
Other restrictions
The Barclays Bank Group is required to maintain balances with central banks and other regulatory authorities and these amounted to £3,119m
(2019: £4,505m).
33 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 consolidate 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:
◾
for further detail.
◾
contractual backstop liquidity facilities to CP conduits.
◾
obligations to employees in relation to share-based remuneration arrangements.
◾
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.
Notes to the financial statements
Scope of consolidation
Barclays Bank PLC 2020 Annual Report on Form 20 -F 183
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:
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 2020
Assets
Trading portfolio assets
-
11,361
-
-
11,361
Financial assets at fair value through the income statement
56,265
-
-
2,780
59,045
Derivative financial instruments
-
-
2,968
-
2,968
Financial assets at fair value through other comprehensive income
-
-
-
153
153
Loans and advances at amortised cost
-
-
-
18,418
18,418
Reverse repurchase agreements and other similar secured lending
10
-
-
-
10
Other assets
-
-
-
11
11
Total assets
56,275
11,361
2,968
21,362
91,966
Liabilities
Derivative financial instruments
-
-
7,075
-
7,075
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
Secured financing arrangements, short-term traded interests and traded derivatives are typically managed under market risk management
policies described in the Market risk management section 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 borrowing and similar arrangements on normal commercial
terms where the counterparty to the arrangement is a structured entity. Due to the nature of these arrangements, especially the transfer of
collateral and ongoing margining, the 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 portfolio 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 2020, £10,682m (2019: £8,903m) of the Barclays Bank Group’s £11,361 m (2019: £9,585m) 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 considered 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 practices are detailed in Note 13. The risk of loss
Notes to the financial statements
Scope of consolidation
Barclays Bank PLC 2020 Annual Report on Form 20 -F 184
may be mitigated through ongoing margining requirements as well as a right to cash flows from the structured entity which are senior in the
payment waterfall. Such margining requirements are consistent with market practice for many derivative arrangements and in line with the
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
notional contract amounts were £153,894m (2019: £314,170m).
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 derivative positions as the fair value of derivatives is subject to changes in market rates of interest, exchange
rates and credit indices which by their nature are uncertain. In addition, the 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
Other
Total
£m
£m
£m
£m
As at 31 December 2020
Trading portfolio assets
-
-
-
-
Financial assets at fair value through the income statement
-
15
2,765
2,780
Financial assets at fair value through other comprehensive income
-
106
47
153
Loans and advances at amortised cost
5,146
12,475
797
18,418
Other assets
8
3
-
11
Total on-balance sheet exposures
5,154
12,599
3,609
21,362
Total off -balance sheet notional amounts
11,750
7,531
-
19,281
Maximum exposure to loss
16,904
20,130
3,609
40,643
Total assets of the entity
87,004
153,990
14,110
255,104
As at 31 December 2019
Trading portfolio assets
-
-
76
76
Financial assets at fair value through the income statement
-
-
2,500
2,500
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
6,256
20,081
Total off -balance sheet notional amounts
8,649
3,732
1,621
14,002
Maximum exposure to loss
14,596
11,610
7,877
34,083
Total assets of the entity
78,716
139,210
16,139
234,065
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
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 enhancements 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 Group incurred an impairment of £22m (2019: £7m) against such facilities.
Notes to the financial statements
Scope of consolidation
Barclays Bank PLC 2020 Annual Report on Form 20 -F 185
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. In addition, other includes
investment funds with interests restricted to management fees based on the performance of the fund and trusts held on behalf of beneficiaries
with interests restricted to unpaid fees.
Assets transferred to sponsored unconsolidated structured entities
Assets transferred to sponsored unconsolidated structured entities were £730m (2019: £471m).
34 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 constructive obligation to make good its share of the losses. In some cases, investments in these entities may be held at fair
value through profit or loss, for example, those held by private equity businesses.
There are no individually significant investments in joint ventures or associates held by Barclays Bank Group.
2020
2019
Associates
Joint ventures
Total
Associates
Joint ventures
Total
£m
£m
£m
£m
£m
£m
Equity accounted (Group)
24
-
24
30
265
295
Summarised financial information for the Barclays Bank Group’s equity accounted associates and joint ventures is set out below. The amounts
shown are the Barclays Bank Group’s share of the net income of the investees for the year ended 31 December 2020, with the exception of
certain undertakings for which the amounts are based on accounts made up to dates not earlier than three months before the balance sheet
date.
Associates
Joint ventures
2020
2019
2020
2019
£m
£m
£m
£m
Profit/(loss) from continuing operations
(1)
19
2
43
Other comprehensive income / (expenses)
(3)
-
-
2
Total comprehensive income/(loss) from continuing operations
(4)
19
2
45
Unrecognised shares of the losses of individually immaterial associates and joint ventures were £nil (2019: £nil).
The Barclays Bank commitments and contingencies to its associates and joint ventures comprised unutilised credit facilities provided to
customers of £nil (2019: £1,726m).
35 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, depending on the individual arrangement, result in continued recognition of the securitised assets and the recognition of the
debt securities issued in the transaction; lead to partial continued recognition of the assets to the extent of the Barclays Bank Group’s continuing
involvement in those assets or lead 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 materia l delay or reinvestment, and also transfers substantially all the risks and rewards of
ownership, including credit risk, prepayment risk and interest rate risk.
In the course of its normal banking activities, the 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 the 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
Notes to the financial statements
Scope of consolidation
Barclays Bank PLC 2020 Annual Report on Form 20 -F 186
The 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 the Barclays Bank Group’s continuing
involvement in those assets can also occur or derecognition of the assets and the separate recognition, as assets or liabilities, of any rights and
obligations created or retained in the transfer.
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:
2020
2019
Assets
Liabilities
Assets
Liabilities
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
963
1,051
(952)
(966)
3,035
3,183
(2,426)
(2,429)
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.
The relationship between the transferred assets and the associated liabilities is that holders of notes may only look to cash flows from the
securitised assets for payments of principal and interest due to them under the terms of their notes, although the contractual terms of their notes
may be different to the maturity and interest of the transferred assets.
For transfers of assets in relation to repurchase agreements, see Note 36.
Continuing involvement in financial assets that have been derecognised
In some cases, the Barclays Bank Group may have transferred a financial asset in its entirety but may have continuing involvement in it. This
arises in asset securitisations where loans and asset backed securities were derecognised as a result of the Barclays Bank Group’s involvement
with asset backed securities, residential mortgage backed securities and commercial mortgage 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 potential 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
2020
Asset Backed Securities
56
56
56
1
1
Residential mortgage backed securities
49
49
49
1
1
Commercial mortgage backed securities
243
237
243
2
6
Total
348
342
348
4
8
2019
Commercial mortgage backed securities
189
188
189
1
4
Total
189
188
189
1
4
Note
a Assets which represent the Barclays Bank Group’s continuing involvement in derecognised assets are recorded in Loans and advances at amortised cost and Debt Securities
at FVTP&L.
36 Assets pledged, 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’s balance sheet, for example because the Barclays Bank Group retains substantially all the
exposure to those assets under an agreement to repurchase them in the future for a fixed price.
Notes to the financial statements
Scope of consolidation
Barclays Bank PLC 2020 Annual Report on Form 20 -F 187
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. 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 remains 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 security against these liabilities:
Barclays Bank Group
2020
2019
£m
£m
Cash collateral and settlements
69,271
61,158
Loans and advances at amortised cost
25,437
18,726
Trading portfolio assets
76,750
65,341
Financial assets at fair value through the income statement
5,584
8,107
Financial assets at fair value through other comprehensive income
15,303
8,011
Assets pledged
192,345
161,343
Notes to the financial statements
Scope of consolidation
Barclays Bank PLC 2020 Annual Report on Form 20 -F 188
The following table summarises the transferred financial assets and the associated liabilities:
Barclays Bank Group
Transferred assets
Associated liabilities
£m
£m
At 31 December 2020
Derivatives
72,732
(72,732)
Repurchase agreements
58,398
(39,044)
Securities lending arrangements
59,824
-
Other
1,391
(1,134)
192,345
(112,910)
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)
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
2020
Recourse to transferred assets only
963
(952)
1,051
(966)
85
2019
Recourse to transferred assets only
3,035
(2,426)
3,183
(2,429)
754
The Barclays Bank Group has an additional £3.1bn (2019: £2.5bn) 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, as referred to in Note 31.
Collateral held as security for assets
Under certain transactions, including reverse repurchase agreements and stock borrowing transactions, the 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
2020
2019
£m
£m
Fair value of securities accepted as collateral
792,317
660,999
Of which fair value of securities re-pledged/transferred to others
684,389
554,111
Additional disclosure has been included in collateral and other credit enhancements on pages 48 to 50.
Notes to the financial statements
Other disclosure matters
Barclays Bank PLC 2020 Annual Report on Form 20 -F 189
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.
37 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.
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 32.
Fellow subsidiaries
Transactions between the Barclays Bank Group and other subsidiaries of the parent company also meet the definition of related party
transactions.
Associates, joint 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. Barclays 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 34.
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 2020
Total income
(606)
41
-
-
3
Credit impairment charges
-
-
-
-
-
Operating expenses
(62)
(2,937)
-
-
(1)
Total assets
6,803
1,917
-
-
4
Total liabilities
25,819
3,954
66
-
69
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
Total liabilities includes derivatives transacted on behalf of the pensions funds of £13m (2019: £6m).
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.
The Barclays Bank Group provides banking services to Key Management Personnel and persons connected to them. Transactions during the
year and the balances outstanding were as follows:
Notes to the financial statements
Other disclosure matters
Barclays Bank PLC 2020 Annual Report on Form 20 -F 190
Loans outstanding
2020
2019
£m
£m
As at 1 January
-
14.6
Loans issued during the year
a
-
0.1
Loan repayments during the year
b
-
(14.7)
As at 31 December
-
-
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
2020
2019
£m
£m
As at 1 January
4.2
2.9
Deposits received during the year
a
13.3
11.5
Deposits repaid during the year
b
(14.1)
(10.2)
As at 31 December
3.4
4.2
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 2020 were £0.2m (2019: £0.1m).
All 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.
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 awarded and the recognised income statement
charge principally relates to the recognition of deferred costs for prior year awards. Figures are provided for the period that individuals met the
definition of Key Management Personnel.
2020
2019
£m
£m
Salaries and other short-term benefits
37.5
37.6
Pension costs
0.1
0.2
Other long-term benefits
7.2
9.1
Share-based payments
12.4
14.2
Employer social security charges on emoluments
6.0
6.0
Costs recognised for accounting purposes
63.2
67.1
Employer social security charges on emoluments
(6.0)
(6.0)
Other long-term benefits – difference between awards granted and costs recognised
0.4
(1.0)
Share-based payments – difference between awards granted and costs recognised
1.3
(0.7)
Total remuneration awarded
58.9
59.4
Disclosure required by the Companies Act 2006
The following information regarding the Barclays Bank PLC Board of Directors is presented in accordance with the Companies Act 2006:
Notes to the financial statements
Other disclosure matters
Barclays Bank PLC 2020 Annual Report on Form 20 -F 191
2020
2019
£m
£m
Aggregate emoluments
a
6.4
7.6
Amounts paid under LTIPs
b
-
0.2
6.4
7.8
Notes
a The aggregate emoluments include amounts paid for the 2020 year . In addition, deferr ed cash and share awards for 2020 with a total value at grant of £0.6m (2019: £1.9m)
will be made to Directors which will only vest subjec t to meeting certain conditions .
b No LTIP amo unts were received by the Executive Directors in 2020 as the release of the first tranche of the 2017 -2019 LTIP was delayed from June 2020 to March 2021.
There were no pension contributions paid to defined contribution schemes on behalf of Directors (2019: £11,932 ). There were no notional
pension contributions to defined contribution schemes.
As at 31 December 2020, there were no Directors accruing benefits under a defined benefit scheme (2019: nil).
The aggregate amount of compensation payable to departing officers in respect of loss of office was £1,850,713.
Of the figures in the table above, the amounts attributable to the highest paid Director in respect of qualifying services are as follows:
2020
2019
£m
£m
Aggregate emoluments
a
3.0
3.2
Amounts paid under LTIPs
-
-
3.0
3.2
Note
a The aggregate emoluments i nclude amounts paid for the 2020 year. In addition, a deferred share award for 20 20 with a value at grant of £0.4 m (2019: £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 (2019: £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 2020 to persons who
served as Directors during the year was £nil (2019: £nil). The total value of guarantees entered into on behalf of Directors during 2020 was £nil
(2019: £nil).
38 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 geographical 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
During the year, Barclays Bank PLC sold its investments in Barclaycard International Payments Limited, Entercard Group AB, Carnegie
Holdings Limited and Barclays Mercantile Business Finance Limited to Barclays Principal Investments Limited, a fellow Barclays PLC Group
company, at their fair values of ��102m, £292m, £188m and £154m respectively. Barclays Bank PLC recorded profit on disposal of £56m,
£192m, £133m and £23m in respect of these transactions. The Barclays Bank Group recorded profit on disposal of £45m, £13m, £57m and
£11m.
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 the Barclays Bank Group.
The transfer of the ownership of Barclays Bank UK PLC to Barclays PLC resulted in a material change to the consolidated financial position and
results of the Barclays Bank Group in 2018, in comparison to prior periods. The transfer had no impact on the share capital and share premium
Notes to the financial statements
Other disclosure matters
Barclays Bank PLC 2020 Annual Report on Form 20 -F 192
of Barclays Bank PLC. 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. The income statement and cash flow statement below
represent three months of results as a discontinued operation to 31 March 2018.
UK banking business disposal group income statement
2020
2019
2018
For the year ended 31 December
£m
£m
£m
Net interest income
-
-
1,449
Net fee and commission income
-
-
296
Net trading income
-
-
(5)
Net investment income
-
-
6
Other income
-
-
2
Total income
-
-
1,748
Credit impairment charges and other provisions
-
-
(201)
Net operating income
-
-
1,547
Staff
��
costs-
-
(321)
Administration and general expenses
-
-
(1,135)
Operating expenses
-
-
(1,456)
Profit before tax
-
-
91
Taxation
-
-
(138)
(Loss)/profit after tax
-
-
(47)
Attributable to:
Equity holders of the parent
-
-
(47)
(Loss)/profit after tax
-
-
(47)
The cash flows attributed to the UK banking business discontinued operation are as follows:
2020
2019
2018
For the year ended 31 December
£m
£m
£m
Net cash flows from operating activities
-
-
(522)
Net cash flows from investing activities
-
-
54
Net (decrease)/increase in cash and cash equivalents
-
-
(468)
39 Auditor’s remuneration
Auditor’s remuneration is included within consultancy, legal and professional fees in administration and general expenses and comprises:
2020
2019
2018
£m
£m
£m
Audit of the Barclays Bank Group's annual accounts
17
16
14
Other services:
Audit of the Barclays Bank PLC subsidiaries
a
13
12
10
Other audit related fees
b
7
6
6
Other services
1
1
1
Total Auditor's remuneration
38
35
31
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 Rul es of the
UK listing authority.
Under SEC regulations, the remuneration of our auditors is required to be presented as follows: audit fees £33m (2019: £31m, 2018: £27m),
audit-related fees £5m (2019: £3m, 2018: £3m), tax fees £nil (2019: £nil, 2018: £nil), and all other fees £nil (2019: £1m, 2018: £1m).
Notes to the financial statements
Other disclosure matters
Barclays Bank PLC 2020 Annual Report on Form 20 -F 193
40 Interest rate benchmark reform
Following the financial crisis, the reform and replacement of benchmark interest rates such as LIBOR has become a priority for global
regulators. The UK’s Financial Conduct Authority (FCA) and other global regulators have instructed market participants to prepare for the
cessation of LIBOR after the end of 2021, and to adopt “near Risk-Free Rates” (RFRs). While it is expected that most reforms affecting the
Barclays Bank Group will be completed by the end of 2021, consultations and possible regulatory changes are in progress. This may mean that
some LIBORs continue to be published beyond that date.
The Barclays Bank Group’s risk exposure is predominately to GBP, USD, JPY and CHF LIBOR and Euro Overnight Index Average (EONIA)
with the vast majority concentrated in derivatives within the Corporate and Investment Bank. Some additional exposure resides on floating rate
loans and advances, repurchase agreements and debt securities held and issued within the Corporate and Investment Bank.
The Barclays Bank Group does not consider there to be risk in respect of the Euro Interbank Offered Rate (EURIBOR) arising from IBOR reform
as at 31 December 2020. This is because the calculation methodology of EURIBOR changed during 2019 and the reform of EURIBOR is
complete. In July 2019, the Belgian Financial Services and Markets Authority (as the administrator of EURIBOR) granted authorisation with
respect to EURIBOR under the European Union Benchmarks Regulation. This allows market participants to continue to use EURIBOR after 1
January 2021 for both existing and new contracts. The EUR Risk Free Rate Working Group has not contemplated the cessation of EURIBOR.
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 based upon overnight rates from actual transactions, and are therefore published
after the end of the overnight borrowing period. Furthermore, IBORs include a credit spread over the RFRs. Therefore, to transition existing
contracts and agreements to RFRs, adjustments for term and credit differences may need to be applied to RFR-linked rates. 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.
How the Group is managing the transition to alternative benchmark rates
The Barclays Group has established a Group-wide LIBOR Transition Programme, with oversight from the Group Finance Director. The
Programme spans all business lines and has cross-functional governance which includes Legal, Conduct Risk, Client Engagement and
Communications, Risk, and Finance. The Transition Programme aims 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 across businesses and workstreams. Barclays’
transition plans primarily focus on G5 currencies while providing quarterly updates on progress and exposures to the PRA/FCA and other
regulators as required.
The Transition Programme follows a risk based approach, using 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
overall Board oversight delegated to the Board Risk Committee. Barclays performs a prominent stewardship role to drive orderly transition via
our representation on official sector and industry working groups across all major jurisdictions and product classes. 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.
Approaches to transition exposure expiring post the expected end dates for LIBOR vary by product and nature of counterparty. The Barclays
Bank Group is actively engaging with the counterparties to transition or include appropriate fallback provisions and transition mechanisms in its
floating rate assets and liabilities with maturities after 2021, when most IBORs are expected to cease to be published. For the derivative
population, adherence to the ISDA IBOR Fallbacks Protocol now provides the Group with an efficient mechanism to amend outstanding trades
to incorporate fallbacks. Beyond the ISDA IBOR Fallbacks Protocol, there will be options to terminate or bilaterally agree new terms with
counterparties. The Barclays Bank Group expects derivative contracts facing central clearing counterparties to follow a market-wide,
standardised approach to reform.
Market participants are currently awaiting publication of the results of ICE Benchmark Administration’s consultation on plans to cease
publication of most LIBORs at end 2021, with certain, actively used USD LIBOR tenors continuing to be provided until end June 2023. The FCA
expects to enable publication of a synthetic LIBOR rate for at least certain actively used GBP LIBOR tenors to facilitate roll-off of relevant
contracts that cannot be actively transitioned by end 2021.
Progress made during 2020
During 2020, the Barclays Bank Group has successfully delivered Alternative RFR product capabilities and alternatives to LIBOR across loans,
bonds and derivatives. Good progress has been made in relation to client outreach and we have been actively engaging with customers and
counterparties to transition or include the appropriate fallback provisions. The Barclays Bank Group has in place detailed plans, processes and
procedures to support the transition of the remainder during 2021. Barclays Bank Group has adhered to the ISDA IBOR Fallbacks Protocol for
its major derivative dealing entities and we continue to track progress and engage with clients on their own adherence. Following the progress
made during 2020, the Barclays Bank Group continues to deliver technology and business process changes to ensure operational readiness in
preparation for LIBOR cessation and transitions to RFRs that will be necessary during 2021 in line with official sector expectations and
milestones.
Risks to which the Group is exposed as a result of the transition
IBOR reform exposes the Barclays Bank Group to various risks, which are being managed through the LIBOR Transition Programme. The
material risks identified include those set out below:
Notes to the financial statements
Other disclosure matters
Barclays Bank PLC 2020 Annual Report on Form 20 -F 194
●
Conduct and Legal risk:
negligent conduct on the part of Barclays Bank Group, in connection with LIBOR transition.
●
Operational Risk:
The LIBOR Transition Programme cuts across all businesses and functions. There are a number of
implementation challenges arising from transition, including technology, operations, client communication and the measurement of
valuation, giving rise to additional operational risks.
●
Market Risk:
Changes to Barclays Bank Group Market Risk profile are expected due to IBOR transition. These changes are expected
to be managed within risk appetite. IBOR transition will also impact the basis risk profile both at the cessation event (when broadly all
LIBOR contracts fall back to alternatives) as well as in the interim period when alternative rates are referenced in contracts.
●
Counterparty Credit Risk:
transactions. This is dependent on client behaviour and the outcome of resulting negotiations and could change the credit risk profile
of client exposure.
●
Financial risk:
give rise to financial losses should the Barclays Bank Group be unable to operate effectively in financial markets.
●
Accounting risk:
were to transition away from IBORs: at different times; to different benchmarks; or using divergent methodologies resulting in
significant volatility to the income statement either through hedge accounting ineffectiveness or failure of the hedge accounting
relationships
A disorderly cessation of LIBOR would carry substantial economic, legal, regulatory, reputational and operational risks for the Barclays bank
Group and the industry in general. The Barclays Bank Group’s expectation is that the transition away from LIBOR will be carefully managed and
that measures including the broad adoption of ISDA IBOR Fallbacks Protocol, the approach the Central Clearing Counterparties are expected to
follow, proactive client engagement, regulatory action and/or terminating or bilaterally amending contracts where clients do not wish to adopt
new conventions (e.g. ISDA IBOR Fallbacks Protocol), can mitigate the risks associated with a disorderly cessation.
The Barclays Bank Group does not expect material changes to its risk management approach and strategy as a result of interest rate
benchmark reform.
The following table summarises the significant exposures impacted by interest rate benchmark reform as at 31 December 2020:
GBP LIBOR
USD LIBOR
JPY LIBOR
CHF LIBOR
Others
Total
£m
£m
£m
£m
£m
£m
Non-derivative financial assets
Loans and advances at amortised cost
19,317
17,990
173
11
1,725
39,216
Reverse repurchase agreements and other similar
secured lending
-
334
-
-
-
334
Financial assets at fair value through the income
statement
1,190
6,373
-
283
209
8,055
Financial assets at fair value through other
comprehensive income
186
106
-
-
8
300
Non-derivative financial assets
20,693
24,803
173
294
1,942
47,905
Non-derivative financial liabilities
Debt securities in issue
-
(1,430)
(22)
-
-
(1,452)
Subordinated liabilities
(21)
(876)
-
-
-
(897)
Financial liabilities designated at fair value
(149)
(1,273)
(759)
-
(139)
(2,320)
Non-derivative financial liabilities
(170)
(3,579)
(781)
-
(139)
(4,669)
Equity
Other equity instruments
(2,122)
(3,062)
-
-
-
(5,184)
Standby facilities, credit lines and other
commitments
18,169
74,008
-
74
15,951
108,202
The table above represents the derivatives exposures to interest rate benchmark reform, which have yet to transition. The exposure disclosed is
for positions with contractual maturities after 31 December 2021. Balances reported at amortised cost are disclosed at their gross carrying
value and do not include any expected credit losses that may be held against them. Balances reported at fair value are disclosed at their fair
value on the balance sheet date.
Notes to the financial statements
Other disclosure matters
Barclays Bank PLC 2020 Annual Report on Form 20 -F 195
The Barclays Bank Group also has exposure to interest rate benchmark reform in respect of its cash collateral balances across some of its
Credit Support Annex agreements, predominantly in EONIA. This exposure is not included within the table above due to its short dated nature.
GBP LIBOR
USD LIBOR
EONIA
JPY LIBOR
CHF LIBOR
Others
Total
£m
£m
£m
£m
£m
£m
£m
Derivative notional contract amount
OTC interest rate derivatives
596,564
2,832,339
457,844
754,206
25,681
41,782
4,708,416
OTC interest rate derivatives - cleared by central
counterparty
1,552,637
2,872,962
623,802
1,091,479
119,382
198,113
6,458,375
Exchange traded interest rate derivatives
300,182
333,705
-
-
2,494
-
636,381
OTC foreign exchange derivatives
155,285
589,332
-
93,108
31,257
1,921
870,903
OTC equity and stock index derivatives
1,845
7,946
544
1,929
491
2,141
14,896
Derivative notional contract amount
2,606,513
6,636,284
1,082,190
1,940,722
179,305
243,957
12,688,971
The table above represents the derivative exposures to interest rate benchmark reform, which have yet to transition. The exposure disclosed is
for positions with contractual maturities after 31 December 2021. Derivatives are reported by using the notional contract amount and where
derivatives have both pay and receive legs with exposure to benchmark reform such as cross currency swaps, the notional contract amount is
disclosed for both legs. As at 31 December 2020, there were £264bn of cross currency swaps where both the pay and receive legs are
impacted by interest rate benchmark reform.
The Barclays Bank Group also had £23bn of Barclays issued debt retained by the group, impacted by the interest rate benchmark reform,
predominately in GBP and USD LIBOR.
The table below provides detail on the contractual maturity of the above exposures:
Notes to the financial statements
Other disclosure matters
Barclays Bank PLC 2020 Annual Report on Form 20 -F 196
Over one year
but not more
than two years
Over two years
but not more
than five years
Over five years
but not more
than ten years
Over ten years
Total
Current benchmark rate
£m
£m
£m
£m
£m
Non-derivative financial assets
GBP LIBOR
4,520
10,781
1,544
3,848
20,693
USD LIBOR
8,381
14,653
1,715
54
24,803
JPY LIBOR
11
144
-
18
173
CHF LIBOR
22
73
88
111
294
Other
931
713
60
238
1,942
Non-derivative financial assets
13,865
26,364
3,407
4,269
47,905
Non-derivative financial liabilities
GBP LIBOR
(32)
(117)
-
(21)
(170)
USD LIBOR
(464)
(1,124)
(1,591)
(400)
(3,579)
JPY LIBOR
(213)
(43)
(240)
(285)
(781)
CHF LIBOR
-
-
-
-
-
Other
(12)
(5)
-
(122)
(139)
Non-derivative financial liabilities
(721)
(1,289)
(1,831)
(828)
(4,669)
Equity
GBP LIBOR
-
-
-
(2,122)
(2,122)
USD LIBOR
-
-
-
(3,062)
(3,062)
Equity
-
-
-
(5,184)
(5,184)
Derivative notional contract amount
GBP LIBOR
872,516
745,834
473,388
514,775
2,606,513
USD LIBOR
2,019,027
2,563,020
1,344,292
709,945
6,636,284
EONIA
395,558
416,670
207,656
62,306
1,082,190
JPY LIBOR
327,669
582,200
731,942
298,911
1,940,722
CHF LIBOR
46,868
73,792
46,010
12,635
179,305
Other
50,777
96,657
72,125
24,398
243,957
Derivative notional contract amount
3,712,415
4,478,173
2,875,413
1,622,970
12,688,971
Standby facilities, credit lines and other commitments
GBP LIBOR
4,827
11,752
441
1,149
18,169
USD LIBOR
15,366
56,579
455
1,608
74,008
CHF LIBOR
-
74
-
-
74
Other
2,897
12,170
862
22
15,951
Standby facilities, credit lines and other commitments
23,090
80,575
1,758
2,779
108,202
Additional information
Barclays Bank PLC 2020 Annual Report on Form 20 -F 197
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 contained in
the company’s Memorandum of Association, including the company’s objects, are now deemed to be contained in the company’s articles. The
Companies Act 2006 also states that a company’s objects are unrestricted unless the company’s articles provide otherwise.
The Articles of Association were adopted 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 or employment in the Company on such terms as they determine.
(vii) The Company may by ordinary resolution remove a Director before the expiry of his/her period of office (without prejudice to a claim for
damages for breach of contract or otherwise) and may by ordinary resolution appoint another person who is willing to act to be a Director in
his/her place.
(viii) A Director may appoint either another Director or some other person approved by the Board to act as his/her alternate with power to attend
Board meetings and generally to exercise the functions of the appointing Director in his/her absence (other than the power to appoint an
alternate).
(ix) The Board may authorise any matter in relation to which a Director has, or can have, a direct interest that conflicts, or possibly may conflict
with, the Company’s interests. Only Directors who have no interest in the matter being considered will be able to authorise the relevant matter
and they may impose limits or conditions when giving authorisation if they think this is appropriate.
(x) A Director may hold positions with or be interested in other companies and, subject to legislation applicable to the Company and the FCA’s
requirements, may contract with the Company or any other company in which the Company is interested. A Director may not vote or count
towards the quorum on any resolution concerning any proposal in which he/she (or any person connected with him/her) has a material interest
(other than by virtue of his/her interest in securities of the Company) or if he/she has a duty which conflicts or may conflict with the interests of
the Company, unless the resolution relates to any proposal:
(a) to indemnify a Director or provide him/her with a guarantee or security in respect of money lent by him/her to, or any obligation incurred by
him/her or any other person for the benefit of (or at the request of), the Company (or any other member of the Group);
(b) to indemnify or give security or a guarantee to a third party in respect of a debt or obligation of the Company (or any other member of the
Group) for which the Director has personally assumed responsibility;
(c) to obtain insurance for the benefit of Directors;
(d) involving the acquisition by a Director of any securities of the Company (or any other member of the Group) pursuant to an offer to existing
holders of securities or to the public;
(e) 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
Additional information
Barclays Bank PLC 2020 Annual Report on Form 20 -F 198
(f) concerning any other arrangement for the benefit of employees of the Company (or any other member of the Group) under which the Director
benefits or stands to benefit in a similar manner to the employees concerned and which does not give the Director any advantage which the
employees to whom the arrangement relates would not receive.
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 exceed the amount recommended by the Board. The Board may also pay interim
or final dividends if it appears they are justified by the Company’s financial position.
Each Preference Share confers the right to a preferential dividend (“Preference Dividend”) payable in such currency at such rates (whether fixed
or calculated by reference to or in accordance with a specified procedure or mechanism), on such dates and on such other terms as may be
determined by the Board prior to allotment thereof.
The Preference Shares rank in regard to payment of dividends in priority to the holders of Ordinary Shares and any other class of shares in the
Company ranking junior to the Preference Shares.
Dividends may be paid on the Preference Shares if, in the opinion of the Board, the Company has sufficient distributable profits, after payment
in full or the setting aside of a sum to provide for all dividends payable on (or in the case of shares carrying a cumulative right to dividends,
before) the relevant dividend payment date on any class of shares in the Company ranking pari passu with or in priority to the relevant series of
Preference Shares as regards participation in the profits of the Company.
If the Board considers that the distributable profits of the Company available for distribution are insufficient to cover the payment in full of
Preference Dividends, Preference Dividends shall be paid to the extent of the distributable profits on a pro rata basis.
Notwithstanding the above, the Board may, at its absolute discretion, determine that any Preference Dividend which would otherwise be payable
may either not be payable at all or only payable in part.
If any Preference Dividend on a series of Preference Shares is not paid, or is only paid in part, for the reasons described above, holders of
Preference Shares will not have a claim in respect of 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
dividend restriction means that, subject to certain exceptions, neither the Company nor Barclays Bank may (a) pay a dividend on, or (b) redeem,
purchase, reduce or otherwise acquire, any of their respective ordinary shares, other preference shares or other share capital ranking equal or
junior to the relevant series of Preference Shares until the earlier of such time as the Company next pays in full a dividend on the relevant series
of Preference Shares or the date on which all of the relevant series of Preference Shares are redeemed.
All unclaimed dividends payable in respect of any share may be invested or otherwise made use of by the Board for the benefit of the Company
until claimed. If a dividend is not claimed after 12 years of it becoming payable, it is forfeited and reverts to the Company.
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
The Directors may make calls upon the members in respect of any monies unpaid on their shares. A person upon whom a call is made remains
liable even if the shares in respect of which the call is made have been transferred. Interest will be chargeable on any unpaid amount called at a
rate determined by the Board (of not more than 20% per annum).
If a member fails to pay any call in full (following notice from the Board that such failure will result in forfeiture of the relevant shares), such
shares (including any dividends declared but not paid) may be forfeited by a resolution of the Board, and will become the property of the
Company. Forfeiture shall not absolve a previous member for amounts payable by him/her (which may continue to accrue interest).
The Company also has a lien over all partly paid shares of the Company for all monies payable or called on that share and over the debts and
liabilities of a member to the Company. If any monies which are the subject of the lien remain unpaid after a notice from the Board demanding
payment, the Company may sell such shares.
Annual and other general meetings
The Company is required to hold an AGM in addition to such other general meetings as the Directors think fit. The type of the meeting will be
specified in the notice calling it. Under the Companies Act 2006, the AGM must be held within six months of the 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
Additional information
Barclays Bank PLC 2020 Annual Report on Form 20 -F 199
specify the intention to propose the resolution as such. The accidental failure to give notice of a general meeting or the non-receipt of such
notice will not invalidate the proceedings at such meeting.
Subject as noted above, all Shareholders are entitled to attend and vote at general meetings. The Articles do, however, provide that
arrangements may be made for simultaneous attendance at a satellite meeting place or, if the meeting place is inadequate to accommodate all
members and proxies entitled to attend, another meeting place may be arranged to accommodate such persons other than that specified in the
notice of meeting, in which case Shareholders may be excluded from the principal place.
Holders of Preference Shares have no right to receive notice of, attend or vote at, any general meetings of the Company as a result of holding
Preference Shares.
Notices
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 deemed to have so agreed pursuant to applicable legislation. A document or information
may only be sent by being made available on a website if the recipient has agreed to receive it in that form or has been deemed to have so
agreed pursuant to applicable legislation, and has not revoked that agreement.
In respect of joint holdings, documents or information shall be sent to the joint holder whose name stands first in the register.
A member who (having no registered address within the UK) has not supplied an address in the UK at which documents or information may be
sent in hard copy form, or an address to which notices, documents or information may be sent or supplied by electronic means, is not entitled to
have documents or information sent to him/her.
In addition, the Company may cease to send notices to any member who has been sent documents on two consecutive occasions over a period
of at least 12 months and when each of those documents is returned undelivered or notification is received that they have not been delivered.
Capitalisation of profits
The Company may, by ordinary resolution, upon the recommendation of the Board capitalise all or any part of an amount standing to the credit
of a reserve or fund to be set free for distribution provided that amounts from the share premium account, capital redemption reserve or any
profits not available for distribution should be applied only in paying up unissued shares to be allotted to members credited as fully paid and no
unrealised profits shall be applied in paying up debentures of the Company or any amount unpaid on any share in the capital of the Company.
Indemnity
Subject to applicable legislation, every current and former Director or other officer of the Company (other than any person engaged by the
company as auditor) shall be indemnified by the Company against any liability in relation to the Company, other than (broadly) any liability to the
Company or a member of the Group, or any criminal or regulatory fine.
Variation of Rights
The rights attached to any class of shares may be varied either with the consent in writing of the holders of at least 75% in nominal value of the
issued shares of that class, or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of that class.
The rights of shares shall not (unless expressly provided by the rights attached to such shares) be deemed varied by the creation of further
shares ranking equally with them or subsequent to them.
Limitations on foreign shareholders
There are no restrictions imposed by the Articles of Association or (subject to the effect of any economic sanctions that may be in force from
time to time) by current UK laws which relate only 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 2020 Annual Report on Form 20 -F 200
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 dividends 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) Taxatio n 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 2020 to 5 April 2021 (inclusive), a nil rate of UK income tax applies to the first £2,000 of Total Dividend Income
received by an individual shareholder in that tax year (the ‘Nil Rate Amount’). For the 2018-2019 and 2019-2020 tax years, 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 Total 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 UK 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 and
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 trusts.
The calculations required to compute chargeable capital gains may be complex. Shareholders are advised to consult their personal financial
adviser if further information regarding a possible tax liability in respect of their holdings of shares is required.
(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’). Any document effecting 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
Additional information
Barclays Bank PLC 2020 Annual Report on Form 20 -F 201
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 are liable to stamp duty reserve tax rather than stamp duty.
Stamp duty reserve tax on transactions settled within the CREST system or reported through it for regulatory purposes will be collected by
CREST.
Special rules apply to certain categories of person, including intermediaries, market makers, brokers, dealers and persons connected with
depositary arrangements and clearance services.
(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 Holders
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 accounting 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 Convention between the UK and the US as entered into force on 11
November 1979 (the ‘Estate and Gift Tax Convention’), the current UK tax law and the practice of HMRC, all of which are subject to change,
possibly on a retroactive basis. This 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 of 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
federal 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 has 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, Barclays Bank PLC believes that it was not treated as a PFIC for US federal
income tax purposes with respect to its 2019 or 2020 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 allowable 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, regardless of whether the payment is in fact converted into
US Dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is
Additional information
Barclays Bank PLC 2020 Annual Report on Form 20 -F 202
includable in income to the date the payment is converted into US Dollars will be treated as ordinary income or loss and, for foreign tax credit
limitation purposes, from sources within the US, and will not be eligible for the special tax rates applicable to qualified dividend income.
Distributions in excess of current or accumulated earnings and profits, as determined for US federal income tax purposes, will be treated as a
return of capital to the extent of the US Holder’s basis in the Shares and thereafter as capital gain. Because Barclays Bank PLC does not
currently 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.
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 adjusted 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 Holder, 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 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), are 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 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 required 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 circumstances.
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 Holder 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 made by, and financial
accounts held with, entities that are classified as financial institutions under FATCA are subject to a special information reporting and
Additional information
Barclays Bank PLC 2020 Annual Report on Form 20 -F 203
withholding tax regime. Regulations implementing withholding in respect of “passthru payments” under 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 Bank 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
.
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 controls and procedures of Barclays Bank
PLC as at 31 December 2020, 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.
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 or with the Government of Iran or certain designated natural persons or entities involved in terrorism or the proliferation
of weapons of mass destruction during the period covered by the report. The requirement includes disclosure of activities not prohibited 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 2020, the period covered by this annual report, or in relation to activity we
became aware of in 2020 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 425 in 2020 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 Iranian banks 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 Weap ons of Mass Destruction Proliferators Sanctions Regulations (“WMDPSR”) in August 2011.
These 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 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 above guarantees unilaterally, and thus it maintains a limited legacy portfolio of these
guarantees, which were in compliance with applicable laws and regulations at the time 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 2020 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 branch. The lease is for 60 years, contains no early termination clause, and has 19 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 2020 in relation to this activity.
Local Clearing Systems
Banks based 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 virtue of its banking activities in the UAE, participates in
the UAE Clearing Systems, in accordance with applicable laws and regulations. In order to mitigate the risk of engaging in transactions in which
Additional information
Barclays Bank PLC 2020 Annual Report on Form 20 -F 204
participant Iranian SDN banks may be involved, Barclays has implemented restrictions relating to its involvement in the UAE Clearing Systems.
Barclays attributed no revenue in 2020 in relation to this activity.
Payments Notified
A Barclays customer was designated pursuant to the Global Terrorism Sanctions Regulations in March 2016. Barclays continues to receive
credit card repayments from this customer in accordance 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 345 in 2020 in relation to this activity.
Barclays maintains customer relationships with certain UK-incorporated medical manufacturing companies. In 2020, Barclays processed two
payments, for the benefit of our customers, relating to the export of medical devices to privately-owned Iranian entities. The end users of these
medical devices include hospitals, medical universities, or clinics that may be owned or controlled by, or affiliated with, the Government of Iran.
The payments were made in accordance with applicable laws and regulations and all payments were received from the privately-owned Iranian
entities; no payments were received directly from any SDN or entity owned or controlled by, or affiliated with, the Government of Iran. Although
OFAC has issued general licenses relating to the sale of medical devices, these licenses do not apply to sales of non-U.S. origin items by non-
U.S. persons. Barclays attributed revenue of approximately GBP 10 in 2020 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 SDNs. Payments are received, in GBP, from a UK-based payment services company or in cash, and are credited to the
customers’ accounts with Barclays. The payments are processed in accordance with applicable laws and regulations. No payments are received
directly from any entity owned by the Government of Iran or any SDN. Barclays attributed no revenue in 2020 in relation to this activity.
Barclays maintains a relationship with Her Majesty's Revenue & Customs (“HMRC”), a UK Government agency, which receives funds from
Iranian SDN financial institutions 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 Her Majesty’s Treasury (“HMT”), another UK
Government agency. Barclays also received a one-off credit to HMRC’s accounts, from HMT, to settle the tax liabilities of an Iranian SDN
financial institution. Barclays attributed revenue of approximately GBP 30 in 2020 in relation to this activity.
Barclays processed four transactions to embassies of the Government of Iran in the European Union (“EU”) 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 no revenue in 2020 in relation to this activity.
In November 2020, a Barclays customer was designated as an SDN pursuant to the W MDPSR. The customer had two accounts with Barclays,
containing total credits of less than GBP 1, both of which were inactive since 2010. Barclays exited the relationship with the customer and
closed the accounts. Barclays attributed no revenue in 2020 in relation to this activity.
In 2020, Barclays processed one GBP through payment from an entity in the Netherlands, affiliated with the Government of Iran, to a UK-based
barristers’ chambers. Neither entity is a customer of Barclays. The payment was for legal services provided by the barristers’ chambers related
to two pending cases between Iran and the U.S. before the International Court of Justice (“ICJ”) in The Hague. The payment was processed in
accordance with applicable laws and regulations. OFAC’s regulations generally authorize the provision of legal services to the Government of
Iran related to the conduct of legal proceedings before the ICJ involving Iran and the United States. However, the payment for legal fees did not
fall within the scope of any authorization from OFAC (nor was it required to, as there was no U.S. jurisdictional nexus). Barclays attributed
revenue of approximately GBP 15 in 2020 in relation to this activity.
Barclays maintains a customer relationship with a UK-incorporated charity that works in the areas of blood cancer and stem cell transplantation.
In 2020, Barclays processed one EUR payment, on behalf of our customer, where the ultimate beneficiary of the payment was affiliated with the
Government of Iran. The payment was for the procurement of a blood sample from an individual in Iran and shipping of the sample to the UK to
determine whether the individual was a potential donor match to a patient in the UK. The payment was processed in accordance with applicable
laws and regulations. Barclays attributed revenue of approximately GBP 10 in 2020 in relation to this activity.
Barclays maintains a customer relationship with a UK university specialising in medicine. They are part of a consortium that includes a
Government of Iran university, which has received funding from the EU to conduct research into a tropical disease. Our customer is the
administrator for the consortium and is responsible for distributing the funding. Barclays processes grant payments to the Government of Iran
university’s account at an Iranian SDN financial institution. All payments were processed in accordance with applicable laws and regulations.
Barclays attributed revenue of approximately GBP 15 in 2020 in relation to this activity.
Additional information
Barclays Bank PLC 2020 Annual Report on Form 20 -F 205
Related undertakings
The Barclays Bank PLC Group’s corporate
structure consists of a number of related
undertakings, comprising subsidiaries, joint
ventures, associates and significant other
interests. A full list of these undertakings, the
country of incorporation and the ownership of
each share class is set out below. The information
is provided as at 31 December 2020.
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 2020 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 or its subsidiaries.
Notes
A
Directly held by Barclays Bank PLC
Class F Preference Shares, Class H 2012
B
Partnership Interest
Ordinary Shares, Class H 2012 Preference
C
Membership Interest
Shares, Class H Ordinary Shares, Class H
D
Trust Interest
Preference Shares, Class I Preference Shares,
E
Guarantor
Class J Ordinary Shares, Class J Preference
Shares
F
Preference Shares
W
First Class Common Shares, Second Class
G
A Preference Shares
Common Shares
H
B Preference Shares
X
Class B Redeemable Preference Shares
I
Ordinary/Common Shares in addition to other
Y
EUR Tracker 1 Shares, GBP Tracker 1
shares
Shares, USD Tracker 1 Shares, USD Tracker 2
J
A Ordinary Shares
Shares, USD Tracker 3 Shares
K
B Ordinary Shares
Z
Not Consolidated (see Note 33 Structured
L
C Ordinary Shares
entities)
M
F Ordinary Shares
AA
USD Linked Ordinary Shares
N
W Ordinary Shares
BB
Redeemable Class B Shares
O
First Preference Shares, Second Preference
CC
Class A Redeemable Preference Shares
Shares
DD
Nominal Shares
P
Registered Address not in country of
incorporation
Q
Core Shares, Insurance (Classified) Shares
R
Capital Contribution Shares
S
A Unit Shares, B Unit Shares
T
Non-Redeemable Ordinary Shares
U
C Preference Shares, D Preference Shares
V
Class A Ordinary Shares,
Class B Ordinary Shares, Class C
Ordinary Shares, Class C Preference Shares,
Class D Ordinary Shares, Class D Preference
Shares, Class E Ordinary Shares, Class E
Preference Shares, Class F Ordinary Shares,
Wholly owned subsidiaries
Note
Wholly owned subsidiaries
Note
Wholly owned subsidiaries
Note
United Kingdom
Durlacher Nominees Limited
A
Gerrard Management Services Limited (In
A
- 1 Churchill Place, London, E14 5HP
Eagle Financial and Leasing Services (UK)
A
Liquidation)
Aequor Investments Limited
Limited
Lombard Street Nominees Limited (In
A
Ardencroft Investments Limited
A
Equity Value Investments No.1 Limited
A
Liquidation)
B D & B Investments Limited
Equity Value Investments No.2 Limited
Ruthenium Investments Limited
A
B.P.B. (Holdings) Limited
A
Finpart Nominees Limited
A
Liquidation)
Barclays (Barley) Limited (In Liquidation)
J, K, A
Foltus Investments Limited
Woolwich Plan Managers Limited (In
A
Barclays Aldersgate Investments Limited
A
Hawkins Funding Limited
A
liquidation)
Barclays Capital Asia Holdings Limited
A
Heraldglen Limited
I, O
Woolwich Surveying Services Limited (In
A
Barclays Capital Finance Limited
A
Isle of Wight Home Loans Limited
A
liquidation)
Barclays Capital Japan Securities Holdings
J.V. Estates Limited
A
- 5 The North Colonnade, London, E14 4BB
Limited
Kirsche Investments Limited
A
Leonis Investments LLP
A, B
Barclays Capital Nominees (No.2) Limited
Long Island Assets Limited
- 9, allée Scheffer, L-2520, Luxembourg
Barclays Capital Nominees (No.3) Limited
A
Maloney Investments Limited
A
Barclays Claudas Investments Partnership
B, P
Barclays Capital Nominees Limited
A
Menlo Investments Limited
A
Barclays Pelleas Investments Limited
B, P
Barclays Capital Securities Client Nominee
A
Mercantile Credit Company Limited
A
Partnership
Limited
Mercantile Leasing Company (No.132)
A
Barclays Blossom Finance General Partnership
B, P
Barclays Capital Securities Limited
A, F, I
Limited
Barclays CCP Funding LLP
A, B
MK Opportunities LP
B
Argentina
Barclays Directors Limited
A
Murray House Investment Management
A
- 855 Leandro N.Alem Avenue, 8th Floor,
Barclays Executive Schemes Trustees Limited
A
Limited (In Liquidation)
Buenos Aires
Barclays Group Holdings Limited
A
Naxos Investments Limited
A
Compañía Sudamerica S.A.
A
Barclays International Holdings Limited
A
Northwharf Nominees Limited
A
- Marval, O’Farrell & Mairal, Av. Leandro N.
Barclays Investment Management Limited
A
Real Estate Participation Management
Alem 882, Buenos Aires, C1001AAQ
Barclays Long Island Limited
A
Limited
Compañia Regional del Sur S.A.
A
Barclays Marlist Limited
A
Real Estate Participation Services Limited
Barclays Nominees (George Yard) Limited
A, Z
Relative Value Investments UK Limited
B
Brazil
Barclays Pension Funds Trustees Limited
A
Liability Partnership
- Av. Brigadeiro Faria Lima, No. 4.440, 12th
Barclays Private Bank
Relative Value Trading Limited
Floor, Bairro Itaim Bibi, Sao Paulo, CEP,
Barclays Services (Japan) Limited
A
Roder Investments No. 1 Limited
A, I, Y
04538-132
Barclays Shea Limited
A
Roder Investments No. 2 Limited
A, I, Y
Barclays Brasil Assessoria Financeira Ltda
A
Barclays Term Funding Limited Liability
B
RVT CLO Investments LLP
B
BNC Brazil Consultoria Empresarial Ltda
A
Partnership
Surety Trust Limited
A
Barclays Wealth Nominees Limited
A
Swan Lane Investments Limited
Canada
Barcosec Limited
A
US Real Estate Holdings No.1 Limited
- 333 Bay Street, Suite 4910, Toronto ON M5H
Barsec Nominees Limited
A
US Real Estate Holdings No.2 Limited
2R2
BB Client Nominees Limited
A
US Real Estate Holdings No.3 Limited
Barclays Capital Canada Inc.
BMBF (No.24) Limited
US Real Estate Holdings No.4 Limited
- Stikeman Elliot LLP, 199 Bay Street, 5300
BMI (No.9) Limited
Wedd Jefferson (Nominees) Limited
A
Commerce Court West, Toronto ON M5L 1B9
Chapelcrest Investments Limited
Westferry Investments Limited
A
Barclays Corporation Limited
A
Clydesdale Financial Services Limited
Woolwich Qualifying Employee Share
A
Cobalt Investments Limited
A
Ownership Trustee Limited
Cayman Islands
Cornwall Homes Loans Limited
A
Zeban Nominees Limited
A
- Maples Corporate Services Limited, PO Box
CP Flower Guaranteeco (UK) Limited (In
A, E
- Hill House, 1 Little New Street, London,
Liquidation)
EC4A 3TR
Cayman, KY1-1104
DMW Realty Limited
A
Barclays Nominees (Branches) Limited (In
A
Alymere Investments Limited
G, H, I
Dorset Home Loans Limited
A
Liquidation)
Analytical Trade UK Limited
Wholly owned subsidiaries
Note
Wholly owned subsidiaries
Note
Wholly owned subsidiaries
Note
Barclays Capital (Cayman) Limited
A
- 25-28 North Wall Quay, Dublin 1,
Mexico
Barclays Securities Financing Limited
F, I
D01H104
- Paseo de la Reforma 505, 41 Floor,
Torre
Braven Investments No.1 Limited
Erimon Home Loans Ireland Limited
A
Mayor, Col. Cuauhtemoc, CP 06500
Calthorpe Investments Limited
Barclays Bank Mexico, S.A.
Additional information
Barclays Bank PLC 2020 Annual Report on Form 20 -F 206
Capton Investments Limited
A
Isle of Man
Barclays Capital Casa de Bolsa, S.A. de
C.V.
Claudas Investments Limited
A, I, CC, X
- P O Box 9, Victoria Street,
Grupo Financiero Barclays Mexico,
A, K,
M
Claudas Investments Two Limited
Douglas, IM99 1AJ
S.A. de C.V.
Gallen Investments Limited
Barclays Holdings (Isle of Man) Limited (In
A
Servicios Barclays, S.A. de C.V.
Hurley Investments No.1 Limited
Liquidation)
JV Assets Limited
L
Barclays Nominees (Manx) Limited
A
Monaco
Mintaka Investments No. 4 Limited
Barclays Private Clients International
A, J,
K
- 31 Avenue de la Costa, Monte Carlo
OGP Leasing Limited
Limited
BP 339
Palomino Limited
A, Z
Barclays Private Asset Management
Pelleas Investments Limited
A
Japan
(Monaco) S.A.M
Pippin Island Investments Limited
A
- 10-1, Roppongi 6 -chome, Minato -ku,
Razzoli Investments Limited
A, F, I
Tokyo
Philippines
RVH Limited
A, F, I
Barclays Funds and Advisory Japan
Limited
- 21/F, Philamlife Tower, 8767 Paseo de
Wessex Investments Limited
Barclays Securities Japan Limited
Roxas, Makati City, 1226
- Walkers Corporate Limited, Cayman
Barclays Wealth Services Limited
Meridian (SPV-AMC) Corporation
Corporate Centre, 27 Hospital Road,
George
Town, KY1- 9008
Jersey
Saudi Arabia
Long Island Holding B Limited
A
- 2
nd
- 3
rd
Esplanade, St. Helier, JE1 1GH
Street, PO Box 1454, Riyadh 11431
Germany
Barclays Services Jersey Limited
A
Barclays Saudi Arabia (In Liquidation)
A
- TaunusTurm, Taunustor 1, 60310,
- 5 Esplanade, St. Helier, JE2 3QA
Barclays Wealth Management Jersey
A
Singapore
Barclays Capital Effekten GmbH
A
Limited
- 10 Marina Boulevard, #24- 01 Marina
Bay
- Stuttgarter Straße 55-57, 73033
BIFML PTC Limited
A
Göppingen
- 13 Castle Street, St. Helier, JE4 5UT
Barclays Capital Futures (Singapore)
Private
Holding Stuttgarter Straße GmbH (In
Barclays Index Finance Trust
S
Limited
Liquidation)
- Lime Grove House, Green Street,
Barclays Capital Holdings (Singapore)
A
St Helier, JE1 2ST
Private Limited
Guernsey
Barbridge Limited (In Liquidation)
A, I,
DD
Barclays Merchant Bank (Singapore) Ltd.
- P.O. Box 33, Dorey Court, Admiral Park,
St.
- 13 Library Place, St Helier, JE4 8NE
Barclays Nominees (Jersey) Limited
A
Spain
Barclays Insurance Guernsey PCC Limited
A, Q
Barclaytrust Channel Islands Limited
A
- Calle Jose, Abascal 51, 28003, Madrid
Barclays UKRF No.1 IC Limited
Z
- Estera Trust (Jersey) Limited, 13-14
Barclays Tenedora De Inmuebles SL.
A
Barclays UKRF ICC Limited
Z
Esplanade, St Helier, JE1 1EE
BVP Galvani Global, S.A.U.
A
- PO BOX 41, Floor 2, Le Marchant House,
Le
MK Opportunities GP Ltd
A
Switzerland
Barclays Nominees (Guernsey) Limited (In
A
Luxembourg
- Chemin de Grange Canal 18 -20, PO
Box
Liquidation)
- 9, allée Scheffer, L-2520
3941, 1211, Geneva
Barclays Alzin Investments S.à r.l.
Barclays Bank (Suisse) SA
Hong Kong
Barclays Bayard Investments S.à r.l.
J, K
BPB Holdings SA
- 42nd floor Citibank Tower, Citibank
Plaza,
Barclays Bedivere Investments S.à r.l.
3 Garden Road
Barclays Bordang Investments S.à r.l.
United States
Barclays Bank (Hong Kong Nominees)
Limited
A
Barclays BR Investments S.à r.l.
(in Liquidation)
Barclays Cantal Investments S.à r.l.
251 Little Falls Drive, Wilmington,
Barclays Capital Asia Nominees Limited (In
Barclays Capital Luxembourg S.à r.l.
DE 19808
Liquidation)
Barclays Capital Trading Luxembourg S.à
r.l.
J, K
Analytical Trade Holdings LLC
- Level 41, Cheung Kong Center, 2
Queen's
Barclays Claudas Investments S.à r.l.
Analytical Trade Investments LLC
BB
Road, Central
Barclays Equity Index Investments S.à r.l.
Archstone Equity Holdings Inc
Barclays Capital Asia Limited
A
Barclays International Luxembourg Dollar
Barclays Bank Delaware
F, I
Holdings S.à r.l.
Barclays Capital Derivatives Funding LLC
C
India
Barclays Lamorak Investments S.à r.l.
T
Barclays Capital Energy Inc.
- 208 Ceejay House, Shivsagar Estate, Dr
A
Barclays Leto Investments S.à r.l.
Barclays Capital Holdings Inc.
G, H,
I
Beasant Road, Worli, Mumbai, 400 018
Barclays Luxembourg EUR Holdings S.à
r.l
T
Barclays Capital Real Estate Finance Inc.
Barclays Securities (India) Private Limited
Barclays Luxembourg Finance S.à r.l.
Barclays Capital Real Estate Holdings Inc.
Barclays Wealth Trustees (India) Private
Barclays Luxembourg GBP Holdings S.à
r.l.
T
Barclays Capital Real Estate Inc.
Limited
Barclays Luxembourg Global Funding S.à
r.l.
Barclays Commercial Mortgage Securities
C
- Level 10, Block B6, Nirlon Knowledge
Barclays Luxembourg Holdings S.à r.l.
I, AA
LLC
Park, Off Western Express Highway
Barclays Luxembourg Holdings SSC
B
Barclays Capital Equities Trading GP
B
Barclays Pelleas Investments S.à r.l.
Barclays Dryrock Funding LLC
C
Barclays Investments & Loans (India)
A, F, I
- 68-70 Boulevard de la Petrusse, L-
2320
Barclays Electronic Commerce Holdings
Inc.
Private Limited
Adler Toy Holding Sarl
Barclays Financial LLC
C
Barclays Group US Inc.
G, I
Ireland
Mauritius
Barclays Insurance U.S. Inc.
- One Molesworth Street, Dublin 2,
- C/O Rogers Capital Corporate
Services
Barclays Oversight Management Inc.
D02RF29
Limited, 3
rd
Barclays Receivables LLC
C
Additional information
Barclays Bank PLC 2020 Annual Report on Form 20 -F 207
Barclays Bank Ireland Public Limited
A
President John Kennedy Street, Port
Louis
Barclays Services Corporation
Company
Barclays Capital Mauritius Limited
A
Barclays Services LLC
C
Barclays Europe Client Nominees
Barclays Capital Securities Mauritius
A
Barclays US CCP Funding LLC
C
Designated Activity Company
Limited
Barclays US Funding LLC
C
Barclays Europe Firm Nominees Designated
- Fifth Floor, Ebene Esplanade, 24
Barclays US Investments Inc.
J, K
Activity Company
Cybercity, Ebene
Barclays US LLC
G,H,I,
U
Barclays Europe Nominees Designated
Barclays Mauritius Overseas Holdings
A
BCAP LLC
C
Limited
Crescent Real Estate Member LLC
C
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
Curve Investments GP
B
Monaco
Gracechurch Services Corporation
- 31 Avenue de la Costa, Monte
Lagalla Investments LLC
Carlo
Long Island Holding A LLC
C
Societe Civile Immobiliere 31
75.00
A
LTDL Holdings LLC
C
Marbury Holdings LLC
Portugal
Procella Investments No.2 LLC
C
Costa no. 15- A, 2750 -423
Procella Investments No.3 LLC
C
Cascais
Preferred Liquidity, LLC
J
Other Related Undertakings
%
Note
Projepolska, S.A. (In Liquidation)
24.50
Z
Relative Value Holdings, LLC
United Kingdom
Surrey Funding Corporation
- 1 Churchill Place, London, E14
5HP
United States of America
Sussex Purchasing Corporation
PSA Credit Company Limited
50.00
A, J, L
- Corporation Service
Company,
Sutton Funding LLC
C
(In Liquidation)
251 Little Falls Drive,
TPProperty LLC
C
- 3 - 5 London Road, Rainham, Kent,
1209 Orange Street,
US Secured Investments LLC
R
ME8 7RG
Wilmington DE ,19808
Verain Investments LLC
Trade Ideas Limited
20.00
A, Z
DG Solar Lessee II, LLC
75.00
C, Z
Wilmington Riverfront Receivables LLC
J, K
- 50 Lothian Road, Festival Square,
DG Solar Lessee, LLC
75.00
C, Z
- Corporation Service Company, 100 Pearl
Edinburgh, EH3 9WJ
- Corporation Trust Company,
Street, 17
th
Equistone Founder Partner II L.P.
20.00
A, B, Z
Corporation Trust Centre, 1209
CT 06103
Equistone Founder Partner III L.P.
35.00
A, B, Z
Orange Street, Wilmington DE
Barclays Capital Inc.
- Enigma, Wavendon Business Park
19801
- Corporation Service Company, 80 State
Milton Keynes, MK17 8LX
VS BC Solar Lessee I LLC
50.00
C, Z
Street, Albany, NY, 12207- 2543
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.
Barclays Payment Solutions Inc.
- 65A Basinghall Street, London,
-Corporation Service Company, 2626
EC2V 5DZ
Glenwood Ave, Suite 550, Raleigh, NC,
Cyber Defence Alliance Limited
25.00
A, E, Z
27608
Barclays US GPF Inc.
Cayman Islands
Equifirst Corporation (In Liquidation)
-PO Box 309GT, Ugland House,
- 745 Seventh Avenue, New York NY
10019
South Church Street, Grand
Subsidiaries by virtue of
control
%
Note
Alynore Investments Limited Partnership
B
Cayman, KY1-1104
United Kingdom
Barclays US Holdings Limited
90
A, J
- 1 Churchill Place, London,
Zimbabwe
E14 5HP
- 2 Premium Close, Mount Pleasant
Business
Korea, Republic of
Oak Pension Asset
0.00
Z
Park, Mount Pleasant, Harare
- 18
th
Management Limited
Branchcall Computers (Pvt) Limited
A
343, Samil-daero, Jung-go, Seoul
Water Street Investments
0.00
Z
Woori BC Pegasus
70.00
A, W
Limited
Securitization Specialty Co.,
Limited
Cayman Islands
- PO Box 309GT, Ugland
Luxembourg
House South Church Street,
- 9, allée Scheffer, L-2520
Grand Cayman, KY1-1104
Preferred Funding S.à r.l.
33.33
X
Hornbeam Limited
0.00
Z
Preferred Investments S.à r.l.
33.33
I, X
Malta
- RS2 Buildings, Fort Road,
Mosta MST 1859
RS2 Software PLC
18.25
A, Z
Additional information
Income statement commentary
Barclays Bank PLC 2020 Annual Report on Form 20 -F 208
Income Statement commentary
Barclays Bank PLC continued to support its customers and clients through the COVID-19 pandemic by providing or facilitating lending, through
a range of support programmes which have been introduced, as well as enabling the raising of debt and equity financing in the capital markets.
Support actions, including payment holidays, were introduced to help customers and clients.
2020 compared to 2019
●
Profit before tax decreased 1% to £3,075m driven by a £1,412m decrease in CC&P to a loss before tax of £292m. This was partially offset
by a £1,339m increase in CIB to £3,929m and a lower loss in Head Office of £562m (2019: £598m)
●
Total income increased 11% to £15,778m
–
CIB income increased 26% to £12,607m driven by a 52% increase in Markets, reflecting gains in market share as well as an
increase in market size
a
, wider spreads, higher levels of client activity and volatility, an 8% increase in Banking fees, partially
offset by a 12% decline in Corporate as deposit balance growth was more than offset by margin compression and due to the
impact of losses on the mark to market of lending and related hedge positions, and the carry costs of those hedges
–
CC&P income decreased 22% to £3,490m reflecting lower cards balances, margin compression and reduced payments, which
were impacted by the COVID-19 pandemic, and disposal of Barclays Partner Finance (BPF) within the Barclays Group in Q220.
Q220 included a c.£100m valuation loss on Barclays’ preference shares in Visa Inc. resulting from the Q220 Supreme Court ruling
concerning charges paid by merchants
–
Head Office income was an expense of £319m (2019: £320m) which included hedge accounting and funding costs on legacy
capital instruments, including £85m from repurchases of the Barclays Bank PLC 7.625% Contingent Capital Note.
●
Credit impairment charges increased to £3,377m (2019: £1,202m)
–
CIB credit impairment charges increased to £1,565m (2019: £157m) due to the deterioration in economic outlook driven by the
COVID-19 pandemic. The current year charge is broadly driven by £711m of non default provisions for future expected customer
and client stress and c.£800m of single name wholesale loan charges
–
CC&P credit impairment charges increased to £1,720m (2019: £1,016m) due to the deterioration in economic outlook driven by
the COVID-19 pandemic. The current year charge is broadly driven by £752m of non default provisions for future expected
customer and client stress. As at 31 December 2020, 30 and 90 day arrears in US cards were 2.5% (Q419: 2.7%) and 1.4%
(Q419: 1.4%) respectively
–
Head Office credit impairment charges increased to £92m (2019: £29m) due to the deterioration in economic outlook driven by the
COVID-19 pandemic. The incremental £63m charge is primarily driven by provision for future expected customer stress in the
Italian home loan portfolio
●
Total operating expenses decreased 5% to £9,459m
–
CIB total operating expenses decreased 3% to £7,129m due to cost efficiencies and discipline in the current environment, partially
offset by higher bank levy charge mainly due to the non recurrence of prior year adjustments
–
CC&P total operating expenses decreased 8% to £2,176m reflecting cost efficiencies, lower marketing spend due to the impacts
of the COVID-19 pandemic and disposal of BPF
–
Head Office total operating expenses decreased 36% to £154m due to lower litigation and conduct charges, partially offset by
charitable donations from Barclays’ COVID-19 Community Aid Package
●
Other net income of £133m (2019: £145m) reflects gains on disposals following the sale of a number of subsidiaries within the Barclays
Group
Please refer to the Financial review section in the Annual Report on form 20-F 2019 for a comparative discussion of 2019 financial results
compared to 2018.
Notes
a Data source: Coalition Greenwich, Preliminary FY20 Competitor Analysis. Market share represents Barclays share of the Global Industry Revenue Pool. Analysis
is based on Barclays internal business structure and internal revenues.
For the year ended 31 December
2020
2019
Return on average total assets
0.16%
0.21%
Dividend payout ratio
15%
11 %
Average total equity to average total assets
4.9%
5.0%
Guide 3 ratios
Additional information
Balance sheet commentary
Barclays Bank PLC 2020 Annual Report on Form 20 -F 209
Total assets
Total assets increased by £183bn to £1,060bn.
Cash and balances at central banks increased £30bn to £156bn due to an increase in the liquidity pool predominantly driven by an increase in
customer deposits.
Cash collateral and settlement balances increased £18bn to £98bn, predominantly due to increased activity.
Loans and advances decreased £7bn to £134bn mainly due to lower unsecured lending balances in CC&P.
Reverse repurchase agreements and other similar secured lending increased £7bn driven by an increase in liquidity pool assets.
Trading portfolio assets increased £14bn to £128bn due to increased client activity.
Financial assets at fair value through the income statement increased £42bn to £172bn driven by reverse repurchase agreements and similar
secured lending.
Derivative financial instruments increased £73bn to £303bn,
driven by a decrease in major interest rate curves and increased client activity.
Financial assets at fair value through other comprehensive income increased £6bn to £52bn due to an increase in the liquidity pool
predominantly driven by an increase in customer deposits.
Total liabilities
Total liabilities increased £180bn to £1,006bn.
Deposits at amortised cost increased £31bn to £245bn primarily due to CIB clients increasing liquidity.
Cash collateral and settlement balances increased £18bn to £86bn, predominantly due to increased activity.
Repurchase agreements and other similar secured borrowing increased £8bn to £10bn driven by increased secured borrowing.
Debt securities in issue and subordinated liabilities had a net decrease of £6bn due to the maturity of a number of issuances which were not
refinanced.
Trading portfolio liabilities increased £11bn to £46bn due to increased client activity.
Financial liabilities designated at fair value increased £45bn to £250bn primarily driven by repurchase agreements and secured lending.
Derivative financial instruments increased £72bn to £301bn, driven by a decrease in major interest rate curves and increased client activity. This
is consistent with the movement in derivative financial instrument assets.
Total shareholders’ equity
Total shareholders’ equity increased £3bn to £54bn.
Other equity instruments increased £0.3bn to £8.6bn driven by AT1 instrument issuances of £1.1bn, partially offset by AT1 redemptions during
the year with principal amounts of £0.8bn. 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 increased £0.4bn driven by an increase in the fair value of bonds due to decreasing
bond yields.
The cash flow hedging reserve increased £0.8bn 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 £0.6bn to £2.7bn reflecting the increase in value of period end GBP against USD partially offset by
the decrease in value of period end GBP against EUR.
The own credit reserve decreased £0.6bn to £1.0bn debit due to a tightening of Barclays’ credit spreads increasing the fair value of liabilities on
balance sheet.
Retained earnings increased £2.9bn driven by £1.8bn profit after tax and a £1.5bn capital contribution received from Barclays PLC, partially
offset by dividends paid on ordinary and preference shares totalling £0.3bn.
Additional information
Additional financial disclosure
Barclays Bank PLC 2020 Annual Report on Form 20 -F 210
Deposits and short-term borrowings
Deposits
Deposits include deposits from banks and customer accounts.
2020
2019
2018
Average for the year ended 31 December
£m
£m
£m
Deposits at amortised cost
UK
148,711
130,726
272,730
Europe
46,353
39,496
32,886
Americas
36,841
31,815
44,562
Asia
12,269
9,268
6,062
Africa
8,290
7,802
6,702
Total deposits at amortised cost
252,464
219,107
362,942
2020
2019
2018
For the year ended 31 December
a
£m
£m
£m
Deposits at amortised cost
244,696
213,881
399,189
In offices in the United Kingdom:
Current and demand accounts
- interest free
44,371
31,865
92,008
- interest bearing
29,655
25,040
35,442
Savings accounts
17,251
14,059
121,600
Other time deposits - retail
4,683
4,846
12,467
Other time deposits - wholesale
67,192
62,949
60,475
Total repayable in offices in the United Kingdom
163,152
138,759
321,992
In offices outside the United Kingdom:
Current and demand accounts
- interest free
15,309
10,613
8,950
- interest bearing
13,772
12,932
9,606
Savings accounts
14,940
14,110
12,738
Other time deposits
37,523
37,467
45,903
Total repayable in offices outside the United Kingdom
81,544
75,122
77,197
Deposits at amortised cost amounts in offices in the United Kingdom received from non-residents amounted to £31,818m (2019: £32,499m).
Note
a The UK/Non-UK deposit analysis is based on the location of the office where the transactions are recorded.
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.
2020
2019
£m
£m
Year -end balance
17,331
18,144
Average balance
a
25,208
24,812
Maximum balance
a
38,199
29,754
Average interest rate during year
0.3%
1.5%
Year -end interest rate
0.5%
2.2%
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.
Additional information
Additional financial disclosure
Barclays Bank PLC 2020 Annual Report on Form 20 -F 211
2020
2019
£m
£m
Year -end balance
13,528
13,874
Average balance
a
17,912
17,475
Maximum balance
a
21,250
20,381
Average interest rate during year
1.1%
1.0%
Year -end interest rate
1.4%
1.2%
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.
2020
2019
£m
£m
Year -end balance
6,803
7,716
Average balance
a
11,965
10,619
Maximum balance
a
17,667
13,315
Average interest rate during year
0.8%
3.0%
Year -end interest rate
1.4%
4.1%
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.
2020
2019
£m
£m
Year -end balance
10,443
2,032
Average balance
a
8,566
4,542
Maximum balance
a
19,129
9,739
Average interest rate during year
0.4%
0.7%
Year -end interest rate
0.3%
1.5%
Note
a Calculated based on month -end balances.
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 2020
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 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
Contractual obligations include debt securities.
Additional information
Additional financial disclosure
Barclays Bank PLC 2020 Annual Report on Form 20 -F 212
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 2020
Long-term debt
a
29,434
11,644
9,478
15,797
66,353
As at 31 December 2019
Long-term debt
a
25,786
21,979
13,457
18,779
80,001
Note
a Long-term debt has been prepared to reflect cash flows on an undiscounted basis , which includes interest payments.
Net cash flows from derivatives used to hedge long-term debt amount to £2.3bn (2019: £1.6bn).
Further information on the contractual maturity of the Barclays Bank Group’s assets and liabilities is given in the Liquidity risk section.
Securities
Investment securities include securities reported within loans and advances at amortised cost and financial assets at fair value through other
comprehensive income.
Other securities include securities reported within trading portfolio and financial assets at fair value through the income statement
.
Analysis of securities
2020
2019
2018
As at 31 December
£m
£m
£m
Investment securities
US government, other public bodies and agencies
13,731
11,628
9,078
United Kingdom government
13,617
12,880
7,516
Other government
16,929
11,685
15,483
Mortgage and asset backed securities
1,702
1,019
617
Corporate and other issuers
20,894
18,476
13,466
Debt securities
66,873
55,688
46,160
Equity securities
1
1
11
Investment securities
66,874
55,689
46,171
Other securities
US government, other public bodies and agencies
21,004
19,410
23,890
United Kingdom government
7,141
10,380
10,005
Other government
17,582
11,622
9,825
Mortgage and asset backed securities
1,733
2,354
2,023
Corporate and other issuers
10,433
13,334
15,906
Debt securities
57,893
57,100
61,649
Equity securities
65,934
62,549
44,737
Other securities
123,827
119,649
106,386
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.
Additional information
Additional financial disclosure
Barclays Bank PLC 2020 Annual Report on Form 20 -F 213
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 2020
£m
%
£m
%
£m
%
£m
%
£m
%
US government, other public
bodies and agencies
1,344
0.4%
6,800
0.6%
4,248
1.2%
1,339
2.5%
13,731
1.0%
United Kingdom government
653
1.3%
5,716
1.5%
1,482
2.6%
5,766
1.1%
13,617
1.4%
Other government
1,593
2.6%
3,990
1.7%
7,728
0.6%
3,618
1.6%
16,929
1.3%
Other issuers
2,313
0.4%
11,464
1.7%
6,267
1.1%
2,552
1.2%
22,596
1.3%
Total book value
5,903
1.1%
27,970
1.4%
19,725
1.0%
13,275
1.4%
66,873
1.3%
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.
The above table is only for debt securities held at the reporting date and does not include associated hedges.
Additional information
Additional financial disclosure
Barclays Bank PLC 2020 Annual Report on Form 20 -F 214
Average balance sheet
Average balances are based upon monthly averages.
Assets
2020
Average
balance
Interest
income
Interest
expenseᵃ
Total interest
Rate
£m
£m
£m
£m
%
Cash and balances at central banks
UK
44,950
84
-
84
0.2
Cash and balances at central banks
Non-UK
123,162
142
(281)
(139)
(0.1)
Cash and balances at central banks
Total
168,112
226
(281)
(55)
-
Loans and advances at amortised cost
UK
78,833
1,500
-
1,500
1.9
Loans and advances at amortised cost
Non-UK
73,781
3,010
(4)
3,006
4.1
Loans and advances at amortised cost
b
Total
152,614
4,510
(4)
4,506
3.0
Cash collateral
UK
61,503
196
(31)
165
0.3
Cash collateral
Non-UK
18,110
36
-
36
0.2
Cash collateral
Total
79,613
232
(31)
201
0.3
Reverse repurchase agreements
UK
675
8
-
8
1.2
Reverse repurchase agreements
Non-UK
8,917
4
(9)
(5)
(0.1)
Reverse repurchase agreements
Total
9,592
12
(9)
3
-
Interest earning assets at fair value through other comprehensive
income
UK
47,665
549
-
549
1.2
Interest earning assets at fair value through other comprehensive
income
Non-UK
2,927
55
-
55
1.9
Interest earning assets at fair value through other
comprehensive income
Total
50,592
604
-
604
1.2
Other interest and similar income
c
-
422
-
422
-
Total interest earning assets not at fair value through P&L
460,523
6,006
(325)
5,681
1.2
Less interest and similar expense
-
(2,846)
325
(2,521)
-
Net interest
460,523
3,160
-
3,160
-
Interest earning assets at fair value through P&L
UK
184,701
Interest earning assets at fair value through P&L
Non-UK
76,369
Interest earning assets at fair value through P&L
Total
261,070
Total interest earning assets
721,593
Impairments
(4,852)
Non-interest earning assets
412,510
Total
1,129,251
Percentage of total average interest earning assets in offices
outside the UK
42%
Notes
a For the purposes of the average balance sheet, negative interest earned on assets (which is presented within interest and similar expense in the statutory accounts) is
included in determining the total net interest figure. This presentation is deemed appro priate to represent the return associated with each asset class in the table.
b 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
c Other interest and similar income principally relates to hedging activity.
Additional information
Additional financial disclosure
Barclays Bank PLC 2020 Annual Report on Form 20 -F 215
Assets
2019
Average
balance
Interest
income
Interest
Total net
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
(233)
393
0.4
Cash and balances at central banks
Total
139,821
919
(233)
686
0.5
Loans and advances at amortised cost
UK
74,894
1,746
1,746
2.3
Loans and advances at amortised cost
Non-UK
71,925
3,768
(3)
3,765
5.2
Loans and advances at amortised cost
b
Total
146,819
5,514
(3)
5,511
3.8
Cash collateral
UK
56,091
394
(14)
380
0.7
Cash collateral
Non-UK
7,400
49
-
49
0.7
Cash collateral
Total
63,491
443
(14)
429
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 and similar income
c
321
-
321
-
Total interest earning assets not at fair value through P&L
405,816
8,085
(250)
7,835
1.9
Less interest and similar expense
(4,178)
250
(3,928)
-
Net interest
405,816
3,907
-
3,907
-
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 Comparatives for negative interest income on liabilities and negative interest expense on assets have been re -presented. Negative interest earned on assets (which is
presented within interest and similar expense in the statutory accounts) is included in determining the total net interest figure. This presentation is deemed appropriate to
represent the return associated with each asset class in the table.
b 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.
c Other interest and similar income principally relates to hedging activity.
Additional information
Additional financial disclosure
Barclays Bank PLC 2020 Annual Report on Form 20 -F 216
Assets
2018
Average
balance
Interest
income
Interest
expense
a
Discontinued
operations
Total net
interest
Rate
£m
£m
£m
£m
£m
%
Cash and balances at central banks
UK
42,611
93
(6)
127
214
0.5
Cash and balances at central banks
Non-UK
106,344
826
(208)
-
618
0.6
Cash and balances at central banks
Total
148,955
919
(214)
127
832
0.6
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
(2)
-
3,327
5.1
Loans and advances at amortised cost
b
Total
199,441
5,554
(2)
1,518
7,070
3.5
Cash collateral
UK
50,437
324
(12)
-
312
0.6
Cash collateral
Non-UK
5,343
47
-
-
47
0.9
Cash collateral
Total
55,780
371
(12)
-
359
0.6
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 assets at fair value through other comprehensive
income
UK
49,733
589
-
132
721
1.4
Interest earning assets 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 and similar income
c
-
(59)
-
(11)
(70)
-
Total interest earning assets not at fair value through P&L
458,201
7,459
(228)
1,766
8,997
2.0
Less interest and similar expense
(4,329)
228
(317)
(4,418)
-
Net interest
458,201
3,130
-
1,449
4,579
-
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 Comparatives for negative interest income on liabilities and negative interest expense on assets have been re- presented. Negative interest earned on assets (which is
presented within interest and similar expense in the statutory accounts) is included in determining the total net interest figure. This presentation is deemed appropriate to
represent the return associated with each asset class in the table.
b Loans and advances at amortised cost include all doubtful lending. Interest receivable on such lending 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.
c Other interest and similar income principally includes interest income relating to hedging activity.
Additional information
Additional financial disclosure
Barclays Bank PLC 2020 Annual Report on Form 20 -F 217
Liabilities
2020
Average
balance
Interest
expense
Interest
incomeᵃ
Total net
interest
Rate
£m
£m
£m
£m
%
Deposits at amortised cost
UK
130,760
200
(15)
185
0.1
Deposits at amortised cost
Non-UK
70,707
444
(15)
429
0.6
Deposits at amortised cost
Total
201,467
644
(30)
614
0.3
Cash collateral
UK
53,245
96
(31)
65
0.1
Cash collateral
Non-UK
13,921
38
-
38
0.3
Cash collateral
Total
67,166
134
(31)
103
0.2
Debt securities in issue
UK
17,935
70
-
70
0.4
Debt securities in issue
Non-UK
23,543
354
(2)
352
1.5
Debt securities in issue
Total
41,478
424
(2)
422
1.0
Subordinated liabilities
UK
34,573
1,104
-
1,104
3.2
Subordinated liabilities
Non-UK
220
8
-
8
3.6
Subordinated liabilities
Total
34,793
1,112
-
1,112
3.2
Repurchase agreements
UK
7,245
29
-
29
0.4
Repurchase agreements
Non-UK
1,321
7
(5)
2
0.2
Repurchase agreements
Total
8,566
36
(5)
31
0.4
Other interest and similar expense
b
-
496
-
496
-
Total interest bearing liabilities not at fair value through P&L
353,470
2,846
(68)
2,778
0.8
Interest bearing liabilities at fair value through P&L
UK
239,987
Interest bearing liabilities at fair value through P&L
Non-UK
51,887
Interest bearing liabilities at fair value through P&L
Total
291,874
Total interest bearing liabilities
645,344
Interest free customer deposits
UK
38,136
Interest free customer deposits
Non-UK
12,860
Interest free customer deposits
Total
50,996
Other non-interest bearing liabilities
377,157
Shareholders' equity
55,754
Total
1,129,251
Percentage of total average interest bearing liabilities in offices
outside the UK
25%
Notes
a For the purposes of the average balance sheet, negative interest earned on liabilities (which is presented within interest and similar income in the statutory accounts) is
included in determining the total net interest figure. This presentation is deemed appropriate to represent the return associated with each asset class in the table.
b Other interest and similar expense principally relates to hedging activity .
Additional information
Additional financial disclosure
Barclays Bank PLC 2020 Annual Report on Form 20 -F 218
Liabilities
2019
Average
balance
Interest
expense
Interest
incomeᵃ
Total net
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
(1)
1,141
1.7
Deposits at amortised cost
Total
178,083
1,778
(1)
1,777
1.0
Cash collateral
UK
50,985
214
(10)
204
0.4
Cash collateral
Non-UK
8,332
82
-
82
1.0
Cash collateral
Total
59,317
296
(10)
286
0.5
Debt securities in issue
UK
15,832
101
-
101
0.6
Debt securities in issue
Non-UK
25,730
772
(2)
770
3.0
Debt securities in issue
Total
41,562
873
(2)
871
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 and similar expense
b
-
104
-
104
-
Total interest bearing liabilities not at fair value through P&L
319,467
4,178
(13)
4,165
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%
Notes
a Comparatives for negative interest income on liabilities and negative interest expense on assets have been re -presented. Negative interest earned on liabilities (which is
presented within interest and similar income in the statutory accounts) is included in determining the total net interest figure. This presentation is deemed appropriate to
represent the return associated with each asset class in the table.
b Other interest and similar expense principally relates to hedging activity.
Additional information
Additional financial disclosure
Barclays Bank PLC 2020 Annual Report on Form 20 -F 219
Liabilities
2018
Average
balance
Interest
expense
Interest
income
a
Discontinued
operations
Total net
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
(7)
-
169
0.4
Cash collateral
Non-UK
5,498
70
-
-
70
1.3
Cash collateral
Total
50,280
246
(7)
-
239
0.5
Debt securities in issue
UK
22,570
75
-
233
308
1.4
Debt securities in issue
Non-UK
32,176
418
(28)
-
390
1.2
Debt securities in issue
Total
54,746
493
(28)
233
698
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 and similar expense
b
581
-
(134)
447
-
Total interest bearing liabilities not at fair value through
P&L
349,495
4,329
(35)
317
4,611
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 Comparatives for negative interest income on liabilities and negative interest expense on assets have been re -presented. Negative interest earned on liabilities (which is
presented within interest and similar income in the statutory accounts) is included in determining the total net interest figure. This presentation is deemed appropriate to
represent the return associated with each asset class in the table.
b Other interest and similar expense principally includes interest expense relating to hedging activity.
Additional information
Additional financial disclosure
Barclays Bank PLC 2020 Annual Report on Form 20 -F 220
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 on average interest earning
assets and average interest bearing liabilities. Where variances have arisen from changes in both volumes and interest rates, these have been
allocated proportionately between the two.
Interest income
2020/2019 Change due to
increase/(decrease) in:
2019/2018 Change due to
increase/(decrease) in:
Total
change
Volume
Rate
Total
change
Volume
Rate
£m
£m
£m
£m
£m
£m
Cash and balances at central banks
UK
(209)
(252)
(23)
Cash and balances at central banks
Non-UK
(532)
(601)
(225)
(28)
(197)
Cash and balances at central banks
Total
(741)
(853)
(146)
(51)
(95)
Loans and advances at amortised cost
UK
(246)
(334)
(1,997)
(1,445)
(552)
Loans and advances at amortised cost
Non-UK
(759)
(854)
Loans and advances at amortised cost
Total
(1,005)
(1,188)
(1,559)
(1,130)
(429)
Cash collateral
UK
(215)
(249)
Cash collateral
Non-UK
(13)
(51)
(14)
Cash collateral
Total
(228)
(300)
Reverse repurchase agreements
UK
(38)
(16)
(22)
Reverse repurchase agreements
Non-UK
(16)
(19)
(7)
Reverse repurchase agreements
Total
(54)
(13)
(41)
Interest earning assets at fair value through other comprehensive
income
UK
(207)
(26)
(181)
(5)
Interest earning assets at fair value through other comprehensive
income
Non-UK
(20)
(1)
(19)
(1)
Interest earning assets at fair value through other
comprehensive income
Total
(227)
(27)
(200)
(2)
Other interest income
-
-
Total interest receivable
(2,154)
(2,481)
(1,162)
(1,118)
(44)
Interest expense
2020/2019 Change due to
increase/(decrease) in:
2019/2018 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
(451)
(550)
(223)
(251)
Deposits at amortised cost
Non-UK
(712)
(762)
Deposits at amortised cost
Total
(1,163)
(1,312)
(32)
(83)
Cash collateral liabilities
UK
(139)
(148)
Cash collateral liabilities
Non-UK
(44)
(80)
(18)
Cash collateral liabilities
Total
(183)
(228)
(7)
Debt securities in issue
UK
(31)
(43)
(205)
(74)
(131)
Debt securities in issue
Non-UK
(418)
(60)
(358)
(92)
Debt securities in issue
Total
(449)
(48)
(401)
(166)
Subordinated liabilities
UK
(32)
(310)
(992)
Subordinated liabilities
Non-UK
(16)
(8)
(8)
(8)
Subordinated liabilities
Total
(40)
(301)
(1,000)
Repurchase agreements
UK
(2)
(7)
Repurchase agreements
Non-UK
(18)
(6)
(12)
(11)
Repurchase agreements
Total
-
(14)
(18)
Other interest expense
-
(343)
-
(343)
Total interest payable
(1,387)
(1,507)
(446)
(930)
Additional information
Additional financial disclosure
Barclays Bank PLC 2020 Annual Report on Form 20 -F 221
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 Stage 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 90 days past due not considered Stage 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 due 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 2020, there are
a further £21m 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.
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
2020
2019
2018
As at 31 December
£m
£m
£m
Gross stage 3 credit impaired loans
United Kingdom
1,016
1,037
872
Rest of the world
4,103
3,311
3,317
Total
5,119
4,348
4,189
Accruing gross loans which are not stage 3 credit impaired loans and are contractually
overdue 90 days or more as to principal or interest
United Kingdom
21
8
19
Rest of the world
–
–
–
Total
21
8
19
Other gross restructured loans
a
United Kingdom
–
–
–
Rest of the world
–
–
–
Total
–
–
–
Total risk elements in loans and advances at amortised cost
United Kingdom
1,037
1,045
891
Rest of the world
4,103
3,311
3,317
Total
5,140
4,356
4,208
Notes
a Prior year comparatives have been restated to ensure the consistent basis of reporting with 2020.
Interest forgone on risk elements in loans and advances
2020
2019
a
2018
a
£m
£m
£m
Interest income that would have been recognised under the original contractual terms
United Kingdom
–
–
–
Rest of the World
69
83
77
Total
69
83
77
Additional information
Additional financial disclosure
Barclays Bank PLC 2020 Annual Report on Form 20 -F 222
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
65, analysing each of these categories 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 default. 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 2020 Annual Report on Form 20 -F 223
Impairment
Movements in allowance for impairment by geography
2020
2019
2018
£m
£m
£m
Allowance for impairment as at 1 January
3,696
3,843
7,102
Exchange and other adjustments
(355)
(168)
(2,837)
Amounts written off:
United Kingdom
(91)
(146)
(514)
Europe
(201)
(96)
(62)
Americas
(1,042)
(1,036)
(862)
Africa and Middle East
(3)
(9)
-
Asia
-
(6)
(18)
New and increased/(released) impairment allowance:
United Kingdom
481
147
91
Europe
423
116
84
Americas
1,931
1,071
809
Africa and Middle East
191
(30)
32
Asia
35
10
18
Allowance for impairment as at 31 December
5,066
3,696
3,843
Average loans and advances at amortised cost for the year
152,614
146,819
199,441
Analysis of impairment charges
2020
2019
2018
As at 31 December
£m
£m
£m
Impairment charges:
United Kingdom
315
93
(163)
Europe
470
127
52
Americas
1,685
927
758
Africa and Middle East
188
(14)
16
Asia
34
8
25
Loans and advances at amortised cost
2,692
1,141
688
Provision for undrawn contractually committed facilities and guarantees provided
547
55
(48)
Loans impairment
3,239
1,196
640
Cash collateral and settlement balances
2
1
(1)
Financial instruments at fair value through other comprehensive income
-
–
4
Other financial assets measured at amortised cost
136
5
-
Impairment charges
3,377
1,202
643
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 industry.
Additional information
Additional financial disclosure
Barclays Bank PLC 2020 Annual Report on Form 20 -F 224
Total impairment charges on loans and advances at amortised cost by industry
2020
2019
2018
As at 31 December
£m
£m
£m
United Kingdom:
Financial institutions
(37)
(4)
66
Manufacturing
23
(7)
(4)
Construction
21
(6)
(2)
Property
64
(5)
(26)
Energy and water
12
6
(1)
Wholesale and retail distribution and leisure
46
32
(45)
Business and other services
124
10
(116)
Home loans
(2)
-
(15)
Cards, unsecured and other personal lending
21
43
54
Other
43
24
(74)
Total United Kingdom
315
93
(163)
Overseas
2,377
1,048
851
Total Impairment charges
2,692
1,141
688
Allowance for impairment by industry
2020
a
2019
2018
As at 31 December
£m
%
£m
%
£m
%
United Kingdom:
Financial institutions
78
1.5
63
1.7
66
1.7
Manufacturing
33
0.7
33
0.9
30
0.8
Construction
35
0.7
25
0.7
27
0.7
Property
97
1.9
38
1.0
39
1.0
Government and central bank
1
–
–
–
-
-
Energy and water
56
1.1
20
0.5
5
0.1
Wholesale and retail distribution and leisure
274
5.4
103
2.8
93
2.4
Business and other services
138
2.7
138
3.7
135
3.5
Home loans
10
0.2
11
0.3
19
0.5
Cards, unsecured and other personal lending
54
1.1
181
4.9
193
5.0
Other
66
1.3
33
0.9
38
1.0
Total United Kingdom
841
16.6
645
17.4
645
16.8
Overseas
4,225
83.4
3,051
82.6
3,198
83.2
Total
5,066
100.0
3,696
100.0
3,843
100.0
Note
a Other financial assets subject to impairment not included in the table above include £146m 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 2020 Annual Report on Form 20 -F 225
Amounts written off and recovered by industry
Amounts written off
Recoveries of amounts
previously written off
2020
2019
2018
2020
a
2019
2018
As at 31 December
£m
£m
£m
£m
£m
£m
United Kingdom:
Financial institutions
26
6
2
18
5
1
Manufacturing
3
2
11
14
4
3
Construction
6
6
7
3
1
-
Property
2
2
31
3
5
4
Energy and water
3
–
4
12
–
-
Wholesale and retail distribution and leisure
20
12
34
35
19
14
Business and other services
17
39
214
39
6
6
Home loans
-
4
5
-
-
-
Cards, unsecured and other personal lending
8
71
191
-
-
-
Other
6
4
15
30
4
2
Total United Kingdom
91
146
514
154
44
30
Overseas
1,246
1,147
942
214
29
56
Total
1,337
1,293
1,456
368
73
86
Impairment ratios
2020
2019
2018
%
%
%
Impairment charges as a percentage of average loans and advances at amortised cost
2.12
0.82
0.32
Amounts written off (net of recoveries) as a percentage of average loans and advances at amortised cost
0.63
0.83
0.69
Allowance for impairment balance as a percentage of loans and advances at amortised cost as at 31 December
3.64
2.54
2.73
Additional information
Additional financial disclosure
Barclays Bank PLC 2020 Annual Report on Form 20 -F 226
Maturity analysis of Gross loans 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 2020
£m
£m
£m
£m
£m
£m
£m
£m
£m
United Kingdom
Corporate lending
2,630
3,892
1,270
2,864
14,258
8,178
5,472
8,183
46,747
Other lending to customers in the United
Kingdom
1,977
178
929
216
3,299
3,343
528
5,379
15,849
Total United Kingdom
4,607
4,070
2,199
3,080
17,557
11,521
6,000
13,562
62,596
Europe
3,376
2,731
847
1,654
7,821
3,154
2,415
2,952
24,950
Americas
3,866
2,721
1,828
2,802
12,818
7,721
5,973
5,581
43,310
Africa and Middle East
716
802
232
420
417
431
414
120
3,552
Asia
1,116
1,272
1,378
385
411
266
69
28
4,925
Total loans and advances at amortised
cost
13,681
11,596
6,484
8,341
39,024
23,093
14,871
22,243
139,333
As at 31 December 2019
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
Industrial and geographical concentrations of Gross loans and advances at amortised cost
Gross Loans and advances at amortised cost by industry
2020
2019
2018
As at 31 December
£m
£m
£m
Financial institutions
33,603
29,516
27,540
Manufacturing
7,252
8,000
8,444
Construction
2,190
2,574
2,486
Property
10,851
11,121
10,745
Government and central bank
13,762
11,404
3,476
Energy and water
4,773
5,373
5,508
Wholesale and retail distribution and leisure
8,156
8,363
9,831
Business and other services
13,988
14,816
17,438
Home loans
11,627
11,334
13,530
Cards, unsecured loans and other personal lending
26,857
36,109
35,498
Other
6,274
6,722
6,306
Loans and advances at amortised cost
139,333
145,332
140,802
Additional information
Additional financial disclosure
Barclays Bank PLC 2020 Annual Report on Form 20 -F 227
Gross Loans and advances at amortised cost in the UK
2020
2019
2018
As at 31 December
£m
£m
£m
Financial institutions
11,951
7,821
5,605
Manufacturing
4,706
4,512
4,035
Construction
2,025
2,320
2,277
Property
8,318
8,373
7,892
Government and central bank
10,141
7,997
1,012
Energy and water
2,284
2,707
2,595
Wholesale and retail distribution and leisure
6,370
6,686
7,993
Business and other services
8,211
9,859
12,542
Home loans
2,690
2,502
2,521
Cards, unsecured loans and other personal lending
2,983
6,903
6,122
Other
2,917
3,533
2,751
Loans and advances at amortised cost in the UK
62,596
63,213
55,345
Loans and advances at amortised cost in Europe
2020
2019
2018
As at 31 December
£m
£m
£m
Financial institutions
5,519
5,668
5,937
Manufacturing
906
1,072
1,335
Construction
127
133
85
Property
512
504
708
Government and central bank
2,370
1,459
1,778
Energy and water
831
828
675
Wholesale and retail distribution and leisure
615
752
735
Business and other services
898
907
991
Home loans
7,764
7,985
10,157
Cards, unsecured loans and other personal lending
4,917
5,090
5,055
Other
491
845
839
Loans and advances at amortised cost in Europe
24,950
25,243
28,295
Gross Loans and advances at amortised cost in the Americas
2020
2019
2018
As at 31 December
£m
£m
£m
Financial institutions
12,289
12,308
12,430
Manufacturing
1,096
1,782
2,426
Construction
5
77
71
Property
1,804
2,123
2,071
Government and central bank
311
319
424
Energy and water
1,397
1,437
1,667
Wholesale and retail distribution and leisure
774
635
612
Business and other services
4,379
3,620
2,970
Home loans
513
380
433
Cards, unsecured loans and other personal lending
18,234
23,439
23,746
Other
2,508
1,907
2,187
Loans and advances at amortised cost in the Americas
43,310
48,027
49,037
Additional information
Additional financial disclosure
Barclays Bank PLC 2020 Annual Report on Form 20 -F 228
Gross Loans and advances at amortised cost in Africa and Middle East
2020
2019
2018
As at 31 December
£m
£m
£m
Financial institutions
1,422
948
1,319
Manufacturing
138
160
51
Property
72
55
52
Government and central bank
297
269
262
Energy and water
59
116
200
Wholesale and retail distribution and leisure
100
67
123
Business and other services
326
363
221
Home loans
536
391
331
Cards, unsecured loans and other personal lending
559
530
484
Other
43
36
96
Loans and advances at amortised cost in Africa and Middle East
3,552
2,935
3,139
Gross Loans and advances at amortised cost in Asia
2020
2019
2018
As at 31 December
£m
£m
£m
Financial institutions
2,422
2,771
2,249
Manufacturing
406
474
597
Construction
33
44
53
Property
145
66
22
Government and central bank
643
1,360
-
Energy and water
202
285
371
Wholesale and retail distribution and leisure
297
223
368
Business and other services
174
67
714
Home loans
124
76
88
Cards, unsecured loans and other personal lending
164
147
91
Other
315
401
433
Loans and advances at amortised cost in Asia
4,925
5,914
4,986
Interest rate sensitivity of gross loans and advances at amortised cost
2020
2019
Fixed rate
Variable rate
Total
Fixed rate
Variable rate
Total
As at 31 December
£m
£m
£m
£m
£m
£m
Gross loans and advances at amortised cost
34,734
104,599
139,333
39,282
106,050
145,332
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 2020
b
United States
11.6
123,328
85,560
18,290
18,387
1,091
France
1.4
14,781
12,004
1,968
781
28
Germany
0.9
9,142
6,359
502
2,095
186
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
France
2.2
19,556
11,976
3,508
4,037
35
Germany
0.9
8,101
4,554
1,612
1,819
116
Notes
a Foreign outstanding includes cross border exposure in non-local currency of the Barclays branches and subsidiaries, and in country foreign currency exp osure.
b Figures are net of short securities.
Additional information
Additional financial disclosure
Barclays Bank PLC 2020 Annual Report on Form 20 -F 229
Off-balance sheet and other credit exposures
2020
2019
2018
As at 31 December
£m
£m
£m
Off-balance sheet exposures
Contingent liabilities
20,932
23,777
19,394
Commitments
265,022
270,027
257,768
On-balance sheet exposures
Trading portfolio assets
127,664
113,337
104,038
Financial assets at fair value through the income statement
171,761
129,470
145,250
Derivative financial instruments
302,693
229,641
222,683
Financial assets at fair value through other comprehensive income
51,902
45,406
44,994
Notional principal amounts of credit derivatives
2020
2019
2018
As at 31 December
£m
£m
£m
Credit derivatives held or issued for trading purposes
a
847,845
825,516
759,075
Note
a Includes credit derivatives held as economic hedges which are not designated as hedges for accounting purposes.
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 230
‘Advanced -Internal Ratings Based (A-IRB)’
‘Acceptances and endorsements’
Reimbursement of an acceptance 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’
share
‘Additional Tier 1 (AT1) securities’
‘Advanced Measurement Approach (AMA)’
required capital 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 default for the correlation trading
portfolio.
‘American Depository Receipts (ADR)’
A negotiable certificate that represents the ownership of shares in a non -US company
(e.g. 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 period.
‘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’
outstanding loan is unpaid or 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 (ABCP)’
special purpose entities for funding purposes.
‘Asset Backed Securities (ABS)’
pool can comprise any assets which attract a set of associated cash flows but are commonly pools of residential or commercial
mortgages and, in the case of a Collateralised Debt Obligation (CDO), the referenced pool may be ABS or other classes of
assets.
‘Attributable profit’
capital securities 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.
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 231
‘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.
‘Average UK leverage ratio’
As per the PRA rulebook, 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.
‘Bank of England (BoE)’
The central bank of the United Kingdom with devolved responsibility for managing monetary policy and
to oversee regulation of the UK’s financial sector. Through the Prudential Regulation Committee, the BoE exercises control over
the PRA.
‘Barclays Africa’ or ‘Absa’ or ‘Absa Group Limited’
Barclays Africa Group Limited (now Absa Group Limited), which was
previously a subsidiary of the Barclays Group.
‘Balance weighted Loan to Value (LTV) ratio’
calculating marked to 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 ratio is calculated using the following formula: LTV = ((loan 1
balance x Marked to market (MTM) LTV% for loan 1) + (loan 2 balance x Marked to market (MTM) LTV% for loan 2) + ...) / total
outstandings in portfolio.
‘Barclaycard’
cards, consumer lending, merchant acquiring, commercial 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 Barclaycard
International business; and Payments).
‘Barclays Execution Services’ or ‘BX’ 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. The division includes the large UK Corporate
business; the International Corporate and Private Bank businesses; the Investment Bank; the Barclaycard International
business; and Payments.
‘Barclays UK’
The segment of Barclays held by Barclays Bank UK PLC. The division includes the UK Personal Banking; UK
Business Banking and the Barclaycard Consumer UK businesses. Following a transfer from Barclays International in Q2 2020,
this also includes Barclays Partner Finance (BPF).
‘Basel 3’
Basel 3 is a set of measures developed by the Basel Committee on Banking Supervision aiming to strengthen the regulation,
supervision and risk management of banks.
‘Basel Committee on Banking Supervision (BCBS)’ or ‘The Basel Committee’
supervisory matters which develops global supervisory standards for the banking industry. Its 45 members are officials from
central banks or prudential supervisors from 28 jurisdictions.
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 232
‘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)’ or ‘bp(s)’
movements in interest rates, yields on securities and for other purposes.
‘Basis risk’
imperfectly correlated, 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 of the Barclays PLC Annual Report, 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 of the Barclays PLC Annual Report
,
activity, including net originations or repayments.
‘Bounce Back Loan Scheme (BBLS)’
A UK Government (British Business Bank) backe d loan scheme which allows small and
medium -sized businesses to borrow between £2,000 and £50,000. The UK Government guarantees 100% of the loan and pays
the first 12 months of interest on behalf of the borrowers, subject to terms and conditions.
‘Business Banking’
offers specialist advice, products and services to small and medium
enterprises in the UK.
‘Business Lending’
Business Lending in Barclays UK primarily relates to small and medium enterprises typically with a turnover
up to £16m.
‘Business scenario stresses’
exposures of the Investment Bank.
‘Buy to let mortgage’
A mortgage where the intention of the customer is 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’
RWAs.
‘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 entered into force from 27 June 2019, with EU member states required to adopt the
measures within the Directive by 28 December 2020.
‘Capital Requirements 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 management 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 securitise d.
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 233
‘Capital resources’
requirements under CRD. Referred to as ‘own funds’ within EU regulatory texts.
‘Capital risk’
business activities and to meet its regulatory capital requirements under normal operating environments or stressed conditions
(both actual and as defined for internal planning or regulatory testing purposes). This includes the risk from the Barclays Bank
Group’s pension plans.
‘Central Counterparty’ or ‘Central Clearing Counterparties (CCPs)’
in a financial 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’
to the recovery of the full balance. This is normally when six payments are in arrears.
‘Client Assets’
Assets managed or administered by the Barclays Bank Group on behalf of clients including assets under
management (AUM), custody assets, assets under administration and client deposits.
‘CLOs and Other insured assets’
other assets wrapped 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 through the
underlying assets.
‘Collateralised Loan Obligation (CLO)’
be made to different classes of owners (in tranches).
‘Collateralised Mortgage Obligation (CMO)’
mortgages and passes them on to investors in the security.
‘Combined Buffer Requirement (CBR)’
In the context of the CRD capital obligations, the total Common Equity Tier 1 capital
required to meet the combined requirements of the Capital Conservation Buffer, the GSII Buffer or the OSII buffer as applicable,
the Systemic Risk buffer and an institution specific counter-cyclical buffer.
‘Commercial paper (CP)’
‘Commercial 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, 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 social housing contractors.
‘Commissions and other incentives’
Plan awards.
‘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 management,
internal control and fraud deterrence.
‘Commodity derivatives’
metals, precious metals, oil and oil related products, power and natural gas).
‘Commodity risk’
commodities (e.g. Brent vs. WTI crude prices).
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 234
‘Common Equity Tier 1 (CET1) capital’
issued and related 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 economic and financial stress and have robust capital-planning processes that account for their
unique risks.
‘Comprehensive Risk Capital Charge (CRCC)’
An estimate of all the material market risks, including rating migration and default
for the correlation trading portfolio.
‘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’
of financial services, including 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 Consumer Bank, Payments (including merchant acquiring and commercial
payments), Barclaycard Germany and the Private Bank.
‘Contingent Capital Notes (CCNs)’
are either permanently 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 relevant 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 (CCNs)’.
‘Coronavirus Business Interruption Loan Scheme (CBILS)’
A loan scheme by the British Business Bank (BBB) to support UK
based small and medium-sized businesses (turnover of up to £45 million) adversely impacted by COVID-19. The CBILS
scheme provides loans up to £5 million which are backed by an 80% UK Government (BBB) guarantee. The UK Government
will pay interest and fees for the first 12 months on behalf of the borrowers, subject to terms and conditions.
Coronavirus Large Business Interruption Loan Scheme (CLBILS)’
A loan scheme by the British Business Bank (BBB) to support
UK based medium-sized businesses (turnover above £45 million, but with no access to CCFF) adversely impacted by COVID-
19, The CBILS scheme provides loans of up to £200 million which are backed by an 80% UK Government (BBB) guarantee.
‘Corporate and Investment Bank (CIB)’
Barclays Corporate and Investment Bank businesses which form part of Barclays
International.
‘Correlation risk’
assets changes over time.
‘Cost of Equity’
‘Cost: income jaws’
‘Cost: income ratio’
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 235
‘Countercyclical 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 (CCR)’
transaction’s cash flows. In the context of RWAs, a component of RWAs that represents the risk of loss from derivatives,
repurchase agreements and similar transactions as a result of the default of the counterparty.
‘Coverage ratio’
‘Covered bonds’
the benefit of the holders of the covered bonds.
‘Covid Corporate Finance Facility (CCFF)’:
firms which make a material UK contribution, helping to bridge coronavirus disruption to their cash flows. The Bank of England
provides liquidity by purchasing short-term debt in the form of commercial paper from corporates. Barclays acts as dealer.
‘CRD IV’
The Fourth Capital Requirements Directive, comprising an EU Directive and an accompanying Regulation (CRR) that
together prescribe EU capital adequacy and liquidity requirements, and which 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 which implements enhanced
Basel 3 proposals in the European Union.
‘Credit conversion factor (CCF)’ A f
actor 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)’
return for contracting to make payments to the protection buyer in the event of a defined credit event. Credit events normally
include bankruptcy, payment default on a reference asset or assets, or downgrades by a rating agency.
‘Credit derivatives (CDs)’
to the seller of the protection.
‘Credit impairment charges’
banks and impairment charges on fair value through other comprehensive income assets and reverse repurchase agreements.
‘Credit market exposures’
that have been 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’
scale” maps the credit 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’
honour their 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 counter party.
‘Credit risk mitigation’
can be broadly divided into three types: collateral, netting and set -off, and risk transfer.
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 236
‘Credit spread’
‘Credit Valuation Adjustment (CVA)’
which takes into account the counterparty’s risk of default. The CVA therefore represents an estimate of the adjustment to fair
value that a market participant would make to incorporate the credit risk of the counterparty due to any failure to perform on
contractual agreements.
‘CRR leverage exposure’
‘CRR leverage ratio’
Calculated using the CRR definition of “Tier 1 capital” for the numerator and the CRR definition of “leverage
exposure” as the denominator.
‘Customer assets’
balances for the year to date divided by number of days in the year to date.
‘Customer deposits’
credit institutions. Such funds are recorded as liabilities in the Barclays Bank Group’s balance sheet under “deposits at
amortised cost”.
‘Customer liabilities’
‘Daily Value at Risk (DVaR)’
conditions, if the current positions were to be held unchanged for one business day, measured to a specified confidence level.
‘DBRS’
‘Debit Valuation Adjustment (DVA)’
value of a portfolio of trades and the market value which takes into account the Barclays Bank Group’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’
leading to their de-recognition from the balance sheet.
‘Debt securities in issue’
the Barclays Bank Group and include certificates of deposit and commercial paper.
‘Default grades’
grades, in order to distinguish differences in the probability of default risk.
‘Default fund contributions’
required to contribute 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 a defaulting member.
‘Derivatives netting’
enforceable bilateral netting agreements and eligible cash collateral received in derivative transactions that meet the
requirements of BCBS 270 (Basel III leverage ratio framework and disclosure requirements).
‘Diversification effect’
parts. It is measured as the sum of the individual asset class DVaR estimates less the total DVaR.
‘Dodd -Frank Act (DFA)’
‘Economic Value of Equity (EVE)’
interest rate movement, based on existing balance sheet run-off profile.
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 237
'Effective Expected Positive Exposure (EEPE)'
The weighted average over time of effective expected 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)’
the Enterprise Risk 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 committee structure.
‘Equities’
‘Equity and stock index derivatives’
stock index swaps 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’
investment and to 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)’
European interbank market.
‘Europe’
Continental and Eastern 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 remit 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)’
occur during a specified period of time. ECLs must reflect the present value of cash shortfalls, and the unbiased and probability
weighted assessment of a range of outcomes.
‘Expected Losses’
approach for capital adequacy calculations. It is measured as the Barclays Bank Group's modelled view of anticipated losses
based on Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD), with a one -year time horizon.
’Expert lender models’
particular 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.
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 238
‘Exposure’
Generally refers to positions or actions taken by a bank, or consequences thereof, that may put a certain amount of a
bank’s resources at risk.
‘Exposure at Default (EAD)’
counterparty in the event of, and at the time of, that counterparty’s default. At default, the customer may not have drawn the
loan fully or may already have repaid some of the principal, so that exposure 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.
‘External ratings based approach / internal assessment approach (Sec ERBA / IAA)’
capital is assigned to securitisation tranches on the basis of their external credit rating. SEC-ERBA approach can also be used
for unrated ABCP exposures where the institution has the regulatory permission to use the Internal Assessment approach (IAA)
to assign a credit rating to the unrated ABCP exposure.
‘Federal Reserve Board (FRB)’
The Board of Governors of the Federal Reserve System, commonly known as the Federal
Reserve Board, is responsible for- amongst other things – setting monetary policy in the US.
'FICC'
Represents Macro (including rates and currency), Credit and Securitised products.
'Financial Policy Committee (FPC)'
remove or 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.
'Foundation Internal Ratings Based (F-IRB)’
‘Financial Conduct Authority (FCA)’
authorised firms. The FCA also has responsibility for the prudential regulation of firms that do not fall within the PRA’s scope.
‘Financial Services Compensation Scheme (FSCS)’
are unable to pay 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’
‘Forbearance Programmes’
less than contractual amounts due where financial distress would otherwise prevent satisfactory repayment within the original
terms and conditions of the contract. These agreements may be initiated by the customer, Barclays or a third party and include
approved debt counselling plans, minimum due reductions, interest rate concessions and switches from capital and interest
repayments to interest-only payments.
‘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’
exchange contracts, currency swaps and currency options. Forward foreign exchange contracts are agreements to buy or sell a
specified quantity of foreign currency, usually on a specified future date at an agreed rate. Currency swaps generally involve the
exchange, or notional exchange, of equivalent amounts of two currencies and a commitment to exchange interest periodically
until the principal amounts are re-exchanged on a future date. Currency options provide the buyer with the right, but not the
obligation, either to purchase or sell a fixed amount of a currency at a specified exchange rate on or before a future date. As
compensation for assuming the option risk, the option writer generally receives a premium at the start of the option period.
‘Foreign exchange risk’
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 239
‘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’
institution derives 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.
‘Gains on acquisitions’
contingent liabilities, 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 within the European Union.
‘General market risk’
a broad equity market movement unrelated to any specific attributes of individual securities.
‘Global-Systemically Important Banks (G-SIBs or G-SIIs)’
interconnectedness, 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 global
systemically important banks.
‘G-SII additional leverage ratio buffer (G-SII ALRB)’
A macroprudential buffer that applies to 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 apply 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’
CRR and CRR II non-compliant capital instruments to be included in regulatory capital subject to certain thresholds which
decrease over the transitional period.
‘Gross charge-off rates’
of average 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’
loans and advances held at amortised cost at the balance sheet date.
‘Gross new lending’
‘Guarantee’
form of credit substitution.
‘Head Office’
‘High -Net-Worth’
worth customers.
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 240
‘High quality liquidity assets (HQLA)’
little or no loss of value in private markets, to meet liquidity needs arising from a liquidity stress scenario or event. Please refer
to ‘Level 1 assets’ and ‘Level 2 assets’.
‘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 proactively contacted to assess
whether assistance is required.
‘Home loan’
loan. The borrower gives the lender a lien against the property and the lender can foreclose on the property if the borrower does
not repay the loan per the agreed terms. Also known as a residential mortgage.
‘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.
'Internal Model Approach (IMA)’
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.
'Internal Model Method (IMM)’
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’
losses in the lending 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.
‘Independent Validation Unit (IVU)’
The function within the bank responsible for independent review, challenge and approval of
all models.
‘Individual liquidity guidance (ILG)’
that the PRA has asked the bank to maintain.
‘Inflation risk’
derivatives.
‘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 for repaying the entire outstanding principal on maturity, which may require the sale of the mortgaged
property.
‘Interest rate derivatives’
and swaptions. An interest rate swap is an agreement between two parties to exchange fixed rate and floating rate interest by
means of periodic payments based upon a notional principal amount and the interest rates defined in the contract. Certain
agreements combine interest rate and foreign currency swap transactions, which may or may not include the exchange of
principal amounts. A basis swap is a form of interest rate swap, in which both parties exchange interest payments based on
floating rates, where the floating rates are based upon different underlying reference indices. In a forward rate agreement, two
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 241
parties agree a future settlement of the difference between an agreed rate and a future interest rate, applied to a notional
principal amount. The settlement, which generally occurs at the start of the contract period, is the discounted present value of
the payment that would otherwise be made at the end of that period.
‘Interest rate risk’
context of the 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 determine 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)’
It describes how the firm identifies, manages and qualifies the risks it
is exposed to, in pursuit of its business strategy. It assesses whether the quality and quantity of capital is available to absorb
capital losses for the risks the firm undertakes. The capital adequacy is assessed on a point of time basis and on a forward
looking basis taking into account baseline and stressed economic capital conditions.
‘Internal Ratings Based (IRB)’
weights . The IRB approach is divided 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 (F-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.
‘Internal Ratings Based approach (SEC-IRBA)’
This is a
method to calculate risk-weighted exposure amounts for securitisation
positions. Under this method, an institution must be able to model regulatory capital requirements for underlying exposures in
the securitisation as if these had not been securitised (‘K
IRB
’), subject to certain other inputs and criteria.
‘Investment Bank’
The Barclays Bank Group’s investment bank which
consists of origination led and returns focused markets
and banking business, and which forms part of the Corporate and Investment Bank segment of Barclays International.
‘Investment Banking Fees’
businesses – including financial advisory, debt and equity underwriting.
‘Investment grade’
credit rating agencies.
‘ISDA Master Agreement’
a framework of documents, designed to enable OTC derivatives to be documented fully and flexibly. The framework consists of
a master agreement, a schedule, confirmations, definitions booklets, and a credit support annex. The ISDA Master Agreement
is published by the International Swaps and Derivatives Association, commonly known as “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’
legal obligations including regulatory or contractual requirements.
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 242
‘Lending’
In the context of Investment Bank analysis of Total Income, lending income includes Net Interest Income (NII), gains
or losses on loan sale activity, and risk management activity relating to the loan portfolio.
‘Letters of credit’
will be made on 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 remaining 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’
including, e.g. lower quality government securities, covered bonds and corporate debt securities, and Level 2B assets,
including, e.g. lower rated corporate bonds, residential mortgage backed securities and equities that meet certain conditions.
‘Lifetime expected credit losses’
of an exposure, reflecting the present value of cash shortfalls over the remaining expected life of the asset.
‘Lifetime Probability’
‘Liquidity Coverage Ratio (LCR)’
30 days. High-quality liquid assets should be unencumbered, liquid in markets during a time of stress and, ideally, be central
bank eligible. These include, e.g. cash and claims on central governments and central banks.
‘Liquidity Pool’
held by the Barclays Bank Group as a contingency to enable 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 it does
not have the appropriate amount, tenor and composition of funding and liquidity to support its assets.
‘Liquidity risk appetite (LRA)’
objectives and in meeting its regulatory obligations.
‘Liquidity Risk Management Framework (the Liquidity Framework)’
The Liquidity Risk Management Framework, which is
sanctioned by the Board Risk Committee, 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.
‘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’
amortised cost at the balance sheet date.
‘Loan to deposit ratio’ or ‘Loan: deposit ratio’
‘Loan to value (LTV) ratio’
value of the asset. The ratios are used in determining 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)’
London interbank market.
‘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’
confidence level, if current 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.
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 243
‘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’
value of derivative positions as well as a potential future exposure add -on to calculate an exposure to which a risk weight can be
applied. This is also known as the Current Exposure Method.
‘Marked to market (MTM) LTV ratio’
Also see ‘Balance weighted Loan to Value (LTV) ratio’ and ‘Valuation weighted Loan to Va lue (LTV) ratio.’
‘Market risk’
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.
‘Master netting agreement’
covered by the agreement in the event of the counterparty’s default or bankruptcy or insolvency, resulting in a reduced
exposure.
‘Master trust securitisation programme’
receivables. The trust issues multiple series of securities backed by these receivables.
‘Material Risk Takers (MRTs)’
Categories of 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.
‘Maximum Distributable Amount (MDA)’
The MDA is a factor representing the available distributable profit whilst remaining in
excess of its combined buffer requirement. CRD IV places restrictions on a bank’s dividend decisions depending on its proximity
to meeting the buffer.
‘Medium-Term Notes’
Investors can choose 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 of the Barclays PLC Annual Report, the effec t 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 member states of the
European Economic Area.
‘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.
‘Model risk’
The risk of the potential adverse consequences from financial assessments or decisions based on incorrect or
misused model outputs and reports.
‘Model updates’
In the context of the Capital Risk section of the Barclays PLC Annual Report, 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.
‘ModelledVaR’
by the PRA.
‘Money market funds’
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 244
‘Monoline derivatives’
held.
‘Moody’s’
‘Mortgage Servicing Rights (MSR)’
A contractual agreement in which the right to service an existing mortgage is sold by the
original lender to another party that specialises in the various functions involved with servicing mortgages.
‘Multilateral development banks’
national boundaries.
‘National discretion’
of certain CRD rules in its jurisdiction.
‘Net asset value per share’
instruments, by the number of issued ordinary shares.
‘Net Interest Income (NII)’
‘Net Interest Margin (NIM)’
‘Net investment income’
result on disposal of available for sale assets.
‘Net Stable Funding Ratio (NSFR)’
assuming a stressed 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 one year, or liabilities with a maturity of over one 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 factor assigned to each particular asset type, added to the amount of potential liquidity exposure
multiplied by its associated required stable funding factor.
‘Net trading income’
making and customer business, together with interest, dividends and funding costs relating to trading activities.
‘Net write-off rate’
recoveries divided by gross loans and advances held at amortised cost at the balance sheet date.
‘Net written credit protection’
credit derivatives 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.
‘Non-asset backed debt instruments’
corporate bonds; commercial paper; certificates of deposit; convertible bonds; corporate bonds and issued notes.
‘Non-Model Method (NMM)’
derived through the use of CRR norms, as opposed to an internal model.
‘Non-Traded Market Risk’
The risk that the current or future exposure in the banking book (i.e. non -traded book) will impact the
bank's capital and/or earnings due to adverse movements in Interest 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 do not meet
the criteria for trading book treatment.
‘Notch’
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 245
‘Notional amount’
The nominal or face amount of a financial instrument, such as a loan or a derivative, that is used to calculate
payments made 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.
‘Operating leverage’
‘Operational risk’
events (e.g. fraud) where the root cause is not due to credit or market risks.
‘Operational Riskdata eXchange Association (ORX)’
industry association dedicated to advancing the measurement and management of operational risk in the global financial
services industry. Barclays is a member of ORX.
‘Origination led’
‘Other systemically important institutions (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’
They offer 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.
‘Own funds and eligible liabilities ratio’
expressed as a percentage of total RWAs.
‘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’
management costs.
‘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 increasing 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’
term incentives, the accounting charge is spread over the relevant periods in which the employee delivers service.
‘Personal Banking’
Offers retail advice, products and services to Community and Premier customers in the UK.
‘Period end allocated tangible equity’
business, adjusted for capital deducti ons, 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 risk and operational risk.
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 246
‘Pillar 2A requirements’
The additional regulatory capital requirement to meet risks not captured under Pillar 1 requirements.
These requirements are 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)’
portfolio level to account for model input data deficiencies, inadequate model performance or changes to regulatory definitions
(e.g. definition of default) to ensure the model output is accurate, complete and appropriate.
‘Potential Future Exposure (PFE) on derivatives’
future credit exposure on both exchange traded and OTC derivative 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’
specific to an 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’
losses that might 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’
Services business also provides brokerage facilitation services for hedge fund clients offering execution and clearance facilities
for a variety of asset classes.
‘Principal’
interest).
Investment in private equity often involves the investment of capital in private companies or the acquisition of a public company
that results in the delisting of public equity. Capital for private equity investment is raised by retail or institutional investors and
used to fund investment strategies such as leveraged buyouts, venture capital, growth capital, distressed investments and
mezzanine capital.
‘Principal Risks’
Bank PLC Annual Report.
‘Pro-cyclicality’
cycle, where the subsequent impact on lending or other market behaviours acts as an amplification of the economic cycle by the
financial sector.
‘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’
access (such as non -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.
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 247
‘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’
on behalf of customers, so as to make a profit for itself.
‘Prudential Regulation Authority (PRA)’
societies, insurers and a small number of significant investment banks in the UK. The PRA is a subsidiary of the Bank of
England.
‘Prudential Valuation Adjustment (PVA)’
fair value to comply 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 criteria set out in Capital Requirements Regulation (CRR Article 154.4). It includes most types of credit card
exposure.
‘Rates’
derivatives.
‘Re-aging’
The returning of a delinquent 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.
‘Recovery book’
strategies to recover the Group’s exposure.
‘Recovery book Impairment Coverage Ratio’
percentage of balance in recoveries.
‘Recovery book proportion of outstanding balances’
of all accounts that 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 portfolio. Balances in recovery will decrease
if: assets are written-off; amounts are collected; or assets are sold to a third party (i.e. debt sale).
‘Regulatory capital’
‘Renegotiated loans’
adverse change in the circumstances of the borrower. In the latter case, renegotiation can result in an extension of the due date
of payment or repayment plans under which the Barclays Bank Group offers a concessionary rate of interest to genuinely
distressed borrowers. This will result in the asset continuing to be overdue, and individually impaired if 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.
‘Repurchase agreement (Repo)’ or ‘Reverse repurchase agreement (Reverse repo)’
use financial 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.
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 248
‘Reputation risk’
and competence by clients, counterparties, investors, regulators, employees or the public.
‘Re-securitisations’
positions where the underlying assets are also predominantly securitisation positions.
‘Reserve Capital Instruments (RCIs)’
terms.
‘Residential Mortgage-Backed Securities (RMBS)’
Investors in these securities 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’
concession has been granted to the debtor that would not otherwise be considered. Where the concession results in the
expected cash flows discounted at the original effective interest rate being less than the loan’s carrying value, an impairment
allowance will be raised.
‘Retail Loans’
businesses. It includes both secured and unsecured loans such as mortgages and credit card balances, as well as loans to
certain smaller business customers, typically with exposures up to £3m or with a turnover of up to £5m.
‘Return on average Risk Weighted Assets’
‘Return on average tangible shareholders’ equity (RoTE)’ P
rofit after tax attributable 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’
possible outcomes as business plans are implemented.
‘Risk weighted assets (RWAs)’
established in accordance with the Basel rules as implemented by CRR and local regulators.
‘Risks not in VaR (RNIVS)’
framework.
‘Sarbanes -Oxley requirements’
safeguard against corporate governance scandals such as Enron, WorldCom and Tyco. All US-listed companies must comply
with SOX.
‘Second Lien’
default, compensation for this debt will only be received after the first lien has been repaid and thus represents a riskier
investment than the first lien.
‘Secondary Stress Tests’
cannot be hedged or 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.
‘Securities Financing Transactions (SFT)’
securities or 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.
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 249
‘Securities Financing Transactions adjustments’
collateral, taking into account master netting agreements.
‘Securities lending arrangements’
agreement to return them at a future date. The counterparty generally provides collateral against non-performance in the form of
cash or other assets.
‘Securitisation’
into a pool, which is used to back new securities. A company sells assets to a special purpose vehicle (SPV) which then issues
securities backed by 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’
bond) is sold, 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 Netting’
their exposure value of regular way purchases and sales awaiting settlement in accordance with Article 429g of CRR, as
amended by Regulation (EU) 2019/876 (CRR 2).
‘Settlement risk’
on one or more settlement obligations.
‘Significant Increase in Credit Risk (SICR)’
quantitative and qualitative assessments.
‘Small and Medium-Sized Enterprises (SME)’
turnover which does not exceed EUR 50 million, and / or an annual balance sheet total not exceeding EUR 43 million. Within
the SME category, a small enterprise is defined as an enterprise which employs fewer than 50 persons and whose annual
turnover and/or annual balance sheet total does not exceed EUR 10 million. This is defined in accordance with Commission
Recommendation 2003/361/EC of 6 May 2003 concerning the definition of micro, small and medium sized enterprises.
‘Slotting’
described in Capital Requirements Regulation (CRR Article 147.8). A standard set of rules are required to be used in credit risk
RWA calculations, based upon an assessment of factors such as the financial strength of the counterparty. The requirements
for the application of the Specialised Lending approach are detailed in CRR Article 153.5.
‘Sovereign exposure(s)’
bonds.
‘Specific market risk’
change in an investment due to factors related to the issuer or, in the case of a derivative, the issuer of the underlying
investment.
‘Sprea d risk’
yields.
‘SRB ALRB’
The Systemic Risk Buffer (SRB) Additional Leverage Ratio Buffer 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 Additional Leverage Ratio Buffer.
‘Stage 1’
since initial recognition. Stage 1 financial instruments are required to recognise a 12 month expected credit loss allowance.
‘Stage 2’
initial recognition. Stage 2 financial instruments are required to recognise a lifetime expected credit loss allowance.
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 250
‘Stage 3’
instruments are required to recognise a lifetime expected credit loss allowance.
‘Standard & Poor’s’
��
‘Standardised approach (SEC-SA)’
Under this method, an institution must be able calculate regulatory capital requirements per standardized approach for
underlying exposures in the securitisation as if these had not been securitised (‘K
SA
’), subject to certain other inputs and criteria.
‘Standby facilities, credit lines and other commitments’
conditions. Such commitments are either made for a fixed period, or have no specific maturity but are cancellable by the lender
subject to notice requirements.
‘Statutory’
the UK Companies Act 2006 and the requirements of International Financial Reporting Standards (IFRS).
‘Statutory return on average shareholders’ equity’
of average shareholders’ equity.
‘STD’ / ‘Standardised Approach’
derive risk weights based on counterparty type and a credit rating provided by an External Credit Assessment Institute.
‘Sterling Over Night Index Average (SONIA)’
sterling unsecured market administrated and calculated by the Bank of England .
‘Stress Testing’
could have 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 period of significant financial stress
calibrated to 99% confidence level over a 10-day holding period.
‘Structured entity’
are generally created to achieve a narrow and well defined objective with restrictions around their ongoing activities.
‘Structural hedge’ or ‘hedging’
medium/long term 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’
exposures to structured credit vehicles.
‘Structured finance or structured notes’
specified asset or index and sometimes offers capital protection if the value declines. Structured notes can be linked to equities,
interest rates, funds, commodities and foreign currency.
‘Sub -prime’
delinquencies and 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’
depositors and other creditors of the issuer.
‘Supranational bonds’
Bonds issued by an international organisation, where membership transcends national boundaries (e.g.
the European Union or World Trade Organisation).
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 251
‘Synthetic Securitisation Transactions’
Securitisation transactions effected through the use of derivatives.
‘Systemic Risk Buffer’
CET1 capital that may be required to be held as part 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 (TNAV)’
intangible assets and goodwill.
‘Tangible Net Asset Value per share’
equity instruments, less goodwill and intangible assets, by the number of issued ordinary shares.
‘Tangible shareholders’ equity’
for the deduction of intangible assets and goodwill.
‘Term premium’
‘The Fundamental Review of the Trading Book (FRTB)’
Committee on Banking Supervision as part of Basel III and applicable to banks’ wholesale trading activities.
‘The Standardised Approach (TSA)’
Under 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.
‘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 monitor their performance against those limits and
constraints (second line); and, colleagues 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’
share premium accounts where qualifying conditions have been met.
‘Tier 2 (T2) securities’
‘Total balances on forbearance programmes coverage ratio’
expressed as a percentage of balance in forbearance.
‘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’
and change in the capital value of the asset. The buyer of the protection in return receives a predetermined amount.
The risk of a reduction to earnings or capital due to volatility of trading book positions.
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 252
‘Trading book’
All positions in financial instruments 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’
transitional provisions set out in Part Ten of CRR.
‘Treasury and Capital Risk’
‘Twelve month expected credit losses’
date (or shorter 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’
based on a percentage of the chargeable equity and liabilities of the bank on its balance sheet date.
‘UK leverage exposure’
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’
As 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’
institution derives 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’
retail and financial sectors.
‘US Residential Mortgages’
‘Valuation weighted Loan to Value (LTV) ratio’
calculating marked to market LTVs derived by comparing total outstanding balance and the value of total collateral we hold
agains t these balances. Valuation weighted Loan to Value ratio is calculated using the following formula: LTV = total
outstandings in portfolio/total property values of total outstandings in portfolio.
‘Value at Risk (VaR)’
confidence level and within a specific timeframe.
‘Weighted off balance sheet commitments’
factors used in the Standardised Approach to credit risk.
‘Wholesale loans’ or ‘wholesale lending’
‘Write -off (gross)’
viable to try to recover 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 underlying asset and the
counterparty, which in the event of default would lead to a significant mark to market loss. When assessing the credit exposure
Glossary of terms
Barclays Bank PLC 2020 Annual Report on Form 20 -F 253
of a wrong-way trade, analysts take into account the correlation between the counterparty and the underlying asset as part of
the sanctioning process.
Barclays Bank PLC 2020 Annual Report on Form 20 -F 254
EXHIBIT INDEX
Exhibit
Description
1.1
Articles of Association of Barclays Bank PLC (incorporated by referen ce 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 rights 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 2020 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 18, 2021
Barclays Bank PLC
(Registrant)
By
/s/ Steven Ewart
Steven Ewart, Chief Financial Officer