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Positioned for growth,
sharing and success
Barclays PLC
Annual Report 2017
About this report
Where we can find out more
You can learn about Barclays’ strategy,
our businesses and performance, approach
to governance and risk online, where latest
and archived Annual and Strategic Reports
are available to view or download.
For further information and a fuller
understanding of the results and the
state of affairs of the Group, please refer to the
full Barclays PLC Annual Report 2017 suite of
documents at home.barclays/annualreport
Barclays PLC
Annual Report
Our Governance,
our Risks and our
Financials
Strategic
Report
An overview of
the business
Environmental
Social
Governance
Report
Our shared growth
ambition
Country
Snapshot
Our tax
contributions
Pillar 3
Report
Our Risk profile
and how we
manage it
Barclays PLC Annual Report was approved by the Board of
Directors on 21 February 2018 and signed on its behalf by
the Chairman.
Details on how to obtain a copy of the full Barclays PLC
Annual Report 2017 can be found in the Shareholder
information section.
Report of the Auditor
The Auditor’s report on the full accounts for the year ended
31 December 2017 was unqualified, and their statement
under section 496 (whether the Strategic Report and the
Directors’ report are consistent with the accounts) of the
Companies Act 2006 was unqualified.
Approach to non-financial performance reporting
We note the requirements under the provisions of
the Companies Act 2006, relating to the preparation
of the Strategic Report which have been amended by
the Companies, Partnerships and Groups (Accounts
and Non-Financial Reporting) Regulations 2016, which
implements EU Directive 2014/95/EU (on non-financial
and diversity information). As a result of these changes,
we have integrated the information required for a
Non-Financial Information Statement into the Strategic
Report, thereby promoting cohesive reporting of
non-financial matters.
Notes, Non-IFRS performance measures and forward-
looking statements
Barclays management believes that the non-IFRS
performance measures included in this document provide
valuable information to the readers of the financial
statements. This document also 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 Group. For further
details on Notes, non-IFRS performance measures, and
forward-looking statements used within this document,
please see the back cover.
2 Barclays PLC Annual Report 2017
Barclays PLC Strategic Report 2017
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The Strategic Report
An overview of our 2017 performance,
a focus on our strategic direction, and
a review of the businesses underpinning
our strategy.
The Detailed Report
Within the Annual Report, these disclosures
inform of Barclays 2017 performance. The content
meets, and where insightful, goes beyond minimal
regulatory reporting standards.
Governance
43 Governance contents
44 Directors’ report
89 People
93 Remuneration report
Risk review
117 Risk review contents
119 Risk management
121 Material existing and emerging risks
127 Principal Risk management
138 Risk performance
197 Supervision and regulation
Financial review
205 Financial review contents
206 Key performance indicators
208 Consolidated summary income
statement
209 Income statement commentary
210 Consolidated summary balance sheet
211 Balance sheet commentary
212 Analysis of results by business
223 Non-IFRS performance measures
Financial statements
227 Financial statements contents
234 Consolidated financial statements
241 Notes to the financial statements
323 Shareholder information
Strategic framework
02 Chairman’s letter
04 Chief Executive’s review
06 Operating environment
08 Business structure
09 Our business model
10 Our strategy
12 Risk management
15 Key performance indicators
A review of our performance
23 Barclays UK
26 Personal Banking
27 Barclaycard Consumer UK
28 Wealth, Entrepreneurs and
Business Banking
29 Barclays International
32 Corporate and Investment Bank
33 Consumer, Cards and Payments
35 Head Office and Group Service
Company
An overview of governance and
financial performance
36 Our people and culture
38 Governance compliance
40 Viability statement
home.barclays/annualreport
Barclays PLC Annual Report 2017 01
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Chairman’s letter
Dear Fellow Shareholders
While a number of challenges remain, the launch of the ring-
fenced bank expected at the beginning of April this year largely
draws a line on large-scale restructuring, and we look forward
to a more traditional business pattern, including the return to
a more normal dividend pattern.
As I indicated last year, Barclays is one of the
largest restructuring situations in bank history.
While this was partly a consequence of the
Global Financial Crisis, it was also partly
a consequence of the doubling of the
balance sheet and the seven-fold increase
in derivatives across 2007 and 2008,
immediately prior to the full onset of the
Global Financial Crisis.
This, together with the subsequent
designation of the Group as globally systemic,
and the consequent more than doubling of
minimum regulatory capital ratios, meant the
need substantially to re-capitalise the Group,
and resulted in a considerable proportion
of our portfolio becoming economically
non-viable in the post-crisis environment.
The consequent recapitalisation involved the
urgent raising of capital in 2008 (now the
subject of charges by the Serious Fraud
Office), a substantial reduction in capital
and balance sheet usage, and the disposal
of a considerable portion of our
international network.
Since the crisis, we have refocused the
business, halving the balance sheet by
£1trn and the staff by some 80,000, through
the disposal of Non-Core assets. We are also
creating a new UK ring-fenced bank from
scratch, resolving and continuing to resolve
multiple large legacy conduct matters, as well
as preparing the Group for Brexit.
The enormous impact all of this has had on
the business, the Board and management, is
a sobering lesson.
Over the past six years, reasonable underlying
operating profits have been fully eroded in the
process. Over this period, we saw £15.1bn in
litigation and conduct charges, £2.4bn in bank
levies, £10.1bn in losses from Non-Core, a
£2.5bn loss from the sell down of Barclays
Africa, and £7.1bn in taxes (at an average rate
of 65%). All of this, totalling £35.6bn over the
six years, resulted in an aggregate attributable
loss of £1.0bn over the same period. Imagine
if all the underlying profits had gone to
shareholders and to investment in growth.
Clearly, shareholders would prefer we declared
higher dividends, but it should be remembered
over the same period, we paid £5bn in dividends
out of negative attributable profits.
02 Barclays PLC Annual Report 2017
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While the bulk of our historical challenges are
behind us, we do continue to face some
residual challenges. These include the
historical residential mortgage backed
securities matter in the US, the Serious Fraud
Office prosecution in the UK as well as the
consequence of Brexit. This said, depending
on their scale and pacing, we believe we have
the capacity to deal with them over time.
So, while a number of challenges remain, the
launch of the ring-fenced bank Barclays UK
expected at the beginning of April this
year largely draws a line on large-scale
restructuring. We look forward to a more
traditional business pattern, including the
return to a more normal dividend pattern,
planned to begin with the 2018 financial year.
Turning to the 2017 financial year itself, this
was another critical year for Barclays. Good
progress was made on a significant number of
fronts. The closure of the Non-Core business
from the start of July marked a significant
milestone. This business was formed in 2014
in order to deliver the divestment of our
non-strategic assets and businesses, releasing
capital to support strategic growth in our Core
business and to strengthen the Group’s capital
position. At its peak, the business comprised
approximately £121bn of risk weighted assets
(RWAs), representing 28% of the Group’s total
at the time and it has been a significant
achievement to reduce this to just c.£23bn by
the time of its closure.
We also implemented the difficult decision to
sell down our shareholding in Barclays Africa
in 2017. The changing regulatory requirements
for global banks resulted in higher hurdles,
making the ownership of the profitable
African business uneconomic. Therefore,
we successfully sold down 33.7% of our
remaining Barclays Africa Group Limited
(BAGL) shareholding in the first half of the
year. We now own a residual 14.9% of the
issued share capital, consistent with
regulatory commitments.
2017 also saw us make significant progress in
terms of creating the new ring-fenced bank as
required by UK legislation. This has been an
enormous undertaking as we are in effect
creating a new bank comprising some
24 million customers. We remain on track to
set up this bank in the second quarter of 2018.
As part of our structural reform requirements
a Group Service Company has been
successfully established which provides a
wide range of operations, technology and
functional services to the Group as a whole.
We continued with our Brexit preparations to
ensure that Barclays can preserve our access
to the EU markets for our customers and
clients. Barclays Bank Ireland, where we have a
banking license and have operated for nearly
40 years, will provide us with a natural base
from which we can continue to provide
products and services which require an EU
presence.
Share price performance in 2017 was
disappointing, with the share price falling
from 223p to 203p over the calendar year. We
are working to reverse this in 2018. Delivering
quality earnings above the cost of equity as
well as returning to higher dividend levels, are
necessary to generate a meaningful recovery
in the share price. This is the priority for 2018
and beyond.
The ultimate resolution of legacy conduct and
litigation issues will allow underlying profit
to fall to the bottom line to the benefit of
shareholders. This, together with the
resolution of the whistleblowing issue, will
also help remove some uncertainty which is
overshadowing the Company.
The past few years have been a really tough
period for the Board and management, and
bottom line results can obscure the real
underlying progress that is being made. I
would therefore like to thank the Board, the
management team and all our staff for the
enormous efforts they are making to secure
our recovery.
Finally, I would thank shareholders for their
patience, and believe it will be rewarded. The
situation is more complex and difficult than
we had envisaged, and is taking longer than
we hoped, but shareholders can rest assured
that we will continue to strive to deliver the
performance and value creation that their
patience deserves.
John McFarlane
Chairman
As shareholders are aware, during 2017
Barclays disclosed a whistleblowing incident
involving allegations made in connection with
the hiring of a senior management team
member. After an internal investigation, the
Board determined that CEO Jes Staley
believed, mistakenly but in good faith, that it
was permissible to identify the author. A
detailed announcement on the issue was
made in April and the matter is now the
subject of an external investigation.
Despite the very significant achievements and
milestones passed during the year, our
financial performance in 2017 highlights that
further progress is required to deliver
acceptable returns to our shareholders. Profit
before tax was £3.5bn, and although this was
a 10% increase on prior year, return on
tangible equity was a negative 3.6% on a
statutory basis. Excluding litigation and
conduct, the loss on sale of our BAGL stake
and a remeasurement of DTAs, largely from
US tax reform, return on tangible equity
was 5.6%.
Fortunately, the losses we experienced last
year from Non-Core, as well as the costs of
structural reform, are unlikely to be repeated
going forward, and this, together with the
profit improvement programme in the core
business, should contribute towards
improving returns.
Accordingly, the focus of management and
the Board’s attention is on performance,
particularly that of the Corporate and
Investment Bank in Barclays International.
There, performance in Markets, and in
particular Macro and Equities, was weak, driven
by difficult market conditions. There have been
significant management changes and action is
being taken to improve profitability in this area.
Barclays Consumer, Cards and Payments saw
profits decline by 22% but still produced a
respectable 16.7% return on tangible equity.
Barclays UK’s profits were marginally up on
the previous year generating 9.8% return on
tangible equity.
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Barclays PLC Annual Report 2017 03
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Chief Executive’s review
We have strong foundations in place for delivering to
stakeholders and society…
Two years ago, we laid out our plan to build a Barclays
that is fit for the future. To recast our business as a transatlantic
consumer and wholesale bank, with global reach.
I am pleased to report that the significant task of
restructuring this great institution was completed in 2017.
The spirit, energy and professionalism that my
colleagues from across Barclays have brought
to this endeavour gives me great confidence
in our future, both as Group CEO and as a
shareholder. While there is still work to be
done, the story of Barclays in 2017 has been
one of considerable strategic progress.
The Barclays of today is almost
unrecognisable, compared with just a few
years ago. The momentum we have built in
successfully delivering on our plans so far,
leaves me with a sense of confidence about
our next task: delivering acceptable Group
returns for you, our shareholders.
On the 1st of June, we completed the sell down
of our shareholding in Barclays Africa. At a
stroke, this single act permitted accounting
deconsolidation and regulatory proportional
consolidation, reduced both cost and
complexity, and improved our capital strength.
Our Group profit before tax
is up by 10%, year on year.
In July, we closed Barclays’ Non-Core unit,
six months ahead of plan. In doing so, we
eliminated some £95bn of risk weighted
assets, sold more than 20 businesses, exited
operations in a dozen countries, and reduced
costs by over £2bn – all in just three years.
In September, we stood up the Group Service
Company, where around 42,000 of our 80,000
employees now work. Operational and
technological strength is a key competitive
advantage for any global bank today. The cost
efficiencies and improvements in effectiveness
realised from this strategic decision are already
being felt right across the Group – and that is
making a real and positive difference to our
customers and clients’ lives, every day.
By December, we had largely completed the
work to build our UK ring-fenced bank, which
we expect will be fully up and running by the
time we meet at the Annual General Meeting
(AGM).
Our financial performance in 2017 shows that
we are on our way to doing this. Our Group
profit before tax is up by 10%, year on year,
largely driven by a reduction in Non-Core
losses. Group return on tangible equity,
excluding litigation and conduct charges, the
losses related to the sell down of BAGL and a
one-off adverse impact from US tax reform,
stood at 5.6% in 2017.
Our two businesses, Barclays UK and Barclays
International, performed fairly well in the year
despite challenging market conditions, and
the Group is benefiting from the balance that
the diversity of product, currency, geography,
and business mix, gives us. In Barclays UK
profitability held up, with good progress in
mortgages, deposit growth, and mobile
banking. Profits were down in Barclays
International versus 2016, due to a poor
performance in the Markets business of our
Corporate and Investment Bank in difficult
trading conditions for the industry. We
have strong plans in place to address that
underperformance in 2018. Our Consumer,
Cards and Payments business continues to
produce excellent levels of income, while
managing risk effectively.
Perhaps most importantly of all, we enter
2018 in a strong capital position. By the end
of 2017, we were at a Common Equity Tier 1
(CET1) ratio of 13.3%, within our end-state
target range.
04 Barclays PLC Annual Report 2017
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In 2017, over half of our
colleagues took part in
volunteering, fundraising
or giving programmes.
It is the talent, ingenuity and dedication of our
people, and the progress we have made in the
past year, which gives me great confidence for
our future. I look forward to discussing this
future with you when we meet at our AGM
in May.
James E. Staley
Group Chief Executive
This shows that Barclays can sustainably
generate profits at a healthy rate, and our
capacity to do so should increase over time
as we grow our businesses.
That is why in 2017 we set ourselves
ambitious but attainable targets for Group
returns of greater than 9% in 2019, and of
greater than 10% in 2020, excluding litigation
and conduct, and based on a CET1 ratio of
around 13%.
A small number of significant legacy conduct
issues remain, and we will need to resolve
them in due course.
Nevertheless, it is our intention to prioritise
the return of capital to shareholders,
beginning this year. We plan to pay a dividend
for 2018 of six and a half pence, which is more
than double the amount paid in 2016 and
2017, and restores it to the level paid in 2015.
This is an important first step, but is still a
fairly modest proportion of our anticipated
earnings for Barclays. It is our firm intent, over
time, to return a greater proportion of our
earnings to shareholders, both through the
annual dividend and in other ways. For
example, it has been some 20 years since
Barclays last used share buybacks as a means
of returning value to investors, but we expect
these to be an important part of the capital
return mix going forward.
I have worked in banking for some 38 years, and
I can say with conviction that the way Barclays
does business, constantly seeking to earn the
trust of every customer, client and community
we serve, is truly extraordinary.
In 2017, we celebrated the 20th anniversary of
the Barclays Citizenship Awards – a year which
saw over half of our colleagues take part
in volunteering, fundraising or giving
programmes. Among many examples of great
contributions to the communities in which we
operate, I was particularly proud of the work
we have done to increase digital safety and
to prevent the growing threat of fraud. Our
education and awareness campaign has seen
over 4.8 million people take action to protect
themselves as a result.
Supporting the ambitions of customers,
clients, and communities is not just the right
way to act, it also makes commercial sense.
When the societies where we operate
succeed, Barclays succeeds. That is why, for
over three centuries, this great institution has
risen to the challenges that our communities
face, and played our part in meeting them.
This is particularly true as our home country,
the United Kingdom, faces an uncertain future
as negotiations to leave the European Union
unfold. Whatever may come, Barclays is here to
stay, and here to help the 24 million customers
and almost one million UK businesses, who put
their trust in us, every day.
Being a contributor is a very important part of the culture of Barclays.
It says the right things about who we are. Barclays is a business built
on our people and we are proud of the contributions that our
extraordinary people make to further our Citizenship ambitions.
Barclays Citizenship Awards
Going the extra mile to benefit society and Barclays is what our
Shared Growth Ambition is all about. Our Citizenship Awards
celebrate the extraordinary Barclays colleagues who do just that and
play a positive role in society.
2017 marked the 20th anniversary of the awards and there were
almost 500 nominations, celebrating the outstanding contributions
of our employees to driving economic, environmental and
social prosperity.
The awards were split into five categories that encompass Citizenship
and our Shared Growth Ambition: access to financing, access to
financial and digital empowerment, access to employment, colleagues
in the community and the way we do business.
Whether it’s creating commercial products with a positive societal
impact, empowering customers with better financial and digital skills,
helping people get into the world of work, improving the way we do
business, or colleagues giving their time and skills to the causes
they’re passionate about, there is a huge variety of ways in which
Barclays colleagues contributed to society in 2017.
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Barclays PLC Annual Report 2017 05
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Operating environment
…in a constantly evolving environment that creates
opportunity and risk
As a transatlantic consumer and wholesale bank with operations
globally, Barclays is impacted by a wide range of macroeconomic,
political, regulatory, accounting, technological and social
developments. The evolving operating environment presents
opportunities and risks which we continue to evaluate to ensure
that we appropriately adapt our strategy and its delivery.
Global growth saw a modest recovery in 2017,
principally driven by an upswing in Europe and
Asia. However, the interest rate environment
remained low, albeit with indications of Central
Banks positioning for a tightening cycle. Notably,
the Federal Reserve and the Bank of England
commenced tightening actions, with an increase
in their key policy rate as well as initiation of
actions to wind-down quantitative easing
programmes. The low interest rate environment
combined with continued low market volatility,
relatively weak consumer confidence and a
slowing housing market in the UK continued to
impact banking sector performance by making
income generation more challenging.
The political environment remained uncertain
globally throughout 2017 with a notable
increase in geopolitical tensions. We remain
vigilant to these risks and their potential impact
on global trade and investment. In the UK, the
General Election resulted in a hung Parliament
while negotiations with the EU on post-Brexit
arrangements continue, without full clarity on
the nature of the UK’s relationship with the EU
immediately following its exit. In July, in response
to the EU referendum outcome, Barclays
announced its intention to use an existing
subsidiary in Ireland as its European licensed
entity from which to passport financial services
across the EU, thereby continuing to serve its
customers and clients in the EU post Brexit.
The regulatory landscape impacting Barclays
evolved through 2017 and will continue to do
so in 2018. The banking industry in the UK has
continued implementation of measures to
meet structural reform requirements, which
include the requirement to ring-fence certain
activities. As part of these reforms, Barclays
launched its Group Service Company in
September 2017. The implementation of
structural reform and other regulatory changes
requires significant focus and we are seeking
to minimise disruption to our customers and
clients, while executing in accordance with
regulatory timelines (as set out on page 204).
Barclays’ ring-fenced bank will be operational
during the first half of 2018, subject to court
and regulatory approvals.
The banking industry
in the UK has continued
implementation of measures
to meet structural reform
requirements, which include
the requirement to ring-fence
certain activities.
With effect from 1 January 2018, as part of the
US Tax Cuts and Jobs Act, the federal corporate
income tax rate has been reduced from 35%
to 21%. Given the Group’s substantial US
operations, this tax rate cut materially impacted
the measurement of Barclays’ US deferred tax
assets, however, it will also result in a material
reduction to the Group’s future effective tax
rate. This Act also introduced the Base Erosion
and Anti-Abuse Tax (BEAT) which involves
complex provisions with currently uncertain
practical and technical application and which
may reduce the future benefit of the lower
statutory tax rate.
Detailed analysis of our tax can be
found in the Annual Report, or in the
Country by Country report, both found at
home.barclays/annualreport
In addition, from 1 January 2018 the
introduction of IFRS 9, Financial Instruments,
will see significant changes to the accounting
for impairment and measurement of expected
credit losses which we discuss further, along
with other significant accounting policies on
pages 241 to 246.
Our operating environment continues to be
influenced by rapid technological change,
significantly impacting customer expectations
and behaviour as well as leading to the ongoing
review of established banking operating
models. We are investing to position our
business at the forefront of this evolving
environment. New technology is transforming
the way customers interact with their banks
and continues to encourage new entrants into
the market. We expect to see these trends
accelerating in 2018 with the implementation
of the Second Payment Services Directive
(PSD2) and Open Banking, which will have a
profound impact on the banking landscape by
allowing customers to choose to enable third
parties to access their data. Barclays is very
supportive of the opportunities that Open
Banking presents for those who design their
propositions and experiences with customers
at their heart. However, we are also aware of
potential customer concerns regarding data
security and we continue to work hard to
ensure the safety of customer data.
06 Barclays PLC Annual Report 2017
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During 2017 there was further activity to
advance the financial sector’s understanding of
the potential financial, operational and strategic
implications of climate change. Recognition of
the commercial, reputational and regulatory
implications of climate change are shaping
the way businesses engage with the climate
change agenda. At Barclays, we want to
facilitate our stakeholders’ access to financing
that places green principles at its core. Please
see the Case Study below for examples of how
we are putting our beliefs into practice.
Developments in the external environment
present both opportunities and risks. Without
active risk management to address these
external factors, our long-term goals could be
adversely impacted.
Our approach to risk management and
material existing and emerging risks to
the Group’s future performance are
outlined in the Risk review section on page 121.
Our Corporate and Investment Bank clients are
anticipating enhanced electronic capabilities as
well as enhanced transparency through the
new Markets in Financial Instruments Directive
and Markets in Financial Instruments
Regulation (collectively referred to as MiFID II),
as part of their operating environment. For
example, recent advances in trading
automation continue to change the operating
landscape through increased experimentation
with, and implementation of, solutions relying
on machine learning, natural-language
processing and predictive analytics.
For further information on the changes
in Supervision and Regulation of the
Group, please see page 197.
We continue to invest in our digital and mobile
capabilities to respond to these rapid changes,
while maintaining a continued focus on the
risks posed by fraud and social engineering and
the importance of network defence, cyber risk,
IT security and the appropriate management of
our most valuable environments and high risk
users in the face of growing cyber threats. In
2017, we launched #digisafe, a UK-wide
consumer engagement campaign to highlight
the importance of digital safety, helping people
to be more aware of the risks that exist in the
digital world and how to be safer online.
Green bonds
Barclays’ green bond is one of a number of innovative green
products, launched in 2017, which reinforce Barclays’ support for,
and participation in, the transition to a sustainable and low carbon
global economy, following the publication of Barclays’ Green Bond
Framework in September 2017.
In November 2017, Barclays successfully priced and issued a €500m
green bond. This was a milestone for the UK market, being the first
green bond issued by a UK bank using UK assets.
Green bonds are fixed income securities, designed to raise finance
for assets that have positive environmental and climate benefits.
The proceeds from Barclays’ green bond have been allocated to the
financing and refinancing of Barclays’ residential mortgages on
environmentally friendly homes in England and Wales.
Barclays is a signatory to the Green Bond Principles and an active
lead manager of green bond issuances across jurisdictions, issuers
and currencies within our investment bank. Barclays remains firmly
committed to contributing to the growth of the green bond market,
and has committed to a green bond investment target of £2bn in its
Liquidity Portfolio.
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Barclays PLC Annual Report 2017 07
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Business structure
Our enhanced structure empowers our business model…
In 2017, Barclays made significant progress
reorganising the business to enable a sharper focus
on our strengths as a transatlantic consumer and
wholesale bank with global reach.
In March 2016, we announced our intention
to operate through two principal business
divisions: Barclays UK and Barclays
International. As well as accelerating the
delivery of our strategy, this change helped
enable Barclays to fulfil the requirements of
our UK regulators in regard to ring-fencing.
Ring-fencing of essential retail banking
services is one of the reforms introduced by
the UK government to strengthen the UK
financial system following the financial crisis
that began in 2007. It requires the larger UK
high street banks, including Barclays, to
separate certain retail and smaller corporate
banking activity and products, like savings
accounts, current accounts and payments,
from more complex, wholesale and
investment banking activity and from certain
activities outside of the UK and European
Economic Area. This separation must be
completed by 1 January 2019.
Barclays Bank UK PLC and
Barclays Bank PLC will operate
alongside, but independently
from one another.
Both Barclays UK and Barclays International
currently operate within the legal entity of
Barclays Bank PLC. Barclays UK offers everyday
products and services to retail and consumer
customers and small to medium sized
enterprises based in the UK, and Barclays
International delivers products and services
designed for our larger corporate, wholesale
and international banking clients. During the
first half of 2018, we will formally separate the
Barclays UK division into a new legal entity
– Barclays Bank UK PLC – which will become
our UK ring-fenced bank, subject to court and
regulatory approvals.
Products and services designed for our larger
corporate, wholesale and international banking
clients will continue to be offered by Barclays
International from within Barclays Bank PLC.
Barclays Bank UK PLC and Barclays Bank PLC
will operate alongside, but independently from
one another as part of the Barclays Group
under the listed entity, Barclays PLC.
In September 2017, in preparation for the
separation of the Barclays UK business into its
separate legal entity, we created our Group
Service Company, Barclays Services Limited, as
a subsidiary of Barclays PLC. The Group Service
Company will deliver critical infrastructure
services to businesses within the Barclays
Group and will enhance operational continuity
for our business units, facilitating the execution
of recovery and resolution plans in the event of
financial difficulty. It will also become a centre
of excellence for services required by the
business, such as fraud management and
cyber security, reducing duplication and
promoting best practice across our businesses.
The new organisational structure, illustrated
below, brings complementary businesses
more closely together; creates an enhanced
focus on our client proposition and offering
across all target sectors; and, through the
creation of the new Group Service Company,
establishes a centre of service excellence
that will drive efficiency and increase the
Group’s resilience.
Further information on structural
reform can be found on page 204.
Illustrative unaudited pro forma
financials for Barclays Bank UK PLC and
Barclays Bank PLC are available at
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Barclays PLC
Barclays Bank PLC
(Barclays International)
Barclays Services Limited
(Group Service Company)
Barclays Bank UK PLC
(Barclays UK – ring-fenced bank)
08 Barclays PLC Annual Report 2017
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Our business model
…and creates value for our stakeholders, with economic
benefits to society
Barclays PLC Group operates via two clearly defined divisions
– Barclays UK and Barclays International – with a diversified
business model that we believe helps enhance our resilience
to changes in the external environment.
Our business model is aligned with our strategy of being
a leading, diversified transatlantic bank with global reach.
Read more on our strategy
on pages 10 to 11.
For further information on our divisions,
see: Barclays UK – pages 23 to 28
Barclays International – pages 29 to 34.
We draw on the following
to support our activities
and deliver value to our
stakeholders:
We aim to provide superior
services to help customers and
clients create, grow and protect
wealth in a sustainable way:
We support our stakeholders
via a commercially successful
business that generates
long-term sustainable returns:
We aim to deliver a broad
spectrum of value through
the way we do business,
including:
■■ the strength and reputation of
our brand – serving customers
and clients for over 325 years
■■ a strong, well-funded and
diversified balance sheet
■■ customer and client
relationships built on trust
■■ a solid track record of
successfully innovating for
customers and clients
■■ our geographic focus: firmly
anchored in the two financial
centres of London and New
York, with global reach
■■ the skills and expertise of our
people and our shared values
which inform the way we
work and how we act
Barclays’ customers and clients
include: individuals, small and
medium-sized businesses, large
corporates and multinational
companies, financial institutions
and banks, institutional investors,
funds, sovereign institutions and
governments.
We offer:
■■ a safe place to save, invest and
manage cash and payments
■■ innovative digital and
technological capabilities
■■ funding for purchases and
growth
■■ management of business and
financial risks
■■ financial and business support
■■ our services generate revenue
via net interest income and
non-interest income,
including fees and
commissions as well as
trading and investment
income through our
wholesale activities
■■ we are a large financial
institution and provide
diversification by business
line, geography and customer
■■ we aim to capture the benefits
of diversification through
efficient delivery of cross-
group synergies
The skills and trust
in our staff helps us,
through a range of
initiatives, increase
financial literacy.
Our business services
are tailored to help
support SMEs and
entrepreneurs, creating
wealth.
Meeting the demands
of our customers
around sustainable
investment drives
sustainable value.
■■ superior service to enable
customers and clients to
achieve their ambitions
■■ challenging and fulfilling
careers for our people in a
values-driven organisation
■■ long-term sustainable returns
for our investors
■■ we work together with
regulators to help reduce risk
in the industry and provide
a more sustainable banking
landscape over the long term
■■ employment and growth in
the economies in which we
operate
■■ engagement with
governments and society in
general to address societal
issues and needs
Innovation through our
products and services
is helping increase
access to finance and
generating dividends
and returns.
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Barclays PLC Annual Report 2017 09
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Our strategy
We have positioned Barclays as a leading, diversified,
transatlantic bank with global reach…
As a leading, diversified, transatlantic bank with
global reach, our goal is to support our stakeholders
via a commercially successful business that generates
long-term sustainable returns.
We reflect our strategy in a number of financial
and non-financial measures.
Read more on our financial and
non-financial measures on pages 15 to 22.
Completion of the restructuring announced
in March 2016
In 2017, we successfully delivered on two key
components of the strategic priorities we
announced in March 2016:
■■ during the course of 2017, we completed
the partial sale of our stake in BAGL
resulting in a non-controlling, accounting
deconsolidated position with a residual
14.9% shareholding in BAGL
■■ on 1 July we closed Barclays Non-Core, six
months ahead of schedule, representing a
watershed moment for the implementation
of the Group’s strategy.
These actions have significantly contributed
to the simplification of the Group, helping to
reduce drag on Group profitability and laying
the foundations for Barclays to drive
sustainable returns in its businesses.
Building on our strong foundations
The strategy of Barclays PLC Group is to build
on our strength as a transatlantic consumer
and wholesale bank, anchored in our two
home markets of the UK and US, with global
reach. Our two clearly defined divisions,
Barclays UK and Barclays International, provide
diversification to our business model. We
believe that combining consumer and
wholesale businesses, as well as accessing
geographic diversification, provide real
advantages to both the Group and our
investors and help contribute to the delivery
of more consistent and sustainable returns
through the business cycle. Effective execution
of our strategy of diversification should reduce
volatility of income and earnings, generate
higher returns through the cycle and improve
resilience of the Group as a whole.
Consistent with the objective of delivering
long-term sustainable value for our
stakeholders, we continue to pursue our
Shared Growth Ambition – our approach to
citizenship and sustainability. The objective
is to make decisions and do business that
provide our clients and customers, and the
communities which we serve, access to a
prosperous future.
You can read more about our
Shared Growth Ambition within our
performance metrics on page 21.
Delivering the Barclays of the future
Our focus is now on building the Barclays
of the future, operating principally through
Barclays UK, Barclays International and
supported by the new Group Service
Company. We are fully committed to our
model as a diversified bank and will remain a
well-diversified financial institution providing
best-in-class products and services to our
customers and clients, underpinned by world
class operations. We believe that the Group
and its entities are well positioned to deliver
future growth and appropriate returns
for shareholders.
We will remain a well-
diversified financial institution
providing best-in-class
products and services to our
customers and clients.
We continue to invest in our technological and
digital capabilities to facilitate delivery of our
strategy. This is particularly relevant in Barclays
UK where we already have a strong digital
proposition, Barclays Mobile Banking. We have
a clear strategy to use technology to deliver
deeper and more meaningful customer
relationships by transforming the way we
interact with customers, leverage data analytics
and take advantage of the opportunities
presented by Open Banking. Delivering a truly
customer-centric model is at the heart of
Barclays UK’s strategy.
Barclays International will continue to focus
on markets and services where we have a
competitive advantage, allocating capital
where we see the ability to generate the most
attractive risk-adjusted returns and investing
where we see an opportunity to expand
our market share. We see technology as a
significant enabler for our strategy across
the investment banking business, particularly
in Markets business lines, and will continue
to invest appropriately, alongside recruiting
the best talent as we build the Barclays of
the future. In July 2017, we announced our
intention to use Barclays Bank Ireland, an
existing licensed EU-based bank subsidiary,
to continue passported activity after the
UK’s departure from the EU.
Despite the uncertainty around the final
outcome of the negotiations between the UK
and EU, our planning is driven by a strategic
intention to preserve EU market access for
Barclays and our customers and clients, with
a continuous seamless service.
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Contact centres –
creating a seamless end to end customer
experience in an omni-channel environment
We believe the Group Service Company will enable the delivery
of world class services to our customers and clients while driving
efficiency gains.
Our global contact centres teams within Barclays UK and Barclays
International support over 60 million customer calls each year,
across several geographies and business areas. Our colleagues are
central to our customer experience and through the creation of the
Group Service Company we have a unique platform to unlock
opportunities across our shared colleague and technology
propositions and through doing so, continue the transformation of
our customer experience for Barclays UK and Barclays International.
In the past, our technology supporting contact centres has been highly
fragmented and we have operated with different processes with each
business unit having their own contact centres, leading to more than
30 different contact centre sites, utilising over 100 bespoke technology
applications. Through the creation of the Group Service Company we
aim to streamline our technology estate, identifying synergies to
support a world class customer and colleague experience.
We will also continue to evolve the way we interact with customers
through a highly integrated omni-channel framework, enabling
customers to interact with Barclays through their channel of choice.
We will continue to roll out and scale new capabilities throughout
2018, supporting our customers choice in how they interact with us.
Leveraging our geographic and business
diversification, we see a significant opportunity
to develop our payments capabilities across
the Group. We aim to leverage our extensive
experience and expertise developed through
our leadership position in the UK to grow our
market share in the US. In the Business to
Business (B2B) space, we will continue to invest
in our commercial payments capabilities, in
order to meet the evolving needs of our
customers, by leveraging innovative solutions
and our data assets. On the consumer side, we
are growing our mobile payment solutions in
the UK. In the US, we see opportunity to build
on our position of 9th largest credit card issuer
by receivables, as our targeted partnership
model drives continued growth. Furthermore,
we are investing in our US consumer banking
proposition, where we have a growing,
own-brand and prime-focused digital
banking offering.
Our strategic execution as a diversified bank
has been enhanced by the launch of the Group
Service Company. The Group Service Company
changes the way Barclays operates, enabling
the delivery of world class services through a
more standardised global operating model. We
believe our Group Service Company will enable
us to extract cross-Group cost synergies
through simpler processes, enhanced controls,
a better co-ordinated service provision and
more effective management of investment in
our technology and processes. The Group
Service Company is a key component of
Barclays’ operating model.
We believe our Group Service
Company will enable us to
extract cross-group cost
synergies.
We remain focused on resolving legacy
conduct, litigation and regulatory matters
and delivering enhanced controls
We aspire to be one of the world’s most
respected and well-regarded banks. We are
working hard to resolve outstanding legacy
issues in an appropriate time frame and
manner, while continuing to strengthen our
control environment. We put our customers
and clients at the heart of everything we do
and seek to strengthen the trust of our
customers, clients and wider society.
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GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Risk management
…with a structure and governance that enable us to
manage risk…
Barclays is exposed to external risks as part of our
ongoing activities. These risks are managed as part
of our business model.
The recent changes to the structure of the
bank in anticipation of ring fencing, together
with the closure of the Non-Core, and the
partial sell down of our shareholding in BAGL
mean that we have even more clarity on our
strategic direction. The risks we undertake
in delivering this strategy are now also
well-defined.
Enterprise Risk Management Framework
At Barclays, risks are identified and managed
in the business through the Enterprise Risk
Management Framework (ERMF), which
supports the CEO and Chief Risk Officer in
embedding effective risk management and
a strong risk culture.
By applying mandate and
scale limits, we can enable
and control specific activities.
The ERMF specifies the Principal Risks of the
Group and the approach to managing them.
Risk Appetite
Risk Appetite defines the level of risk we are
willing to take across the different risk types,
taking into consideration varying levels of
financial stress. Risk Appetite is key for our
decision making process, including business
planning, mergers and acquisitions, new
product approvals and business change
initiatives. By applying mandate and scale
limits across legal entities and businesses,
we can enable and control specific activities
that may have material concentration.
The management of risk is embedded into
each level of the business, with all colleagues
being responsible for the understanding and
managing of risks. This is done by specifying
responsibilities according to the ‘Three Lines
of Defence’. Each Line of Defence is overseen
by the next, resulting in a strong design,
implementation, remediation, monitoring and
testing framework, with independence and
robust governance.
Three Lines of Defence
The First Line of Defence comprises the
revenue generating and client facing areas,
along with all associated support functions.
The First Line identifies the risks, and sets the
policies, standards and controls, within the
criteria set by the Second Line of Defence.
The Second Line of Defence comprises Risk
and Compliance employees and oversees
the First Line, setting the limits, rules and
constraints, consistent with the Risk Appetite
of the firm.
The Third Line of Defence comprises Internal
Audit employees, providing independent
assurance to the Board and Executive
Management.
The Legal function does not sit in any of the
three lines, but supports them all and plays
a role in overseeing Legal Risk. The Legal
function is also subject to oversight from the
Risk and Compliance functions with respect
to the management of operational and
conduct risks.
Together with a governance process using
Business and Group level Risk Committees
and Board level forums, the main Board of
Barclays receives regular information in
respect of the risk profile of the Group, and
has ultimate responsibility for risk appetite
and capital plans.
Risk management post-ring fencing
There are no significant changes to the ERMF
proposed following ring-fencing. However,
each of the Boards of Barclays Bank UK PLC
and Barclays Bank PLC will approve and
implement the ERMF at an entity level, with
any requirements specific to the relevant
legal entity documented within the ERMF.
Group-wide risk management principles
will govern both Barclays Bank UK PLC and
Barclays Bank PLC and their own legal
entity governance processes around risk
management, capital and liquidity plans.
We believe that our structure and governance
will enable us to manage risk in changing
economic, political and market environments.
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Principal Risks are overseen by a dedicated Second Line function
Risks are classified into Principal Risks, as below
How risks are managed
Credit Risk
Market Risk
Treasury and
Capital Risk
Operational Risk
Model Risk
Reputation Risk
Conduct Risk
Legal Risk
The risk of loss to the firm from the failure of clients,
customers or counterparties, including sovereigns,
to fully honour their obligations to the firm, including the
whole and timely payment of principal, interest, collateral
and other receivables.
Credit risk management teams set the Risk Appetite,
monitoring risk against limits and help manage risk through
the credit cycle.
The risk of loss arising from potential adverse changes
in the value of the firm’s assets and liabilities from
fluctuation in market variables including, but not limited
to, interest rates, foreign exchange, equity prices,
commodity prices, credit spreads, implied volatilities
and asset correlations.
A range of complementary approaches to evaluate market
risk including specific management and regulatory
measures, are used to capture exposure to market risk.
These are overseen and managed by dedicated market risk
management teams who engage with the businesses
to challenge the risk profile on a regular basis.
Liquidity Risk:
The risk that the firm is unable to meet its contractual
or contingent obligations or that it does not have the
appropriate amount, tenor and composition of funding
and liquidity to support its assets.
Capital Risk:
The risk that the firm has an insufficient level or
composition of capital to support its normal business
activities and to meet its regulatory capital requirements
under normal operating environments or stressed
conditions (both actual and as defined for internal
planning or regulatory testing purposes). This includes
the risk from the firm’s pension plans.
Interest Rate Risk in the Banking Book:
The risk that the firm is exposed to capital or income
volatility because of a mismatch between the interest rate
exposures of its (non-traded) assets and liabilities.
The risk of loss to the firm from inadequate or failed
processes or systems, human factors or due to external
events (e.g. fraud) where the root cause is not due to
credit or market risks.
The risk of the potential adverse consequences from
financial assessments or decisions based on incorrect
or misused model outputs and reports.
Treasury and capital risk is managed and monitored through
a wide range of activities including: managing limits on a
variety of on and off-balance sheet exposures; monitoring
of market indicators for early signs of liquidity risk; recovery
planning; capital planning and allocation; internal Group-
wide stress testing; management of foreign exchange and
pension risk, and uses a range of metrics and sensitivity
analysis to measure non-traded market risk.
The Group assesses its operational risk and control
environment across its businesses and functions with a view
to maintaining an acceptable level of residual risk.
Models are validated and approved upon implementation
and on an ongoing basis.
The risk that an action, transaction, investment or event
will reduce trust in the firm’s integrity and competence by
clients, counterparties, investors, regulators, employees or
the public.
Reputation risk is managed by maintaining a controlled
culture within Barclays, with the objective of acting with
integrity, enabling strong and trusted relationships to be built
with customers and clients, colleagues and broader society.
The risk of detriment to customers, clients, market
integrity, competition or Barclays from the inappropriate
supply of financial services, including instances of wilful
or negligent misconduct.
All colleagues are responsible for the management and
mitigation of conduct risk. The Compliance function sets
the minimum standards required, and provide oversight to
monitor that these risks are effectively managed and
escalated where appropriate.
The risk of loss or imposition of penalties, damages
or fines from the failure of the firm to meet its legal
obligations including regulatory or contractual
requirements.
The Group conducts diverse activities in a highly regulated
global market and therefore is exposed to legal risks in the
conduct of its business. The Group General Counsel and the
Legal function support colleagues to manage legal risks.
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GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Risk management
…and help us focus on climate change
Climate change and resource scarcity are
acknowledged as two of the greatest global
challenges facing society today. As a global
institution, we support our clients and
communities as they adopt measures to
mitigate and adapt to climate change such as
clean technologies and infrastructure resilience.
We acknowledge the validity of climate science
and support the efforts of public and private
stakeholders around the world aiming to limit
global temperature rise to two degrees Celsius
above pre-industrial levels.
Barclays participated in the Financial Stability
Board’s Task Force on Climate-Related
Financial Disclosures (TCFD), which published
its final recommendations in June 2017.
Barclays endorsed the final report, and will
work to implement the recommendations over
the coming years.
The principles laid out in the TCFD
recommendations are an important step
in providing the foundations from which
companies, investors, banks and other
market participants can move forward
together to improve transparency and build
better understanding of potential climate-
related risks and opportunities.
This is the start of a longer-term process to
enhance disclosures and improve understanding
of potential material financial impacts.
This is the start of a longer-
term process to enhance
disclosures and improve
understanding of potential
material financial impacts.
Governance
On behalf of the Board, the Board Reputation
Committee reviews and approves Barclays’
overall Environmental, Social and Governance
(ESG) strategy, which includes the approach
taken on climate change and emission
targets. The Committee discussed the
outcome of an externally facilitated review
on Barclays alignment with the TCFD
recommendations in 2017. See pages 69 to
74 for the Board Reputation Committee
report.
Strategy
Significant financing requirements for energy
transition and resilient infrastructure will
necessitate access to the capital markets, bank
debt and wider funding solutions, providing
revenue pools that are projected to grow over
time. Our approach is to focus on managing
potential climate change related risks at a client
and transactional level, and assess current and
emerging opportunities across our product
suite and geographical footprint.
In the shorter term, Barclays sees immediate
opportunities in Green Bonds and other
financing solutions. We actively manage our
own direct carbon footprint and are making
good progress towards our target of 30%
reduction by end 2018, against a 2015 baseline,
reducing our emissions by 26.1% in 2017.
Managing climate risk and opportunity
Through a dedicated Environmental Risk
Management team within the Credit Risk
function, we are focused on managing both
physical risks, for instance flood risk for our UK
mortgage book, as well as potential transition
risks if carbon intensive industries do not plan
strategically for a smooth medium to long term
transition to a low carbon economy.
During 2017, we have significantly increased
our focus on developing new climate
opportunities, including the launch of a suite of
industry-leading Green Products driven by the
Green Banking Council and the issuance of
Barclays inaugural Green Bond. Please see the
Green Bonds case study on page 7.
Please refer to the 2017 ESG Report
for further information, found at
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Key performance indicators
A holistic approach to measuring success
Our approach reflects the way in which management
monitors the performance of the Group, allows for a
holistic assessment and sets out our progress towards
the strategic goals of the organisation.
By incorporating a broad range of financial and
non-financial measures, our framework is focused on
achieving positive and sustainable outcomes for our
diverse group of stakeholders, and influences incentive
outcomes for Barclays’ employees.
Read more on our remuneration framework in the Remuneration report
pages 93 to 116.
Approach and governance:
Performance measurement
In the 2016 Barclays Annual Report, we
introduced our revised performance
measurement framework to assess progress
against our strategy, across our diverse
stakeholder groups. The framework reflects a
balance of key financial performance metrics
and broader strategic non-financial measures.
Financial performance metrics
The financial metrics are aligned to Barclays PLC
Group financial targets, updated in Q317, and
are reported quarterly as part of our financial
results. Achieving our targets is consistent with
our aim of generating long-term sustainable
returns for the shareholders of
Barclays PLC Group.
Strategic non-financial performance measures
Non-financial measures are an important
element of how we evaluate our progress
towards achieving our ambition of delivering a
sustainable business for all our stakeholders. We
focus on the impact we have on our customers
and clients, colleagues, and the benefit we bring
to society via our citizenship activity. These
measures are underpinned by how we behave
towards all our stakeholders, through our
conduct and our culture. To assess our
performance, progress towards delivering
positive outcomes for our stakeholders is
informed by a number of sources including
internal dashboards, regular management
reporting and external measures, to help provide
a balanced review of performance.
We have a range of policies and guidance
that can support our key outcomes for our
customers and clients, colleagues and
citizenship activity. Performance against our
strategic non-financial performance measures is
one indicator of the effectiveness and outcome
of aspects of certain policies and guidance. Our
policies and guidance are refreshed regularly. For
further details, please see our Customer and
Client, Colleague and Citizenship sections.
Barclays PLC Group Performance Measurement Framework
Financial performance metrics
Group RoTE* >9% in 2019 >10% in 2020
CET1 ratio
150–200 bps above the end point regulatory minimum level
Group costs £13.6–£13.9bn in 2019† Targeting cost: income ratio below 60%
* excluding litigation and conduct, and based on a CET1 ratio of c.13%
† excluding litigation and conduct
Strategic non-financial performance measures
Delivering positive outcomes for our stakeholders
Customer and Client
■■ Building trust with our customers
and clients, such that they are
happy to recommend us to others
■■ Successfully innovating
and developing products and
services that meet their needs
■■ Offering suitable products and
services in an accessible way,
ensuring excellent customer and
client experience
Colleague
Promoting and maintaining:
Citizenship
■■ Making decisions and doing
■■ A diverse and inclusive workforce in
which colleagues of all backgrounds
are treated equally and have the
opportunity to be successful and
achieve their potential
■■ Engaged and enabled colleagues
■■ A positive conduct and values-
based environment
business that provides our clients,
customers, shareholders,
colleagues and the communities
which we serve with access to a
prosperous future, through our
Shared Growth Ambition
■■ Proactively managing the
environmental and societal
impacts of our business
Underpinned by how we behave towards all our stakeholders through our conduct and culture
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Barclays PLC Annual Report 2017 15
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Approach and governance: Remuneration
Performance against our financial metrics and
strategic non-financial performance measures
is directly linked to executive remuneration,
and also influences incentive outcomes for
Barclays’ employees more broadly. This
approach supports us in our work to deliver
positive outcomes for all our stakeholders.
Please refer to the Remuneration Report on
pages 93 to 116 for further information.
How we are doing
Group Return on Tangible Equity
(3.6)%
2016 3.6%
Common Equity Tier 1 (CET1) ratio
13.3%
Cost: income ratio
73%
Operating expenses*
£14.2bn
2016 12.4%
2016 76%
2016 £15.0bn
* excluding litigation and conduct
Financial performance metrics
Key outcomes we will look to achieve include:
Achieving our financial targets, consistent
with our aim of generating long-term
sustainable returns for the shareholders of
Barclays PLC Group.
How we measure success
The financial performance metrics are aligned
to Barclays PLC Group financial targets,
updated in Q317:
■■ Group Return on Tangible Equity (RoTE) of
greater than 9% in 2019 and greater than
10% in 2020, excluding litigation and
conduct, and based on a CET1 ratio of c.13%
■■ CET1 ratio of 150–200 bps above the end
point regulatory minimum level
■■ Group costs, excluding litigation and
conduct, of £13.6–13.9bn in 2019, and to
have a target cost: income ratio below 60%.
RoTE measures our ability to generate
acceptable returns for shareholders. It is
calculated as profit after tax attributable to
ordinary shareholders, including an adjustment
for the tax credit recorded in reserves in respect
of other equity instruments, as a proportion of
average shareholders’ equity excluding
non-controlling interests and other equity
instruments adjusted for the deduction of
intangible assets and goodwill.
This measure indicates the return generated
by the management of the business based on
shareholders’ tangible equity. Achieving a
target RoTE demonstrates the organisation’s
ability to execute its strategy and align
management’s interests with the
shareholders’. RoTE lies at the heart of the
Group’s capital allocation and performance
management process.
The CET1 ratio is a measure of the capital
strength and resilience of Barclays. The Group’s
capital management objective is to maximise
shareholder value by prudently managing the
level and mix of its capital. This is to ensure
the Group and all of its subsidiaries are
appropriately capitalised relative to their
minimum regulatory and stressed capital
requirements, and to support the Group’s risk
appetite, growth, and strategic options while
seeking to maintain a robust credit proposition
for the Group and its subsidiaries.
The ratio expresses Barclays’ capital as a
percentage of risk weighted assets (RWAs), as
defined by the PRA, in the context of Capital
Requirements Directive IV (CRD IV – an EU
directive prescribing capital adequacy and
liquidity requirements), and is part of the
regulatory framework governing how banks
and depository institutions are supervised.
Barclays views operating expenses as a key
strategic area for banks; those which actively
manage costs and control them effectively will
gain a strong competitive advantage.
Restructuring the cost base is a key execution
priority for management and includes a
review of all categories of discretionary
spending and an analysis of how we can run
the business to ensure that costs increase at a
slower rate than income.
The cost: income ratio measures operating
expenses as a percentage of total income and
is used to assess the productivity of the
business operations.
Updating the Return on Tangible Equity metric
Significant strategic progress was made in
2017 with the closure of Non-Core and sell
down of our stake in Barclays Africa, marking
the completion of our restructuring.
With the closure of Non-Core, we no longer
have a Core and Non-Core distinction within
the Group, and hence our prior target of
Group RoTE to converge with Core RoTE no
longer exists. The RoTE target has been
updated to reflect our commitment to
continuing to execute at pace against our plan
and we are confident in asserting when
Barclays will start to deliver the economic
performance that the Group is capable of.
How we are doing
Group Return on Tangible Equity
2017 reflected a number of one-off items
including losses related to the sell down of
BAGL of £2.5bn and a net charge of £0.9bn
due to the remeasurement of US DTAs in
Q417, as well as litigation and conduct of
£1.2bn. These items drove a Group RoTE of
negative 3.6% (2016: positive 3.6%).
Excluding these material items, Group RoTE
was 5.6%.
16 Barclays PLC Annual Report 2017
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Key performance indicatorsA holistic approach to measuring success
Colleague: We remain focused on increasing
the diversity of our workforce and continuing
to build an inclusive culture. We are proud
of the progress we have made on the
multicultural, multigenerational, LGBT and
disability pillars, and we continue to receive
external recognition for our diversity and
inclusion work. We also continue to focus on
the positive engagement of our workforce,
and are encouraged to see a 3 percentage
point improvement in our annual employee
engagement survey score.
Citizenship: We are conscious of our wider
stakeholders and the communities in which
we operate and have performed well against
our citizenship agenda, meeting our internal
objectives on all six of our Shared Growth
Ambition metrics.
Areas of continued focus:
Customer and Client: Further transformation
of our customer and client experience remains
a key priority for Barclays, particularly as
customer and client expectations continue to
evolve rapidly. Although we are encouraged by
the reductions in the number of complaints
we received in 2017, this remains an ongoing
area of focus for management and the Board.
Colleague: Our commitment to increasing
female representation at all levels of Barclays
remains firm. Although we have achieved an
increase in the percentage of women at our
Managing Director and Director levelsa, we
recognise that there is still progress to be
made regarding senior female representation.
In addition, although we have made progress,
we recognise there is still more to do to
further reduce obstacles to efficiency and
enable our colleagues to achieve excellent
performance. We remain committed to driving
the right culture throughout all levels of the
organisation and continuing to enhance the
effective management of Conduct Risk.
Citizenship: We have made good progress in
delivering access to sustainable finance and
developing new green products. We see
further opportunity in this space and are
working to develop broader sustainability and
sensitive sector guidelines. In addition, we
continue to focus on enhancing disclosures,
particularly on climate change, and improving
our Environmental, Social and Governance
(ESG) ratings and benchmark scores on an
absolute and relative basis.
CRD IV fully loaded CET1 ratio
The Group’s CRD IV fully loaded CET1 ratio
increased to 13.3% (2016: 12.4%) driven by a
decrease in RWAs of £53bn to £313bn, which
was partially offset by a reduction in CET1
capital to £41.6bn (2016: £45.2bn). The 90bps
improvement was driven by organic capital
generation from continuing operations, the
benefit of the proportional consolidation of
BAGL and the rundown of Non-Core, partially
offset by an adverse movement in reserves
and the net impact of the remeasurement of
US DTAs.
Operating expenses and cost: income ratio
Group operating expenses were £15.5bn
(2016: £16.3bn). Excluding litigation and
conduct charges, Group operating expenses
were £14.2bn (2016: £15.0bn), in line with
2017 guidance. The reduction in operating
expenses was primarily driven by lower
Non-Core related operating expenses.
The Group cost: income ratio was 73%
(2016: 76%).
For further information on the financial
performance of the Group, please see
page 47.
Strategic non-financial
performance measures
How we are doing: summary
We assess progress towards the delivery
of positive outcomes our customers and
clients (page 18), colleagues (page 19), and
citizenship activity (page 21), all underpinned
by conduct and culture.
Areas of encouragement:
Customer and Client: In 2017, we continued to
focus on delivering excellent customer and
client experience, by offering products and
services to meet their needs in an appropriate
and accessible way. We are encouraged by the
performance of our Relationship Net Promoter
Scores (NPS®), while our client ranking and
market share indicators remained broadly
stable across many of our international
business areas, which we believe reflect
the relevance of our customer and client
proposition. Digital solutions can enable a
convenient and secure everyday banking
experience for customers and clients, and we
believe this is reflected in a 7% year on year
increase in the number of Barclays UK
customers using our digital services.
®Net Promoter, Net Promoter System, Net Promoter Score, NPS and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.
Note
a 2016 restated on an ex-Africa basis.
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Barclays PLC Annual Report 2017 17
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Customer and Client
Key outcomes we will look to achieve include:
■■ building trust with our customers and
clients, such that they are happy to
recommend us to others
■■ successfully innovating and developing
products and services that meet their needs
■■ offering suitable products and services in an
accessible way, ensuring excellent customer
and client experience.
How we measure success
Measures used in our evaluation include,
but are not limited to:
■■ Net Promoter Scores (NPS)
■■ client rankings and market shares
■■ lending volumes provided to customers and
clients
■■ digital engagement
■■ complaints performance
■■ conduct indicators.
How we are doing
Areas of encouragement:
Net Promoter Scores (NPS)a
Improvements to our customer experience
and customer value proposition, as well as our
campaign to educate customers about how
they can take steps to protect themselves
from fraud, have all contributed to customers
advocating our brand. Barclays Relationship
NPS ended the year with an improved score
of +14 (2016: +10), while Barclaycard UK
Relationship NPS remained relatively flat year
on year with a score of +9 (2016:+7). Our
Barclaycard International business also
continued to perform well on Relationship
NPS, supported by a continued focus on
customers and improvements in our products
and digital experiences.
Client rankings and market shares
With the repositioning of the Corporate and
Investment Bank largely completed in 2017, we
believe the business is well-positioned to
deliver for our clients in our two home markets.
Our Corporate and Investment Bank achieved a
6th place ranking by fee share (2016: 5th) in
our UK and US home markets across M&A,
equity and debt capital markets, and
syndicated loan transactions, and we were
highly encouraged by the 1st place ranking in
the UK (Dealogic). In 2017 Barclays ranked 4th,
based on Global Fixed Income market share
(Greenwich Associates), unchanged from 2016.
88% of our largest UK corporate clients
considered the service they receive from
Barclays to be good, very good or excellent, a
2 percentage point decrease on 2016
(Charterhouseb). We also processed more than
a third of all card payments made in the UK.
Please refer to the Consumer, Cards and
Payments section on page 33 for
further information on our market
presence across our international businesses.
Lending volumes provided to customers
and clients
Barclays continues to be an important provider
of financial services to UK businesses. We
provided around £66bn of lending, down 6%
on 2016, as we continued to exert high levels of
discipline in capital allocation decisions to
strengthen the long-term sustainability of the
business for all our stakeholders. We continue
to support UK SMEc customers in achieving
their ambitions, with new lending of £2.8bn
(2016: £2.5bn). We also extended or renewed
mortgage facilities worth nearly £20bn (2016:
nearly £19bn) to nearly 88,000 UK households.
Our Mortgage business continued to focus on
enhancing the customer experience, with
Barclays winning eight awards in 2017d.
Notes
a NPS measures customer experience and facilitates benchmarking. It is widely used in banking and other industries.
In this reporting year, the basis of Barclays Relationship NPS has been revised from a three-month rolling average to
a 12-month rolling average, to reduce fluctuations in the data. On a three-month rolling average basis we reported
Barclays Relationship NPS of +13 in 2016, which remained unchanged at +13 in 2017.
Source: GfK FRS, 12 months ending December 2017. Adults interviewed: 8,568 Barclays main Current Account
holders (Barclays Relationship NPS), and 4,754 Barclays main Credit Card holders (Barclaycard UK Relationship NPS).
b Charterhouse Research Business Banking survey: 820 interviews with businesses in the UK, turning over £25m–£1bn
year end 2017. Data is weighted by region and turnover to be representative of the UK business market. Share-based
on bank named as main bank.
c SME Customers reflects our Business Banking customers. In 2016, we reported on UK SME lending across Barclays
according to the UK Finance definition of SME (2016: just over £3.6bn. 2017: not available). Business Banking has
now been established as part of Barclays UK and we believe that moving to report on this basis ensures we provide
strategic clarity, while continuing to cover the majority of customers who would be classified as ‘SMEs’.
d Best Lender for first-time buyers with family support (Moneywise); Best Lender for Larger loans (Moneywise); Best
Online Lender (What Mortgage); Best Help to Buy Mortgage Lender – Equity Loan (What Mortgage); Best
Intermediary Lender (Mortgage Finance Gazette); Best Overall Lender (Mortgage Finance Gazette); Best National
Bank (Mortgage Finance Gazette); Best Large Loans Mortgage Lender (Your Mortgage).
e In 2016 we reported complaint volumes for ‘Barclays UK’ which reflected total UK FCA reportable complaints
(including complaints which now sit within Barclays International). Following preparation for the formal separation
of the Barclays UK division into a new legal entity we are now able to accurately split UK FCA Complaints between
our Barclays UK and Barclays International divisions.
f For further information on Barclays’ complaint volumes, the FCA publishes firm-level complaints data on their
website.
Digital engagement
Digital solutions can enable a convenient and
secure everyday banking experience and over
10 million customers and clients in the UK are
using our digital services on a regular basis
(2016: nearly 9.5m). Barclays Mobile Banking
has now been chosen by 5.5 million customers
as a ‘bank in their pocket’, to access key services
whenever and wherever they need them.
We are also mindful that while we have
customers who fully embrace digital channels,
we serve a wide customer base. We continue
to work alongside communities to help our
customers feel comfortable in the digital
environment and we also launched our Digital
Safety campaign which aims to heighten
awareness and educate our customers on the
risks posed by cyber crime.
In 2017, Barclaycard US customers logged into
our website and mobile apps over 230 million
times, up 12% on 2016. Of our over eight
million digitally active customers in Barclaycard
US, 57% are mobile active and they expect
instant, relevant and safe access to their most
important banking needs including account
management, rewards, and payments. In 2017,
we continued to leverage consumer insights
and feedback to build innovative experiences
for our customers as evidenced by our 3rd
place in the JD Power 2017 Mobile Banking
Credit Card evaluation and the launch of our
mobile-first Uber co-branded credit card. See
our case study on Uber on page 34.
Areas of continued focus:
Complaints performance
In Barclays UK, we continue to focus on
customer journeys and our underlying
complaint volumes (Barclays UK, excluding
PPI) reduced 13% year on year, however we
have seen a small increase in PPI complaints
(up 2% year on year) driven largely, we
believe, by the FCA deadline announcement.
Barclays UK complaint volumes, including PPI,
were down 7% year on yeare. Barclays
International complaints reduced by 19% year
on year, largely driven by a strong
performance in the Barclaycard US business,
as we continued our focus on improving
customer experience. Complaints reduction
remains a priority across the Group and,
despite improvement in 2017, we have more
work to do, as can be seen from our position
in the H1 2017 FCA complaints tables in the
UKf.
18 Barclays PLC Annual Report 2017
home.barclays/annualreport
Key performance indicatorsA holistic approach to measuring success We therefore remain focused on areas
requiring our attention including, for example,
the recent issues we have experienced with
our Smart Investor proposition, and we are
working to improve our service as a result of
customer feedback.
In 2017, Barclaycard US
customers logged into our
website and mobile apps over
230 million times.
Conduct indicators
Barclays has operated at the overall set
tolerance for Conduct Risk throughout 2017.
The tolerance is assessed by the business
through Key Indicators which are aggregated
and provide an overall rating which is reported
to the Board Reputation Committee as part of
the Conduct Dashboard.
We remain focused on the continuous
improvement being made to manage Conduct
Risk effectively, with an emphasis on
enhancing governance and management
information to facilitate the identification of
risks at earlier stages. For further information
on the management and performance of
Conduct Risk, please refer to the Risk Review
section on page 117.
________________________________________
Policies and guidance can support delivery
towards the key outcomes for our customer
and clients. The Barclays Way contains
statements on how we strive to deliver
excellent customer service, and respect and
protect the personal information we hold. It
defines Conduct Risk outcomes as guiding
principles and contains statements on privacy
and data protection that colleagues must
adhere to. The Barclays Way is available to
view at: home.barclays/citizenship/
our-approach.html. Performance against our
strategic non-financial performance measures
for our customers and clients is one indicator
of the effectiveness and outcome of certain
policies and guidance. Policies which support
our customer and client strategic non-
financial measures include aspects of our
Customer Complaints Global Policy.
Our customers and clients are at the heart
of our purpose and strategy. For further
information on our two divisions, Barclays UK
and Barclays International, please refer to
pages 23 to 34.
Colleague
Key outcomes we will look to achieve include:
Promoting and maintaining:
■■ a diverse and inclusive workforce in which
employees of all backgrounds are treated
equally and have the opportunity to be
successful and achieve their potential
■■ engaged and enabled colleagues
■■ a positive conduct and values-based culture.
How we measure success
Measures used in our evaluation include, but
are not limited to:
■■ diversity and Inclusion statistics
■■ employee sustainable engagement survey
scores
■■ conduct and culture measures.
How we are doing
Areas of encouragement:
A diverse and inclusive workforce
We remain focused on increasing the diversity
of our workforce and continuing to build an
inclusive culture. In 2017, we have placed
additional focus on upskilling our leadership
through a range of initiatives including our
Unconscious Bias Training, which has been
delivered to over 10,000 leaders to date.
How we are doing
Barclays Relationship NPS
+14
2016: +10
Sustainable engagement
of colleagues
78%
2016: 75%
Access to financing
£31.7bn
2016: £30.5bn
We are proud of our achievements in 2017,
across the following pillars of our global
Diversity and Inclusion strategy:
LGBT: Our Spectrum Allies programme is
growing, with an estimated over 8,000
colleagues (2016: over 7,000), who have
pledged to challenge homophobia, biphobia
and transphobia and provide support to
LGBT colleagues.
Disability: This year, alongside PwC, we have
further scaled the ‘This is Me in the City’
initiative along with the Lord Mayor of the
City of London.
Multicultural: The number of apprentices who
identify as Black, Asian and Minority Ethnic
was 19% in 2017 (2016: 30%), 8 percentage
points above the national apprenticeship
average.
Multigenerational: Since the Barclays Armed
Forces Transition, Employment and
Resettlement (AFTER) programme began in
2010, the programme has assisted over 5,500
veterans in employment transition and since
2013 we have hired over 500 ex-military
personnel (2016: nearly 400).
Our Dynamic Working campaign is relevant to
colleagues at every life stage and encourages
the integration of personal and professional
responsibilities through smarter work
patterns. The campaign is having a positive
effect on colleague engagement, with 59% of
colleagues actively working dynamically in
2017 with an average overall sustainable
engagement score of 83% among this group.
Gender: Our commitment to increasing
female representation at all levels remains
firm. Please see ‘Areas of continued focus’
below for details on our progress.
Throughout 2017, our work was recognised
externally, including: Stonewall recognising
Barclays as one of only 12 Top Global
Employers; the Human Rights Campaign
awarding Barclays 100% on their corporate
equality index; Working Families UK
recognising Barclays as one of the top 10
Employers for Working Families in 2017; and
the City of London and the Social Mobility
Commission acknowledging Barclays as a
Top 50 Employer through the Social Mobility
Employer Index.
home.barclays/annualreport
Barclays PLC Annual Report 2017 19
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report We continue to see improvements in conduct
performance and are committed to continuing
to drive the right culture throughout all levels
of the organisation. Barclays will continue
to enhance the effective management of
Conduct Risk and appropriately consider the
relevant tools, governance and management
information in decision making processes.
________________________________________
Policies and guidance can support delivery
towards the key outcomes for our colleagues.
The Barclays Way contains statements on how
we aim to create and promote a culture that is
diverse and inclusive and create the positive
and respectful environment all employees are
entitled to enjoy. It also contains requirements
for employees to: inform their line managers
of changes in circumstances, including, for
example, any conflict of interest or outside
business interest; take reasonable care of their
own and others’ health and safety; and the
responsibility to protect Barclays’ assets. It
also contains statements on: physical security;
Group Resilience Policy and Standards; and
communication with the media and public
speaking appearances. Performance against
our strategic non-financial performance
measures for our colleagues is one indicator
of the effectiveness and outcome of certain
policies and guidance. Policies which support
our colleague strategic non-financial
measures include aspects of our Employee
Opinion Survey Policy.
Please refer to the section on
Our people and culture on page 36 and
the People section on pages 89 to 92
for further information on our progress.
Engaged and enabled colleagues
An engaged workforce is critical to the
success and delivery of our strategy. Our
principle measurement of employee
engagement is through our employee opinion
survey ‘Your View’. This year, sustainable
engagement of our employees improved by
3 percentage points to 78%, with the majority
of key survey question results recording
improvements compared to 2016, and the
rest remaining stable.
Areas of particular strength from the
annualised ‘Your View’ results include ‘I would
recommend Barclays as a good place to work’
(82% favourable, up 6 percentage points on
2016), ‘Barclays is truly focused on achieving
good customer and client outcomes (88%
favourable, up 5 percentage points on 2016)
and colleagues ‘believe strongly in the goals
and objectives of Barclays’ (90% favourable,
up 3 percentage points on 2016).
In addition, by supporting internal mobility
across Barclays, we hope to successfully
attract, retain and develop internal talent.
In 2017, our rate of internal hiring was 40%
(2016: 48%).
A positive conduct and values-based culture
In 2017, we focused on embedding the culture
measurement framework we developed in
2016, and using the insights to stimulate
senior management discussion.
We have made good progress in continuing to
embed the value of ‘Integrity’, highlighted by
results to the questions ‘it is safe to speak up’
(83% favourable, up 2 percentage points on
2016) and ‘I can report instances of dishonest
or unethical practices to the appropriate level
of authority without fear’ (86% favourable,
flat on 2016). ‘Stewardship’ also remains a
strongly embedded value with 89% of
colleagues stating that they are proud of
the contribution Barclays makes to the
community and society (up 1 percentage
point on 2016). ‘Service’ and ‘Respect’ remain
strong with 90% of colleagues believing
strongly in the goals and objectives of Barclays
(up 3 percentage points on 2016) and 91%
of colleagues agreeing that ‘leaders at
Barclays support diversity in the workplace’
(up 2 percentage points on 2016).
Areas of continued focus:
A diverse and inclusive workforcea
Our commitment to increasing female
representation at all levels remains firm and we
are mindful of the need to remain focused on
improving our gender diversity with goals to
improve the percentage of female Managing
Directors and Directorsb to 26% by 2018
(2017: 23%, a 1 percentage point improvement
year on yearc); 33% female representation on
our Board by 2020 (2017: 21%, 2016: 31%); and
33% female representation among the Group
Executive Committee and their direct reports
(2017: 25%, flat year on year). Recognising the
importance of strengthening our talent
pipeline, we also have an ambition for 50%
female graduate hires (2017: 40%, 2016: 39%).
Engaged and enabled colleagues
Although it is pleasing to note that we have
made progress across areas identified for
opportunity, including ‘eliminating obstacles
to efficiency’ and ‘ensuring colleagues have
the tools and resources to achieve excellent
performance’, there is always more to do.
Enabling our employees to achieve excellence
remains a key priority and throughout 2018
new initiatives will be identified that will
continue to improve the simplicity and
efficiency of our tools, processes and systems.
A positive conduct and values-based culture
Within our culture measurement framework,
which is anchored in our values, ‘Excellence’
remains the biggest opportunity for
improvement, as the ‘Enable’ component
within the colleague survey continues to be
the lowest scoring measurement of
sustainable engagement (64%, up
4 percentage points on 2016). A set of
improvement initiatives were identified in
2017 and will continue in 2018 to drive
progress in this area.
Barclays has operated at the overall set
tolerance for Conduct Risk throughout 2017.
The tolerance is assessed by the business
through Key Indicators which are aggregated
and provide an overall rating which is reported
to the Board Reputation Committee as part of
the Conduct Dashboard.
Notes
a Under the Companies Act 2006, Barclays is required to report on the gender breakdown of our employees and ‘senior managers’. Of our global workforce of 79,900 (45,100 male,
34,800 female), 555 were senior managers (401 male, 154 female), which include Officers of the Group, certain direct reports of the Chief Executive, heads of major business
units, certain senior Managing Directors, and directors on the boards of undertakings of the Group, but exclude individuals who sit as directors on the Board of the Company.
The definition of senior managers within this disclosure has a narrower scope than the Managing Director and Director female representation data provided above.
b Previously called female representation across ‘senior leadership’.
c Based on 2016 actual (24%) restated on an ex-Africa basis (22%).
20 Barclays PLC Annual Report 2017
home.barclays/annualreport
Key performance indicatorsA holistic approach to measuring success Citizenship
Key outcomes we will look to achieve include:
■■ making decisions and doing business
that provides our clients, customers,
shareholders, colleagues and the
communities which we serve with access to
a prosperous future, through our Shared
Growth Ambition
■■ proactively managing the environmental
and societal impacts of our business.
How we measure success
Measures used in our evaluation include, but
are not limited to:
■■ delivery against our Shared Growth
Ambition
■■ colleague engagement in citizenship
activities
■■ external benchmarks and surveys.
How we are doing
Areas of encouragement:
Delivery against our Shared Growth Ambition
We met our internal objectives on all six of
our Shared Growth Ambition metrics.
Performance was on-track against our internal
milestones for three initiatives around ‘access
to financing’, ‘access to digital and financial
empowerment’ and ‘access to employment’.
We also met or exceeded our 2017 annual
targets for The Barclays Way training, carbon
emissions reduction and payment of suppliers
on time.
Access to financing
We continued to deliver financing solutions in
areas including renewable energy, water and
low carbon technologies; social infrastructure;
development institutions; and small business
financing. Barclays delivered £31.7bn in
financing for specific social and environmental
segments across our business lines
(2016: £30.5bna).
There has been significant momentum across
the Barclays franchise in 2017, including the
launch of a range of new Green Loans, Asset
Finance and Deposit products; the issuance of
Barclays inaugural Green Bond (see case study
on page 7); an industry-first Multi-Impact
Growth Fund for retail investors; a range of
innovative transactions such as solar project
bonds and green asset backed securities; and
continued coverage from our Research teams
on ESG and Sustainability themes.
Supporting sustainable ventures
Barclays and the Unreasonable Group hosted the first Unreasonable
Impact World Forum in 2017, bringing together 27 innovative
companies from Asia, the US and Europe working to solve some of
the world’s most pressing problems. Held in London, the Forum
included elevator pitches from entrepreneurs and panel sessions on
themes such as scaling businesses and raising capital through
impact investors. Over 400 representatives from a range of
stakeholder groups, including investors, clients, NGOs and
government agencies attended in person, with the event broadcast
live on select social media channels globally.
Unreasonable Impact is an innovative multi-year partnership between
Barclays and Unreasonable Group to launch the world’s first
international network of accelerators focused on scaling-up
entrepreneurial solutions that will help employ thousands worldwide
while solving some of our most pressing societal challenges.
See https://unreasonableimpact.com/ for more information.
Access to financial and digital empowerment
Inclusive financial systems are key to
achieving economic and societal progress, but
there can be several barriers to access. We
believe digital offerings can help break down
these barriers. We helped empower around
205,000 people in 2017 (2016: 249,000)
through initiatives such as Barclaycard Initial
for those with a limited credit history; our
Digital Eagles network, comprised of specially
trained Barclays employees working to provide
free technology support to customers
and non-customers; and the continued
development of learning platforms.
We work closely with partners in the free debt
advice sector and collaborate on a number
of projects including research and colleague
training on financial vulnerability, and how
we can best match customers to the advice
service that suits them.
Access to employment
Barclays is committed to helping people gain
access to skills, and supporting entrepreneurs
to drive job creation. We helped upskill over
2.1 million people in 2017 (2016:1.7 million),
driven by a range of regional employability
partnerships and our flagship LifeSkills
programme in the UK.
Barclays delivered £31.7bn in
financing for specific social
and environmental segments.
We held Accelerators for the second cohort of
the ‘Unreasonable Impact’ programme in
partnership with Unreasonable Group, focused
on scaling ventures that solve environmental
and societal problems. 57 ventures have
participated to date in programmes across the
UK, US and Asia.
Note
a Financing volume based on a use of proceeds framework. 2016 actuals have been restated from £21.1bn due to the inclusion of new qualifying categories such as national
development banks. Further detail available in the ESG Report.
home.barclays/annualreport
Barclays PLC Annual Report 2017 21
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report
Business conduct and environmental impact
The Barclays Way outlines the Purpose and
Values which govern our way of working.
99.9% of our colleagues completed annual
training on The Barclays Way in 2017
(2016: 99.6%) ahead of our target of
above 97%.
We reduced carbon emissions by 26.1%
against the 2015 baseline (2016: 14.3%a),
making good progress towards our 30%
target by 2018.
We also achieved 89% (2016: 88%) on-time
payment by value to our suppliers
(Target: 85%) and have published an updated
Statement on Modern Slavery which includes
additional information on the work we are
doing with our clients and customers, as well
as our suppliers.
Please see the statement on our website
home.barclays/citizenship/our-approach/
human-rights.html
Colleague engagement in citizenship activities
Colleague participation is essential to the
success of our citizenship strategy. More
than 50% of our colleagues participated in
volunteering, fundraising or regular giving
activity with 43,700 unique participants
(2016: almost 44,000)b. We also have active
internal Digital and LifeSkills, Environmental,
Social Innovation and Intrapreneur networks.
Areas of continued focus:
Shared Growth Ambition
We will continue to focus on improving
integration with our product suite and
developing innovative sustainable financing
solutions. We intend to focus on enhancing
the impact of our employability programmes
and providing compelling opportunities for
our colleagues to participate in citizenship
activities.
In addition, we are developing wider
sustainability and sector guidelines for
business activity in 2018, and will increase our
contribution to policy initiatives and multi-
stakeholder partnerships.
Supporting sustainability-focused ventures
to scale-up is one way in which Barclays is
supporting the Sustainable Development
Goals (SDGs), and we will continue to review
and improve our core focus on raising access
to financing for social and environmental
segments, building skills and supporting
empowerment.
External benchmarks and surveys
Barclays’ strategy and performance on a
range of ESG factors is evaluated by external
agencies on an annual basis.
In 2017, we broadly maintained our
performance scores in key ratings and indices.
Although methodologies vary and continue to
evolve, we believe there is an opportunity to
continue to enhance our performance on an
absolute and relative basis.
We maintained membership of both the Dow
Jones Sustainability Indexc series, where our
score reduced by 1 percentage point to 83
points against an industry average of 58
points (2016: 61 points), and the FTSE4Good
Index seriesd, with our absolute score up to
4.3/5 (2016: 3.9/5) and our position relative
to the banks sector improved to the 91st
percentile (2016: 78th percentile). Barclays
was rated ‘BBB’ by MSCI ESG Ratingse (2016:
‘BBB’) and scored 61 points in Sustainalytics
ESGf Ratings (2016: 62 points).
________________________________________
Policies and guidance can support delivery
towards the key outcomes for citizenship. The
Barclays Way contains statements on: respect
for society – our Shared Growth Ambition;
respect for human rights; respect for the
environment and supporting the communities
in which we operate.
Our activity is supported by policies and
position statements on a range of material
issues including: environmental sustainability;
modern slavery; human rights; and anti-
bribery and anti-corruption. These are
available at home.barclays/citizenship/
our-approach/policy-positions.html
Barclays’ Group Statement on Human
Rights aims to achieve a consistent and
comprehensive approach to respecting
human rights. We are committed to operating
in accordance with the Universal Declaration
of Human Rights and we take account of
other internationally accepted human rights
standards. We respect and promote human
rights through our employment policies and
practices, through our supply chain and
through the responsible provision of our
products and services.
The Barclays Anti-Bribery and Anti-Corruption
(ABC) Policy and Standards and the Barclays
Introducer Policy and Standard extend to all
Barclays’ business dealings globally. Barclays
takes a zero-tolerance approach to bribery and
corruption and we are committed to
conducting our global activities free from any
form of bribery and corruption. We also
expect the same from any third parties
providing services for or on behalf of Barclays.
Employees who fail to comply with the
requirements of our policies and standards,
may face disciplinary action, up to and
including dismissal or termination of
employment.
Performance against our strategic non-
financial performance measures for citizenship
is one indicator of the effectiveness and
outcome of certain policies and guidance.
Policies which support our citizenship
strategic non-financial measures include
aspects of our policy statement on
environmental sustainability.
The full details of our policies and position
statements are available at home.barclays/
citizenship/our-approach/policy-positions.
html
We provide additional information in
the Environmental Social Governance
(ESG) Report 2017 available at
home.barclays/annualreport
Notes
a 2016 carbon reduction actuals have been restated due to improved billing data replacing
estimates and restatements to travel emissions. Further detail available in the ESG Report.
b Unique participants measures colleague involvement in eligible volunteering, matched
fundraising, regular giving initiatives. Data sourced from internal reporting systems including
several manual sources.
c Source: S&P Dow Jones; Sustainable Asset Management (SAM).
d Source: FTSE Russell.
e Source: MSCI ESG Inc.
f Source: Sustainalytics Inc.
22 Barclays PLC Annual Report 2017
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Key performance indicatorsA holistic approach to measuring success Barclays UK
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Barclays PLC Annual Report 2017 23
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Barclays UK
Our performance in the UK
With 30,000 colleagues and 24 million customers and clients,
Barclays UK strives to help people move forward by providing
personalised and perfect experiences, delivered by passionate
colleagues. In 2017, we have made significant progress in
establishing the ring-fenced bank, protecting our customers
and clients and transforming our business through digitisation
and automation.
Overview of products, services and clients
Our future ring-fenced bank, Barclays UK, is a
personal and business banking franchise, built
around our customers’ needs with innovation
at its core. Our Personal and Premier Banking
financial solutions help customers move
forward by putting them at the heart of
everything we do, connecting the different
aspects of their lives to their financial lives, at
a time that suits them. Barclaycard Consumer
UK is a leading credit card provider, offering
flexible borrowing and payment solutions,
while delivering a market-leading customer
experience. Wealth, Entrepreneurs and
Business Banking serves a spectrum of
clients, from those who manage their own
investments to small and medium-sized
enterprises (SMEs) who need specialist
advice, products and services.
Market and environment in which the
division operates
Against the background of a prolonged
uncertain political and economic climate in
the UK, we continue to deliver solid financial
performance and provide innovative solutions
for our customers and clients. The operating
environment continues to be challenging
including rapidly changing customer
behaviours; increasing expectations of society
and regulators; and significant technological
disruption amid the threat of dis-aggregation
from competitors and new entrants. However,
we have a leading brand, a solid customer
base and we remain well positioned in the
current environment.
Barclays UK operational model
Customers
and Clients
■■ Individuals
■■ Businesses (SMEs)
Products
and services
■■ Personal banking services
■■ Credit cards and
transactional lending
■■ Investment products and
services
Value
creation
■■ To our customers and
clients – Building
meaningful relationships to
provide relevant financial
solutions
■■ Business banking solutions
■■ To society – Helping
communities move forward
■■ To Barclays – Ring-fenced
UK-focused bank with
sustainable returns and
prudent balance growth
Contribution
to Group
£7.4bn
Income
£1.7bn
Profit before tax
9.8%
RoTE
66%
Cost: income ratio
£70.9bn
Risk Weighted Assets
24 Barclays PLC Annual Report 2017
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Educating our customers in digital safety
In May 2017, we launched our UK-wide consumer engagement
campaign to highlight the importance of digital safety and our role
in helping people move forward in this digital age.
The digital age has made our lives much easier in many ways.
We now share information, shop online, pay bills, and keep in touch
with each other in cyberspace. For many people, this is their way of
life and they feel confident in navigating the digital world. However,
having the confidence to be able to work and play in the digital age
isn’t the same as knowing how to keep safe while doing so.
Our campaign resulted in over 4.8 million people taking action off
the back of this outreach, resulting in our leadership role being
recognised by Government ministers and the media.
We are committed to ensuring
continued growth of Barclays
UK, and are cognisant of the
rapid pace of technological
change in today’s environment.
Risks to the operating model
We continue to monitor leading indicators to
identify trends in UK economic performance
– in particular, trends caused by low interest
rates, Brexit uncertainty, as well as from the
impact of the increase in zero hour contracts.
We aim to remain conservative and well
positioned post-Brexit with stable trends in
impairments supported by our strong risk
management framework and oversight.
We are committed to ensuring continued
growth of Barclays UK, and are cognisant of
the rapid pace of technological change in
today’s environment. In order to continue to
provide exciting and relevant solutions for our
customers and remain competitive against
new entrants, we are investing significantly
in new technology, while simplifying and
automating our existing platforms.
Unrelenting growth and sophistication in
organised crime remains a concern. In order
to reduce the risk of cyber threat and protect
our customers and clients, we continue to
invest heavily in cyber risk, improving
detection and response capability and
implementing new resilience standards and
testing approaches.
Innovation at our core
Half a century after launching the world’s first
Automated Teller Machine – the ATM, we
developed new ‘contactless cash’ withdrawal
options in 2017, fit for the digital age. In
addition, we extended our cheque imaging pilot
programme to other banks, allowing more
than 243,000 customers the ability to pay in
cheques instantly from wherever they are,
24 hours a day. We also achieved an industry
first with Insurance Instant Price – our first
mobile insurance proposition, allowing
instant price quotes from our providers to
approximately one million customers.
Key highlights this year in delivering
our strategy
This year we have built the Barclays UK
ring-fenced bank and a diverse, highly-
experienced Board has been appointed by the
Barclays UK Chairman. We have also migrated
over 600,000 customers onto new sort codes
with minimal customer impact.
Alongside this, we have made good progress
building meaningful relationships with our
24 million customers and significantly
reducing the number of customer complaints
– one of our key objectives for 2017 – by
developing our colleagues and tackling the
root causes. Interactive tools are now available
to enable colleagues to more effectively own,
manage and collaborate in the timely
resolution of complaints. Reducing customer
complaints further will continue to remain one
of our top priorities for 2018.
Over 10 million customers are
now actively engaged with
our digital services, including
our award-winning Barclays
Mobile Banking mobile app.
Delivering on shared growth
Our signature citizenship programme,
LifeSkills, aims to inspire young people to
develop the skills they need for a better future.
In less than five years, it has reached over
5.5 million young people and more than
16,000 colleagues are now registered as
LifeSkills volunteers.
We expect 2018 to be a pivotal year for
the financial services industry with the
introduction of PSD2 and Open Banking
but we believe Barclays UK has a significant
opportunity to thrive in this environment.
I am positive we will continue our lead in
innovation in an Open Banking environment,
as a new ring-fenced bank.
Ashok Vaswani
CEO, Barclays UK
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Barclays PLC Annual Report 2017 25
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Personal Banking
Our performance in Personal Banking
Our Personal and Premier Banking team develop transparent
and innovative solutions for our customers. We help customers
move forward by putting them at the heart of everything we
do, connecting the different aspects of their lives to their
financial lives, at a time that suits them. This ranges from
opening their first bank account to completing a mortgage on
their dream home.
We launched a new online Track Savings
Goals tool available through Barclays Finance
Manager, which aims to support customers in
setting and reaching their targets.
Our Mortgages business has continued to
focus on enhancing the customer experience
this year, and has won eight awardsa in 2017.
We’ve also continued to enhance our CloudIt
offering, including allowing customers to
access their mortgage statements online.
This year we created a single Product and
Propositions team, bringing together our core
product capabilities in Current Accounts, FX
and Insurance, Consumer Lending, Mortgages
and Savings with our newer Information
Business and Mobile Payments products,
as well as with the Community and Premier
segments they serve. Through doing this,
we are now able to more fully anticipate and
deliver responses to our customers’ needs and
understand what they want in the moment
they need it.
Moving Barclays UK forward
2017 has seen a continued focus on rewarding
customer loyalty and creating advocates for
every interaction. Over 930,000 customers now
benefit from Blue Rewards, including Cashback.
We landed our first 10% Cashback retail offers
and have helped our customers earn over
£5 million in savings since Cashback
was launched.
Technology and data are such fundamental
parts of how we serve customers and clients
that it is vital that we all become more digitally
savvy and help our customers to do the
same. We started several years ago with the
nationwide force of Digital Eagles, offering our
customers and clients the help and resources
to improve their digital skills; and continued
this year with our Digital Safety campaign
which aims to heighten awareness and
educate our customers to be digitally safe.
Leveraging our data to benefit our customers
and clients is a fundamental pillar of our
strategy. We launched Local Insights, providing
consumers, businesses and MPs key insights
about their local area. We celebrated one year
of our Barclays Identity Service, which allows
consumers to access government services
such as tax self-assessment online in a
simplified, secure manner.
Helping our customers and colleagues
Barclays has made significant progress to
enhance accessibility this year. Our high
visibility and tactile debit cards aren’t just
useful for the visually impaired – many people
struggle to read the numbers on their card –
so we’ve offered a high contrast design option.
We also launched a new larger audio
PINsentry device to facilitate easier access to
online banking for customers with dexterity
and sight difficulties, enabling them to
continue to do their banking independently.
We have supported customers in vulnerable
circumstances by automating complex
processes such as registering a power
of attorney.
As well as delivering for our customers and
clients, we need to ensure we deliver for our
colleagues too. Our focus on investment in
training, development and coaching as well as
creating new ways to engage and support our
colleagues continues. Our colleagues’ needs
are changing just as those of our customers
are, and empowerment, dynamic and flexible
working as well as improved technology
have been a strong focus as we develop
a world-class team who put the customer
at the centre of everything they do.
“Barclays has always believed
in me. The real support has
come from my points of
contact at the bank. It’s these
relationships that not only
keep me banking with
Barclays, but encourage me,
without a shadow of a doubt,
to recommend Barclays.”
Kieran Miles, Premier Customer
Note:
a Best Lender for first-time buyers with family support
(Moneywise); Best Lender for Larger loans
(Moneywise); Best Online Lender (What Mortgage);
Best Help to Buy Mortgage Lender – Equity Loan
(What Mortgage); Best Intermediary Lender (Mortgage
Finance Gazette); Best Overall Lender (Mortgage
Finance Gazette); Best National Bank (Mortgage
Finance Gazette); Best Large Loans Mortgage Lender
(Your Mortgage).
26 Barclays PLC Annual Report 2017
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Barclaycard Consumer UK
Our performance in Barclaycard Consumer UK
We are continuously looking for ways to
improve the customer experience we deliver
Throughout 2017 we focused on reducing
customer complaints, maintained a stable
Relationship NPS and reached new records on
several transaction NPS, including Customer
Service. We are pleased to have won a number
of awards, acknowledging the market-leading
service we offer our customers. We were
recognised at the Top 50 Companies for
Customer Service Awards, with two awards,
Best Extra-Large Centre and Best Social
Media Team.
We support consumers by providing free
credit scores, and personalised hints and tips
on how to become fraud smart. Fraud-related
activity is increasing and our research tells us
that customers are increasingly concerned
about how to protect themselves, and look to
us to help provide support and information.
We developed a digital interactive Fraud
Fighter Tool to help customers understand
where they are vulnerable and what they
could do to better protect themselves,
by giving them personalised fraud
prevention tips.
We also launched the Barclaycard Start Today
campaign, to encourage people to start
something new that they always wanted
to do. So whether it is signing up to those
pottery lessons or buying a bike, Barclaycard
is there for our customers to help them
move forward.
Barclaycard Consumer UK is a leading credit card provider,
providing flexible borrowing and payment solutions to around
10 million customers in the UK. We help people move forward,
by enabling them to borrow and pay in a way that suits them.
We are a responsible lender, providing credit based on credit
history, ability to afford credit and our risk appetite, while
delivering a market-leading customer experience.
Barclaycard Consumer UK offers a suite of
products to our customers. Our Barclaycard
Initial credit card is aimed at customers who
are looking for a first credit card, or have a
limited credit history, and helps them to build
a credit profile. Our Barclaycard Platinum
card offers promotional savings on balance
transfers and purchases for borrowers with
good credit history. Alternatively, shoppers
can earn reward points everywhere they
shop with our Barclaycard Freedom Rewards
credit card.
The UK credit market continues to experience
considerable change, driven by new
competitors, new technologies, economic
and regulatory pressures, and changing
consumer expectations and behaviour. We are
responding by developing new products and
services for our consumers. For example, this
year we have further diversified our offers to
new and existing customers with the launch
of our Barclaycard Platinum travel card, which
has no non-Sterling transaction fees on
foreign spend and ATM withdrawals.
This year also saw the
integration of Barclaycard
Consumer UK with our retail
bank to build and grow more
sustainable income while
reducing complaints and
creating better customer
experience.
The integration of Barclaycard Consumer UK
into Barclays UK has progressed with focus on
enhancing the customer experience, as well
as leveraging resources, technology and
digital capabilities.
0000 0000 0000 0000
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Barclays PLC Annual Report 2017 27
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Wealth, Entrepreneurs and Business Banking
Our performance in Wealth, Entrepreneurs
and Business Banking
This year, we launched the Multi-Impact
Growth Fund, the first impact-investing
vehicle of its kind from a major UK bank,
offering mainstream investors the opportunity
to generate long-term capital growth while
making a positive contribution to society.
Business Banking overview
Our Business Banking unit provides coverage
for clients across the UK at every stage of their
business cycle in every industry, delivering
distribution models which match clients’
needs and sophistication.
This year, we launched our SmartBusiness
Dashboard and App and now have over
12,000 clients benefiting from this unique
client experience. With all their key business
data in one handy place, our business clients
are now spending more time within
SmartBusiness and reaping the benefits.
The roll-out of Direct, our unique telephony
relationship model for small business and
start-up customers, has vastly increased the
number of conversations and in-depth client
reviews we are able to have, which directly
benefits over 900,000 customers already on
this new, interactive model.
In 2017, we supported more clients, reduced
account opening times, lent more money and
generated more income than in 2016 through
targeting sustainable, long-term growth. Our
aim in 2018 is to empower our colleagues
through continuing to invest in technology
and services.
Within Wealth, Entrepreneurs and Business Banking, Wealth
and Investments serves a spectrum of clients, from those
who manage their own investments and require an execution
service, to those who require a dedicated and holistic service
through our Wealth Management services.
Business Banking offers specialist advice, products and
services to over one million business clients across the UK,
helping them to run and grow their business, from start-ups
through to mid-sized businesses.
Smart Investor provides clients access to a wide
range of investment products, educational
resources to help build their confidence in
investing, and tools to assist in planning for
their future. The focus of the business this year
has been launching Smart Investor and
migrating over 225,000 existing Stockbrokers’
clients onto the new platform. This allows our
clients to leave the day-to-day management of
their investments to our experts, thereby taking
the complexity out of investing.
Wealth and Investments overview
Wealth and Investments is formed of two
businesses; Wealth Management and Smart
Investor, both of which are supported by our
in-house investment and asset management
capabilities. Clients of our Wealth Management
business benefit from holistic advice in
banking, credit, wealth planning, and
investments through their dedicated Wealth
Manager and access to specialists across
Wealth and Investments and the wider
Barclays UK division. Despite significant
investment in regulations required, Wealth
Management has achieved a strong
performance, and achieved year on year
growth in client acquisitions.
Despite significant investment
in regulations required, Wealth
Management has achieved
a strong performance, and
achieved year on year growth
in client acquisitions.
Investing in change
The Multi-Impact Growth Fund invests primarily in specialist
third-party funds which have been identified and blended by our
experienced in-house fund and manager selection team. These
funds have been chosen as best-in-class based on both their
potential for strong financial returns and the consideration of their
impact around key social and environmental issues such as climate
or demographic changes. The Fund is the first Barclays product in
the wider impact investing proposition being developed and is
available to clients in Wealth Management and Smart Investor.
28 Barclays PLC Annual Report 2017
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Barclays International
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Barclays PLC Annual Report 2017 29
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Barclays International
Our performance in International
Barclays International is the diversified transatlantic, wholesale
and consumer bank within Barclays Bank PLC. Encompassing
the Corporate and Investment Bank, Barclaycard International
and Private Bank and Overseas Services businesses, our dual
home markets in the UK and US anchor our business in the two
most important global financial centres.
Our business model in Barclays International
is dependent upon our client relationships,
the services we provide to our clients and our
capital – human, technological and financial.
In 2017, Barclays International contributed
68% to Group income with an RoTE of 6.6%,
excluding the impact of the US deferred tax
assets remeasurement.
Overview of products, services and clients
On the consumer side, within Barclaycard
International, we provide consumers with
credit cards, lending and deposit accounts. In
Private Bank and Overseas Services, we
provide banking, investment and wealth
management services. For SMEs and
corporates, we enable payment acceptance,
commercial card payments and point-of-sale
finance. Through our Corporate and
Investment Bank, we serve our clients by
providing advice, financing, trade and
payment solutions, and raising capital. We
support our institutional clients through sales
and trading of securities.
Barclays International operational model
Customers
and Clients
■■ Corporates
■■ Financial institutions
■■ Institutional investors
■■ Governments
■■ Consumers
■■ High and Ultra-High
Net Worth Individuals
■■ Family Offices
Products
and services
■■ Financial advice
■■ Primary capital raising and
capital markets execution
■■ Risk and liquidity
management
■■ Lending
■■ Sales and trading
■■ International credit cards
■■ Consumer payments
■■ Banking
■■ Investments
■■ Wealth management
Value
creation
■■ To our customers and
clients – we create value by
facilitating the transmission
of money from providers to
users of capital
■■ To society – we provide
financing to a range of
social and environmental
segments
■■ To shareholders – as a
diversified transatlantic,
wholesale and consumer
bank
Contribution
to Group
£14.4bn
Income
£3.3bn
Profit before tax
3.4%
RoTE (6.6% excl. the impact of the
US deferred tax assets remeasurement)
69%
Cost: income ratio
£210.3bn
Risk Weighted Assets
30 Barclays PLC Annual Report 2017
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Market and environment in which the
division operates
The economic markets in 2017 were
characterised by a low volatility and low
interest rate environment. With this benign
backdrop, valuation gains in the equity
markets prevailed throughout the year.
Prospective and confirmed legislative and
regulatory changes continued to influence
and shape strategies of all market players. In
the UK, consumer confidence hit a four-year
low, amid Sterling depreciation and despite
historically low unemployment. In the US,
the labour market and consumer spending
strengthened, with subdued wage growth.
Barclays International is
focused on investments in
talent, capital and technology.
Barclays International has achieved significant
milestones to meet structural reform
regulations. Working closely with regulators
and stakeholders, we are set up to serve our
clients across the globe in alignment with
regulatory policies and legislation. The
newly-created divisional Board of Directors
has been confirmed and has convened prior to
formal Board meetings to ensure that we are
set to operate within the Barclays governance
framework upon the formalisation of
structural reform. Significant entities within
Barclays International, such as the US
Intermediate Holding Company (IHC), are
subject to stringent governance standards
to ensure safety and soundness, particularly
around capital, liquidity and risk management.
Risks to the operating model
Geopolitical and macroeconomic uncertainty
in some markets remain a risk, while the
volume and reach of regulatory change
continues to require significant attention.
We are making comprehensive plans for the
UK’s planned exit from the EU and we believe
we will provide an uninterrupted service to
our clients, consumers and other stakeholders
during and after the transition.
We continue to monitor growth in US
consumer delinquencies having proactively
reduced our exposure to middle market
consumers earlier this year.
Advising on pan-European expansion
Asahi Group Holdings, the largest brewer in Japan, has targeted
Europe as its next platform for growth in its drive to become a
global beer industry leader. Having already established a presence in
Italy, the UK and the Netherlands through the acquisition of brands
such as Peroni, Grolsch and Meantime, Asahi engaged Barclays to
assist in creating a truly pan-European franchise.
In March 2017, with Barclays acting as Financial Adviser, Asahi
successfully closed on its €7.3bn acquisition of AB InBev’s business in
the Czech Republic, Slovak Republic, Poland, Hungary and Romania.
Asahi turned to Barclays for this critical transaction due to our holistic
capability, including a long-standing, global coverage relationship,
leading brewing industry and M&A experience, deep insight into
Central Europe and cross-border deal execution expertise.
Cyber crime had a hugely detrimental
impact on the global economy in 2017,
with unprecedented attacks in terms of their
scale, impact and rate of spread. We have
continued to invest heavily to ensure that
our infrastructure retains industry-leading
resilience to cyber crime.
The growth strategy within Barclays
International will continue to be executed in
a controlled, commercial manner within the
ERMF framework.
Business highlights
Barclays International is focused on
investments in talent, capital and technology.
In 2017, we affirmed the executive
management leadership team within BI. In our
Markets division, a new leadership structure
has enabled streamlining and simplification,
with global heads across credit, equities,
macro and distribution.
We are focused on dynamically managing and
allocating financial resources to businesses
within Barclays International through
optimisation of capital, leverage, risk weighted
assets, funding and tax across all jurisdictions
and legal entities.
Barclays International continues to enhance
its customer and client experiences through
innovation. For example, in Barclaycard
International, we launched a new core
payment processing platform that provides,
multi-currency and multi-geography
settlement capabilities and enables all
currencies in all territories to be processed
on a single platform. We also launched an
Artificial Intelligence/Machine Learning tool
to provide the latest advanced platforms and
techniques for fraud detection and intelligent
customer service automation.
Overall, 2017 was a milestone year for Barclays
International. Together, with our colleagues
across the globe, we have embarked on a
number of initiatives and areas of growth as
we strive to matter more to our clients, to
grow our revenues, and deliver much improved
sustainable returns to our shareholders.
Tim Throsby
President, Barclays International and
Chief Executive Officer, Corporate and
Investment Bank
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GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Corporate and Investment Bank
Our performance in the Corporate and Investment Bank
The Corporate and Investment Bank offers wholesale
banking products and services to corporate and institutional
clients. The business is focused on serving our UK and US
home markets, while supporting the global ambitions of our
strategic clients. The Corporate and Investment Bank includes
our markets, investment banking, corporate banking and
research businesses.
issues. Serving clients across a number of
industries and segments, Barclays is proud
to be a top three financier of capital for
supranationals, sovereign and agency
institutionsa, enabling the funding of critical
infrastructure and helping to promote global
economic growth and stability.
With industry expertise and a history of
innovation, our corporate banking business
provides comprehensive banking, financing,
trade and payment solutions to businesses
across the UK. For example, Barclays has
supported Pod Point, the UK’s leading provider
of electric vehicle charging since inception
in 2009. Barclays’ venture debt offering –
enabled by our innovation finance product
which is partly guaranteed by the European
Investment Fund – has supported Pod Point to
gain early access to capital so they can focus
on developing their business.
Finally, our research business delivers
independent, thought-leading content across
Equities, Credit, Macro and Quantitative
Portfolio Strategy. The implementation of
MiFID II has brought unprecedented change
to the research industry and reinforced
Barclays’ commitment to providing clients
with differentiated market insights, actionable
trade ideas and thematic views delivered
through publications, one-to-one analyst
interactions, conferences and events.
Business update
Our markets businesses provide execution,
prime brokerage and risk management
services across the full range of asset classes
including equity, fixed income and rates.
With a new markets leadership team in place,
we are highly focused on investments in
technology to drive client successes and
increase market share. For example, we
migrated to a new digital platform and funded
critical upgrades to our electronic trading
platforms in 2017. We are focused on the
standardisation and simplification of
post-trade technologies with the backdrop of
a strong regulatory and controls environment.
In 2017, Barclays was named Best Bank for
FX in London and Best Bank for GBP/USD
in FX Week’s annual awards.
Our investment banking business provides
long-term strategic advice on mergers and
acquisitions, corporate finance and strategic
risk management solutions, and equity and
credit origination capabilities. In 2017, Barclays
achieved its highest global fee share in three
yearsa, and was the number one ranked bank
in the UK for the first time since 2012a.
Bolstered by strong mergers and acquisitions
activity, we advised on numerous landmark
deals to deliver for our clients. Our Leveraged
Finance business reached its highest ever
global fee share, ranking Barclays top four for
the second consecutive yeara. Barclays was
named 2017 Sterling Bond House of the Year
by IFR magazine – with over 150 Sterling bond
Note
a Source: Dealogic.
32 Barclays PLC Annual Report 2017
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Consumer, Cards and Payments
Our performance in Consumer, Cards and Payments
Consumer, Cards and Payments includes Barclaycard
International and the Private Bank and Overseas Services.
Barclaycard International provides branded and co-branded
consumer credit cards, lending and deposit accounts to our
customers in the US and Germany, and payment solutions
to our clients in the UK. Private Bank and Overseas Services
provide banking, investment and wealth management services
to over 160,000 clients, globally.
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Barclaycard International
Our Barclaycard International business
operates in three divisions: Barclaycard US,
Barclaycard Business Solutions and
Barclaycard Germany.
Barclaycard US offers co-branded and branded
credit cards in the US, along with consumer
loans and online retail deposits. We are the
ninth-largest credit card issuer in the market
and this business has strengthened further in
2017. We launched a new co-branded credit
card with Uber, which featured a ground
breaking integration into the Uber app,
offering a simple, seamless and frictionless
customer experience. Our relationship with
existing partners strengthened further, with
our JetBlue co-branded card being named the
‘best no-fee loyalty airline card’ for 2017 by
MONEY magazine.
Across all credit card products, Barclaycard US
added over two million new accounts in 2017.
In addition, our Barclays-branded consumer
retail deposits now exceed $12.5bn.
Barclaycard Business Solutions provides
merchant acquiring, payments integration and
acceptance, payment gateway, commercial
payments and point-of-sale consumer finance
solutions in the UK. We are a leading provider
in all our businesses and we are one of the
largest payment acceptance providers in
Europe. In 2017, we processed close to
£250bn in payments through acquiring.
In 2017, we processed close to
£250bn in payments through
acquiring.
In 2017, we completed a four-year investment
in a new core payment processing platform
that provides omni-channel, multi-currency
and multi-geography settlement capabilities
to help us strengthen our merchant
relationships and support their growth.
Coinciding with the launch of Apple’s iPhone
8 and X, Barclays Partner Finance rolled out an
in-store financing offer in the UK with 131,000
applications received in-store since launch.
We are also now a preferred partner for UK
point-of-sale finance for Tesla via a digital
in-store offering. Barclaycard Business
Solutions’ electronic funds transfer platform,
known as PrecisionPay Bank Transfer, went
live in Q3 with a successful launch, providing
clients with the ability to pay their suppliers
via bank transfer, which is funded by a
commercial card.
Barclaycard has been present in Germany for
over a quarter of a century and now serves
over 1.2 million cards and loans customers.
We are the leading issuer of revolving credit
cards in the country by outstanding balances.
We also have a strongly growing instalment
loans business as well as an online deposit
product. In recognition of our focus on
innovative products and features, all three
Barclaycard open market products (New Visa,
Gold and Platinum) received several best-in-
class recognitions from leading German
business and finance magazines. Barclaycard
Germany continues to drive exceptional
customer satisfaction rankings, with the
business placing in the top two for both cards
and loans.
We also provide cards and lending in Norway,
Sweden and Denmark via our EnterCard joint
venture with Swedbank and we are a leading
player in the region.
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Barclays PLC Annual Report 2017 33
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report
Consumer, Cards and Payments
Our performance in Consumer, Cards and Payments
Disrupting the US co-branded
credit card market
November 2017 marked the unveiling of the Uber Visa Card,
recognised as one of the most rewarding ‘no annual fee’ card
programs in the US.
As a pioneer in transportation and technology, Uber recognised
Barclays’ leadership in payments, innovation and partnerships when
launching its first co-branded credit card. With an eye toward the
future of mobility, technology and commerce, our companies built
one of the most modern payment experiences in the US market.
This cutting-edge payments program represents a ground-breaking
approach to mobile app technology that meets the demands of
today’s on-the-go consumer. Using their smartphone, approved
customers can apply, load their card into the Uber wallet, and start
earning rewards in a matter of minutes, providing them value and
experiences that are instant, integrated and rewarding.
Private Bank and Overseas Services
Private Bank and Overseas Services provides
a diversified range of financial and wealth
products and services to a broad base of
clients, ranging from retail, high net worth and
ultra high net worth, to family offices and
corporates. With a significant global footprint,
business operates across the UK, EMEA, India
and Offshore Islands.
With a significant global
footprint, the business
operates across the UK, EMEA,
India and Offshore Islands.
Within the Private Bank, affluent clients at
Barclays are supported by a dedicated Private
Banker and a team of investment and wealth
specialists. In addition, the Private Bank
facilitates access to Barclays Corporate and
Investment Bank products and services for
ultra high net worth clients. The Overseas
Services business delivers banking, treasury
and investment solutions to core client
segments through relationship led services
and online channels.
With a focus on enhanced service delivery
and product offerings, our Private Bank and
Overseas Services business is poised for
growth and scale.
34 Barclays PLC Annual Report 2017
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Head Office and Group Service Company
Our service operations
The Head Office function contains the central operations
of the Group. With the reintegration of remaining legacy assets
and businesses in the second half of 2017, the function
became a more material contributor to the Group results.
Going forward, many of the Head Office functions will be
within the Group Service Company.
The Head Office of Barclays includes the
impact of treasury operations, which manage
the capital, funding and liquidity position of
the Group.
In 2017, the Head Office became more
significant for Barclays as it contained some
of the costs associated with the legacy assets
and businesses, which were reintegrated on
1 July 2017. These factors contributed to a
£834m loss before tax in 2017.
From 1 April 2018, the treasury operations will
be embedded into the respective legal entities
of Barclays Bank UK PLC, and Barclays Bank
PLC, as well as into Barclays PLC.
The Group Service Company
has significant commercial
and competitive value.
Central operations are already operating
through the Group Service Company –
a separate legal entity, recharging all of its
costs to the two legal entities.
The Group Service Company was ‘stood up’ in
September 2017 and is the hub through which
we will deliver a wide range of operations,
technology and functional services to the
Barclays Group and the two legal entities of
Barclays Bank UK PLC and Barclays Bank PLC.
The purpose of the Group Service Company is
to provide world-class services that are high
quality, efficient and cost effective, to support
our goal to be at the forefront of industry
change and innovation.
With significant commercial and competitive
value, we believe the Group Service Company
will radically reduce duplication of effort and
cost, allowing us to give a more consistent
and seamless experience to our colleagues,
clients and customers. This will allow us to
lead the way in next generation products and
services in banking, to fully embrace the
advantages that lie in automation, capitalise
on our data and to innovate like a Fintech.
We intend to unlock efficiencies and release
capital for strategic investment, helping to
drive the optimisation of Barclays as a whole
and delivering value to our shareholders.
The scale of the Group Service Company is
substantial, accounting for around 42,000
colleagues working globally. It delivers
services across a wide range of technical and
functional capabilities, including Compliance,
Corporate Relations, Legal, Risk, Real Estate,
Finance, Operations and Technology. The
Group Service Company operates as a
separate legal entity with its own Board of
Directors, thereby promoting transparency
and increased accountability.
The Group Service Company is also a major
step in the delivery of our structural reform
programme. It is Barclays’ response to the
ring-fencing requirements established by the
UK Government following the financial crisis
that began in 2007. Grouping our services
together in this way will allow us to maintain
operational continuity for our business units
and facilitate the execution of our recovery
and resolution plans in the event of financial
difficulty, thereby strengthening the overall
resilience of the Barclays Group. It also means
we have a centre of excellence for services
required by the business, such as fraud
management and cyber security, where we
can reduce duplication and benefit from
implementing best practice across all of
our businesses.
For further information on the timeline
and progress of our structural reform
programme, please see page 204.
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Barclays PLC Annual Report 2017 35
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Our people and culture
Our ongoing commitment to our people drives our success
Fostering the right culture at Barclays is critical to our success.
By promoting respect, diversity and performance in the
workplace we strive for excellence to deliver the best results for
our customers and clients, taking pride in our achievements.
We continue to be focused on the importance of embedding a
conduct and values-based culture throughout the organisation
and this is at the core of our strategy and processes. In
recognising the significance of this commitment, conduct, culture
and values remained one of our strategic priorities in 2017.
In 2016, we developed a culture measurement
framework, anchored in our values to track
and measure cultural progress across the
Group. In 2017, we focused on embedding this
framework, ensuring it is a key component of
the non-financial metrics reviewed to assess
the performance and culture of Barclays.
Through this framework, and the results from
our employee opinion survey ‘Your View’,
quarterly insights, key cultural metrics and
performance indicators are produced,
stimulating management discussions which
result in actions and decisions to further
promote and embed a conduct and values-
based culture.
We continue our ambition to
become the most accessible,
inclusive and sought after
employer, where colleagues
feel engaged and empowered
to achieve their best in order
to deliver the best for our
customers and clients.
We continue our ambition to become the
most accessible, inclusive and sought after
employer, where colleagues feel engaged and
empowered to achieve their best in order to
deliver the best for our customers and clients.
We are pleased that in 2017 the sustainable
engagement of our employees improved to
78% across the Group.
This year colleagues were asked to select
the phrases that they would use to describe
the current culture at Barclays and we are
encouraged that customer satisfaction,
continuous improvement and growth are
some of the top words selected. Focus
continues in areas that we know are key to
advancing cultural change, for example our
Dynamic Working and employee well-being
campaigns, as well as prioritising positive
mental health awareness through our ‘This
is Me’ campaign. Our ongoing commitment
towards increasing female representation at
all levels across Barclays remains a core focus
of our talent management and leadership
succession processes and we recognise that
our commitment to greater gender equality
is integral to drive societal change in equality,
diversity and inclusion. Further details on our
gender diversity commitments and additional
highlights from across our Diversity and
Inclusion strategy can be found in the People
section on pages 89 to 92.
We continue to run Group CEO sponsored
Enterprise Leaders’ Summits, which seek
to develop the next generation of enterprise
leaders and strengthen a culture of
collaboration among our leaders in order
to deliver improved solutions and products
for our customers and clients. The control
functions rotational programme launched
in 2016, which was expanded this year,
recognises that future leaders in our
businesses must have a strong awareness and
understanding of the control environment.
The programme provides colleagues the
opportunity to work within a control function
gaining valuable perspective.
36 Barclays PLC Annual Report 2017
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We are committed to helping people succeed,
whether entering the workplace for the first
time or as an experienced professional. In
support of the Barclays Shared Growth
Ambition, and youth unemployment and
social mobility, our apprenticeship programme
has continued to provide opportunities
for candidates from a broad range of
backgrounds. Since the programme began
we have hired over 3,400 apprentices, the
majority with no prior qualifications or
experience. We have continued to expand the
programme, launching in 2017 the first ever
Agriculture Higher Apprenticeship programme
and Degree Apprenticeship in banking.
Through the Barclays Armed Forces Transition,
Employment and Resettlement (AFTER)
programme we have assisted over 5,500
veterans in employment transition, hired
over 500 ex-military colleagues and donated
over £4.25m to military charities to assist
wounded and injured service personnel in
employment transition.
During 2017, external recognition has
confirmed the sustained and global impact
of our work. We are proud of the increased
colleague engagement we are seeing across
the organisation and both the external and
internal differences that our values and culture
are having and the change we can make to
people’s lives as a result, enabling success and
giving them access to a future where they can
thrive. Our drive to continue to embed a
conduct and values-based culture shows the
importance that we place on the positive and
creative contributions of each and every one
of our colleagues in order to serve customer
and clients and to continue to build trust and
respect in the profession of banking.
Tristram Roberts
Group Human Resources Director
For further information about the
gender pay gap at Barclays, please
see page 90.
Dynamic Working
Dynamic working is empowering our colleagues to work in a way
that suits their lives and supports our business, to better serve our
customers’ and clients’ needs. Every stage of life brings new
priorities, responsibilities and opportunities. Having the flexibility
when, where and how colleagues work can help them integrate their
professional and personal lives and fulfil all their roles more easily.
Dynamic working is not flexi-time rebranded, it is not a policy,
instead it is agile, attitudinal approach to meeting colleagues
wide-ranging needs while having a positive impact on productivity,
engagement and retention in the following ways:
■■ colleagues who work dynamically score higher on engagement
and job satisfaction with 87% saying they would recommend
Barclays as a good place to work
■■ dynamic working provides agility to address the needs of clients
and colleagues across the globe living in different time zones
■■ dynamic working is addressing the needs of a work force that
spans five generations.
You can find out more on our Diversity and Inclusion
activities reporting at:
home.barclays/about-barclays/diversity-and-inclusion.html
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Barclays PLC Annual Report 2017 37
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Governance compliance
Compliance with the UK Corporate Governance Code
A snapshot of how Barclays complies with the
requirements of the UK Corporate Governance Code
(the Code) is set out below. For further information,
see pages 80 to 84.
Leadership
There is clear division of responsibilities
between the Chairman, who runs the Board,
and the Group Chief Executive, who runs the
Group’s business. Individual roles on the Board
and their responsibilities are set out in
Barclays’ Charter of Expectations.
Effectiveness
The skills, knowledge and experience needed
for an effective Board are recorded on a skills
matrix, which is used by the Board
Nominations Committee to inform Director
recruitment, induction and ongoing
development.
The Senior Independent Director, Sir Gerry
Grimstone, provides a sounding board for
the Chairman, acts as an intermediary for
the other Directors when necessary and
is available to shareholders if they have
concerns that have not been addressed
through the normal channels.
The Board has set out Barclays’ culture, values
and behaviours in the Barclays Values and
Purpose and The Barclays Way, which are
embedded throughout the Group.
Directors are expected to provide rigorous and
constructive challenge on matters that, owing
to their strategic, financial or reputational
implications or consequences, are considered
significant to the Group.
The composition of principal Board
Committees meets the independence criteria
of the Code and there is appropriate cross-
membership to further promote effectiveness.
11 of 14 Directors are independent non-
executive Directors (79%), while the
Chairman was independent on appointment.
As at the date of this report, there are three
female Directors (21%), compared to our
target of 33% by 2020 which the Board
remains committed to achieving.
The Board Nominations Committee regularly
considers Board and senior management
succession plans.
Appointments to the Board are made
following 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 Barclays’
strategic direction.
All Directors are expected to commit sufficient
time to fulfil their duties to Barclays. In 2017,
Directors’ attendance at scheduled Board
meetings was 99% and across the scheduled
Board Committee meetings was an average
of 94%.
The Board assesses its effectiveness and that
of its Committees and the individual Directors
annually in a process that is externally
facilitated by an independent third party.
Directors are subject to election or re-election
each year by shareholders at the AGM.
Barclays’ Charter of Expectations sets out
responsibilities for providing the Board with
accurate, timely and high-quality information
necessary for it to fulfil its duties.
The Board, assisted by its Risk
and Reputation Committees,
conducts robust assessments
of the principal risks facing
Barclays.
Accountability
The Board is responsible for setting Barclays’
risk appetite, that is, the level of risk it is
prepared to take in the context of achieving
Barclays’ strategic objectives.
Barclays’ Enterprise Risk Management
Framework is designed to identify and set
minimum requirements in respect of the main
risks to achieving the Barclays’ strategic
objectives and to provide reasonable
assurance that internal controls are effective.
The Board, assisted by its Risk and Reputation
Committees, conducts robust assessments of
the principal risks facing Barclays, including
those that would threaten its business model,
future performance, solvency or liquidity. It
reports on this in the annual viability
statement on pages 40 and 41.
38 Barclays PLC Annual Report 2017
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The Directors also review the effectiveness of
the Group’s systems of internal control and
risk management.
The Board has put in place processes to
support the presentation to shareholders
of fair, balanced and understandable
information.
The Board Audit Committee, comprising
independent non-executive Directors,
oversees the effectiveness of Barclays’
internal and external auditors.
Remuneration
The Board Remuneration Committee,
comprising independent non-executive
Directors, sets the overarching Group
remuneration policy and approves the
remuneration arrangements of the
Chairman, the executive Directors and
other senior executives.
The Board Remuneration Committee seeks
the views of Barclays’ major shareholders
on remuneration matters. This engagement
is meaningful and contributes directly to
the decisions it makes.
Barclays’ reward framework is simple
and transparent and is designed to
support and drive business strategy
and long-term success.
To ensure alignment with shareholder
interests, a significant part of performance-
related pay is delivered through
Barclays shares.
Unvested deferred remuneration is subject to
malus. Clawback also applies to any variable
remuneration awarded to Material Risk Takers
after 1 January 2015.
Engagement
The Chairman and Senior Independent
Director, together with other Board
representatives and the Company Secretary,
hold meetings with investors focusing on
corporate governance matters.
The Group Chief Executive and Group Finance
Director present quarterly results briefings and
the Group Finance Director holds briefings for
equity and debt sell-side analysts.
The Board Remuneration
Committee seeks the views of
Barclays’ major shareholders
on remuneration matters. This
engagement is meaningful
and contributes directly to the
decisions it makes.
Regular engagement with Barclays’ brokers
ensures that the Group’s strategy and
performance is being communicated
effectively and provides a better
understanding of investor views.
The Board receives feedback on investor
relations activity, along with regular reports
of changes in holdings of substantial
shareholders and reports on share
price movements.
A number of events are held throughout
the year to maintain an open dialogue
with investors, of which the AGM is the
most important.
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Barclays PLC Annual Report 2017 39
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Governance compliance
Compliance with the UK Corporate Governance Code
Viability statement
While the financial statements and accounts
have been prepared on a going concern basis,
the UK Corporate Governance Code also
requires the Directors to make a statement in
the Annual Report regarding the viability of
the Group, including explaining how they
assessed the prospects of the Group, the
period of time for which they have made
the assessment and why they consider that
period to be appropriate.
In light of the analysis summarised below, the
Board has assessed the Group’s viability and
confirms that the Directors have a reasonable
expectation that the Group will be able to
continue in operation and meet its liabilities
as they fall due over the next three years. This
timeframe is used in management’s Working
Capital and Viability Report (WCR), prepared
at February 2018. The availability of the WCR
gives management and the Board sufficient
visibility and confidence on the future
operating environment for this time period.
The three-year timeframe has also been
chosen because:
■■ it is within the period covered by the
Group’s future projections of profitability,
cash flows, capital requirements and
capital resources;
■■ it is also within the period over which
regulatory and internal stress testing is
carried out; and
■■ it is representative of the continued level
of regulatory change in the financial
services industry.
The Directors are satisfied that this period is
sufficient to enable a reasonable assessment
of viability to be made.
In making their assessment the Board has:
■■ carried out a regular and robust assessment
of the Group’s risk profile and material
existing and emerging risks. Notable among
these are risks which senior management
believe could cause the Group’s future
results of operations or financial condition
to differ materially from current expectations
or could adversely impact the Group’s ability
to maintain minimum levels of regulatory
capital, liquidity, funding and the minimum
requirement for own funds and eligible
liabilities (‘MREL’) over the period of the
assessment;
■■ reviewed how those risks are managed and
controlled (further detail provided on pages
127 to 137);
■■ considered the WCR which provides an
assessment of forecast CET1, leverage ratio,
Tier 1 and total capital ratios, as well as the
build-up of MREL up to 2022;
■■ reviewed the Group’s liquidity and funding
profile, particularly Barclays’ internal liquidity
risk appetite (LRA) and regulatory liquidity
coverage ratios;
■■ considered the Group’s viability under
specific internal and regulatory
stress scenarios;
■■ considered the stability of the major markets
in which it operates, the risks posed by the
simplification of the business model and
regulatory changes;
■■ considered the impacts of structural reform,
including the creation of the UK ring-fenced
bank;
■■ reviewed the draft statutory accounts and
the in-depth disclosure of the financial
performance of the Group;
■■ considered the Group’s medium-term plan
(MTP); and
■■ reviewed the legal, competition and
regulatory matters set out in Note 29 to the
financial statements on pages 285 to 293.
Risks faced by the Group’s business, including
in respect of conduct, capital and operational
risk, are controlled and managed within the
Group in line with the Enterprise Risk
Management Framework and the relevant
Principal Risk Frameworks, through the
Three Lines of Defence model. Executive
management set a Risk Appetite for the Group,
which is then approved by the Board. The
second line set limits, within which the first
line are required to operate. Management and
the Board then oversee the associated Risk
Profile. Internal Audit comprise the third line of
defence and provide independent assurance to
the Board and Executive Management over the
effectiveness of governance, risk management
and control over current, systemic and
evolving risks.
A full set of material risks to which the
organisation is exposed can be found in the
Material Existing and Emerging Risks on
pages 121 to 126. Certain particular risks to
viability identified by the Board are detailed
below. These have been chosen on the basis
of their ability to impact viability over the
timeframe of the assessment but in some
instances the risks exist beyond this
timeframe. These particular risks include:
■■ legal proceedings, competition, regulatory
and conduct matters giving rise to the
potential risk of fines, loss of regulatory
licences and permissions and other
sanctions, as well as potential adverse
impacts on our reputation with clients and
customers and on investor confidence and/
or potentially resulting in impacts on capital,
liquidity and funding;
■■ sudden shocks or geopolitical unrest in any
of the major economies in which the Bank
operates which could impact credit ratings,
alter the behaviour of depositors and other
counterparties and affect the ability of the
firm to maintain appropriate capital and
liquidity ratios; and
■■ evolving operational risks (notably cyber
security and technology) and the ability
to respond to the new and emergent
technologies in a controlled fashion.
40 Barclays PLC Annual Report 2017
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Legal proceedings, competition, regulatory
and conduct matters and remediation/
redress are also assessed as part of the stress
testing process. Capital risk appetite and LRA
are set at a level designed to enable the
Group to withstand various stress scenarios.
As part of this process management also
identified actions, including cost reductions
and withdrawal from lines of business,
available to restore the Group to its desired
capital flightpath under a range of operating
environments.
The Group-wide stress testing framework
also includes reverse stress testing techniques
which aim to identify and analyse the
circumstances under which the Group’s
business model would no longer be viable,
leading to a significant change in business
strategy and to identify appropriate
mitigating actions. Examples include extreme
macroeconomic downturn scenarios,
or specific idiosyncratic events, covering
operational risk (for example, cyber attack),
adverse outcomes in legal proceedings,
competition, regulatory and conduct matters
and capital/liquidity events.
We use an inventory of models, non-modelled
methods and quantitative procedures to
support the stress test calculations and
projections. These tools range from
experienced management judgement through
to sophisticated regression models based on
historical data depending on the stress test
application. The stress test evaluation process
produces both gross impacts and the effect of
mitigation including management actions
which enables us to understand, monitor
control and manage the risks identified
effectively. The stress testing process is
overseen by a detailed governance structure
from the Board through to the three lines of
defence within the business. Management is
confident that the internal and external stress
testing process is rigorous and considers a
wide range of severe but plausible events,
however, stress tests should not be assumed
to be an exhaustive assessment of all possible
hypothetical extreme or remote scenarios.
These internal and external stress tests
informed the conclusions of the WCR. Based
on current forecasts, incorporating key
known regulatory changes to be enacted and
having considered possible stress scenarios,
the current liquidity and capital position of
the Group continues to support the Board’s
assessment of the Group’s viability.
For a statement as to our dividend policy
please see page 85.
The Board’s assessment of the
Group’s viability over the next three
years is subject to material existing
and emerging risks highlighted on pages
121 to 126.
As a Transatlantic Consumer and Wholesale
Bank with operations globally, Barclays is
impacted in the longer term by a wide range
of macroeconomic, political, regulatory
and accounting, technological and social
developments. The evolving operating
environment presents opportunities and risks
which we continue to evaluate and take steps
to appropriately adapt our strategy and
its delivery.
In relation to regulatory change, the firm is
implementing changes required by structural
reform, the final stage of which will be the
creation of the ring-fenced bank in Q2 2018.
The risk identification processes and link
to business model will not differ post ring
fencing and in assessing the viability of the
organisation a standard and common process
exists which is both top-down and bottom-up
across each entity and the Group as a whole.
The Board has also considered the Group’s
viability under specific internal and regulatory
stress scenarios.
The Board reviewed external regulatory stress
test results which are designed to assess the
resilience of banks to adverse economic
developments and confirm that we have
robust forward looking planning processes for
the risks associated with our business profile.
In addition, the latest internal stress test
conducted in Q4 2017 considered the
potential impacts of:
■■ a severe UK recession including falling
property prices which fail to recover over
the forecast horizon;
■■ a global downturn driven by decelerating
growth in China and emerging markets;
and
■■ a significant drop in commodity prices,
all of which could result in, among other
things, a loss of income or increased
impairment. The stress test outcome for
macro-economic tests shows our full
financial performance over the horizon of
the scenario and focuses on the CET1
capital ratio.
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Barclays PLC Annual Report 2017 41
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Governance
This section sets out our corporate governance processes and the role they play in supporting
the delivery of our strategy, including reports from the Chairman and each of the Board
Committee Chairmen.
■■ Index to disclosures
■■ Board of Directors
■■ Group Executive Committee
■■ Board report
■■ Board Audit Committee report
■■ Board Risk Committee report
■■ Board Reputation Committee report
■■ Board Nominations Committee report
Directors’ report
UK Corporate Governance Code
Chairman’s introduction
Who we are
What we did in 2017
How we comply
Other statutory information
People
Remuneration report
Page
44
45
47
49
50
53
64
69
75
80
85
89
93
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Barclays PLC Annual Report 2017 43
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report UK Corporate Governance Code – index to disclosures
“The purpose of corporate governance is to facilitate effective, entrepreneurial and prudent
management that can deliver the long-term success of the company.”
The UK Corporate Governance Code
The UK Corporate Governance Code (the Code) is not a rigid set of rules. It consists of principles (main and supporting) and provisions.
The Listing Rules require companies to apply the main principles and report to shareholders on how they have done so.
You can find our disclosures as follows:
Page
Remuneration
Executive directors’ remuneration should
be designed to promote the long-term
success of the company. Performance-
related elements should be transparent,
stretching and rigorously applied.
■■ Remuneration report
93
There should be a formal and transparent
procedure for developing policy on
executive remuneration and for fixing
the remuneration packages of individual
directors. No director should be involved
in deciding his or her own remuneration.
■■ Remuneration report
93
Relations with shareholders Page
There should be a dialogue with
shareholders based on the mutual
understanding of objectives. The board as
a whole has responsibility for ensuring that
a satisfactory dialogue with shareholders
takes place.
■■ Stakeholder engagement
The board should use general meetings
to communicate with investors and to
encourage their participation.
■■ Stakeholder engagement
84
84
Leadership
Every company should be headed by
an effective board which is collectively
responsible for the long-term success of
the company.
Page
All directors should receive an induction
on joining the board and should regularly
update and refresh their skills and
knowledge.
■■ Board of Directors
■■ Composition of the Board
47
81
■■ Induction
81
■■ Training and development 82
There should be a clear division of
responsibilities at the head of the company
between the running of the board and the
executive responsibility for the running of
the company’s business. No one individual
should have unfettered powers of decision.
■■ Roles on the Board
80
The chairman is responsible for leadership
of the board and ensuring its effectiveness
on all aspects of its role.
The board should be supplied in a timely
manner with information in a form and
of a quality appropriate to enable it to
discharge its duties.
■■ Information provided to the Board
82
The board should undertake a formal
and rigorous annual evaluation of its own
performance and that of its committees
and individual directors.
■■ Review of Board and Board Committee
■■ Roles on the Board
80
effectiveness
As part of their role as members of a unitary
board, non-executive directors should
constructively challenge and help develop
proposals on strategy.
■■ Roles on the Board
80
Page
Effectiveness
The board and its committees should have
the appropriate balance of skills, experience,
independence and knowledge of the
company to enable them to discharge their
respective duties and responsibilities
effectively.
■■ Board of Directors
■■ Board diversity
47
46
There should be a formal, rigorous and
transparent procedure for the appointment
of new directors to the board.
■■ Appointment and re-election
of Directors
77
All directors should be able to allocate
sufficient time to the company to discharge
their responsibilities effectively.
■■ Attendance
■■ Time commitment
80
81
All directors should be submitted for
re-election at regular intervals, subject
to continued satisfactory performance.
■■ Composition of the Board
■■ Appointment and re-election
of Directors
78
81
77
Accountability
The board should present a fair, balanced
and understandable assessment of the
company’s position and prospects.
Page
■■ Strategic Report
■■ Risk management
■■ Viability statement
2
119
40
The board is responsible for determining
the nature and extent of the principal risks
it is willing to take in achieving its strategic
objectives. The board should maintain
sound risk management and internal
control systems.
■■ Risk management and
internal control
82
The board should establish formal and
transparent arrangements for considering
how they should apply the corporate
reporting, risk management and internal
control principles, and for maintaining
an appropriate relationship with the
company’s auditors.
■■ Board Audit Committee report
■■ Accountability
53
82
44 Barclays PLC Annual Report 2017
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Governance: Directors’ report Governance: Directors’ report
Chairman’s introduction
Throughout this period of activity and change, your
Board has been providing critical oversight of executive
management to oversee the successful execution of the
Group’s long-term strategy.
strong foundation needed for effective
management of the Group.
Board changes in 2017
Through the Board Nominations Committee,
we are always considering whether we have
the right mix of individuals on the Board,
providing an appropriate balance and diversity
of skills, experience and perspectives. It is
important that it is inherent within the
composition of the Board that a broad range
of perspectives and views are able to be
provided which are representative of our
customers, clients and employees as the
foundations of our Bank. In addition, we are
also regularly thinking about Board succession
planning and ensuring we have a strong
pipeline of directors to steer the Group over
the long term. With this in mind, we brought
on three new non-executive Directors in 2017:
Sir Ian Cheshire, Matthew Lester and Mike
Turner CBE, all of whom have significant
board-level experience and bring specific
sector and technical expertise to your Board.
During 2017, Diane de Saint Victor and Steve
Thieke, both non-executive Directors, left the
Board and I thank them on behalf of the Board
for their contributions and service.
With the changes in 2017, our current female
representation on the Board sits at 21%. Last
year I reported that we set ourselves a Board
diversity target of having 33% female
representation on the Board by 2020. We are
conscious that our gender diversity balance
on the Board has fallen from 2016, but remain
committed to achieving the target that we
have set. Ensuring diversity of gender, as well
as diversity in its other forms such as ethnicity,
is built into our governance processes around
Board composition and succession planning,
and you can read more about this in the Board
Nominations Committee report on pages 75
to 79.
Dear Fellow Shareholders
Welcome to my 2017 corporate governance
report. In my Chairman’s letter on page 2, I
highlighted the significant milestones and
achievements for Barclays in 2017, including
the further sell-down of our interest in
Barclays Africa Group Limited, the closure of
Barclays Non-Core, progress towards the
establishment of our ring-fenced bank in 2018
as well as preparations for the UK’s departure
from the EU. Throughout this period of
activity and change, your Board has been
providing critical oversight of executive
management to oversee the successful
execution of the Group’s long-term strategy.
I firmly believe and have often said that the role
of the Board is to create long-term, sustainable
value for our shareholders. In order to do this,
we must have a robust corporate governance
framework, providing systems of checks and
controls to ensure accountability and drive
better decision-making, and also policies and
practices which ensure that the Board and its
Committees operate effectively. Part of this is
creating an environment which encourages a
constructive relationship between the Board
and executive management to enable an
appropriate level of debate, challenge and
support in the decision-making process. I am
pleased to report that in 2017 your Board and
executive management continued to
demonstrate this dynamic as we worked
together in executing strategy.
The impending changes to our Group
corporate structure following structural
reform has been a significant area of focus for
the Board in 2017 and no doubt will continue
to be at the forefront of our minds in 2018.
After approving for appointment Sir Gerry
Grimstone as the Chairman of Barclays
International and Sir Ian Cheshire as the
Chairman of Barclays UK, we worked closely
with both of them to recruit high quality
candidates to build the boards of those two
entities. Our aim is to ensure that corporate
governance within Barclays is in line with best
practice for FTSE100 companies and as a
Board we will work hard to ensure that our
governance framework is always providing the
home.barclays/annualreport
Barclays PLC Annual Report 2017 45
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Chairman’s introduction
Relations, as well as the views of employees
through the results of the Barclays Your View
employee opinion surveys. Another key
stakeholder of Barclays is our regulators, and
during 2017 the Board invited representatives
of our regulators to attend meetings to hear
directly their views and expectations of
Barclays. All of these views form the context in
which Board decision-making takes place and
feeds into the considerations and debate
when determining the Group’s strategy.
Board effectiveness
To deliver our strategy and achieve the
delivery of long-term, sustainable value for
shareholders requires an effective Board. It is
an important part of my role as Chairman to
satisfy myself that the Board – both collectively
and its individual members – operates
effectively. Each year, we conduct a self-
assessment of our performance with the aid of
an independent facilitator. As part of this
process, I receive a report on the performance
of our individual Directors, and our non-
executive Directors, led by our Senior
Independent Director, have the opportunity to
review my performance. I am pleased to report
that the results of the findings showed that
your Board and its Committees are still
operating effectively. There are, of course,
areas to work on and challenges ahead once
the new Group structure is crystallised
following the stand-up of our new ring-fenced
bank in 2018. Ensuring that there is clear
accountability and delineated responsibilities
in the new structure, not just between boards
but also between committees and between
the boards and the executive team, will be a
key focus for us in 2018. You can read more
about the findings and the review process
undertaken for 2017 on page 78.
Looking ahead
2018 will be another pivotal year for Barclays
with the execution of our new Group
corporate structure, and I look forward to
working closely with the boards of Barclays UK
and Barclays International to embed a strong
framework to ensure clear, effective and
consistent corporate governance. We will
continue to work closely with executive
management on improving performance
within the Group’s businesses, without losing
sight of the need to constantly be acting in
line with the Barclays Values and Purpose to
build on and retain the trust and confidence of
our customers, clients, employees. Together
with your Board, we remain focused on
working hard to execute the Group’s strategy
in order to create sustainable long-term value
for our shareholders.
John McFarlane
Chairman
21 February 2018
Board diversity
The Board has a balanced and diverse
range of skills and experience. All Board
appointments are made on merit, in the
context of the diversity of gender, skills,
experience and background required to be
effective.
Balance of non-executive Directors:
executive Directors
Chairman
1
Executive Directors
2
Non-executive Directors
11
Gender balance
Female
3
Male
11
Length of tenure
(Chairman and non-executive Directors)
1
3
2
1 0-3 years
2 3-6 years
3 6-9 years
6
4
2
Industry experience
(Chairman and non-executive Directors)*
1 Financial Services
2 Political/regulatory experience
3 Current/recent Chair/CEO
4 Accountancy/auditing
5 Operations and Technology
6 Retail/marketing
12 (100%)
12 (100%)
5 (42%)
2 (17%)
1 (8%)
1 (8%)
International experience†
(Chairman and non-executive Directors)*
1 International (UK)
2 International (US)
3 International (Rest of the World)
10 (83%)
2 (17%)
2 (17%)
Notes
* Individual Directors may fall into one or more
categories.
† In relation to board experience based on the
location of the headquarters/registered office of a
company.
Conduct, culture and values
The Board also actively supports diversity
throughout the Group. To attract and retain
the best talent, we need to create an
environment in which colleagues can thrive,
develop and achieve their ambitions. I am
very proud of the initiatives that we have at
Barclays to encourage diversity and support
inclusion among colleagues. Most recently,
we launched a campaign aimed at increasing
mental health awareness as Barclays aims
to become a ‘mental health confident’
organisation, and we are delighted that
our Chief Internal Auditor, Sally Clark, is the
Executive sponsor for ‘Be Well’, our well-being
initiative. Everything we do at Barclays is
underpinned by the Barclays Values and
Purpose, and we must act with respect,
transparency and integrity in our interactions
with stakeholders and with each other to
create the right culture, and encourage the
right behaviours by colleagues, across the
Group. With that framework, we can build
and maintain the trust and confidence of
our stakeholders and the market.
An important part of our strategy in relation to
cultural progress and embedding our Barclays
Values is our citizenship strategy, the Shared
Growth Ambition, where our long-term aim is
to create and grow a collection of products,
services and partnerships that improve the
lives of people in the communities that we
serve. In 2017 we launched Barclays’ ‘green
bonds’ as part of our support for the transition
to a sustainable and low carbon economy.
This was the first green bond issued by a UK
bank using UK assets, and you can read more
about this on page 7. Initiatives like this not
only enable us to contribute meaningfully to
society, but also enable us to better
understand the environment in which we
operate and our wider societal obligations,
supporting the Board’s objective of delivering
sustainable returns to shareholders.
You can read more about the
Shared Growth Ambition at
home.barclays/citizenship
Stakeholder views
As a Board we are conscious of the impact
that our business and decisions have on our
customers, clients and employees as well as
our wider societal impact. It is through an
appreciation of our stakeholders that we can
create a strategy aimed at delivering
sustainable returns to our shareholders over
the long term. The Board is supported in this
role by the Board Reputation Committee,
which monitors key indicators across the
areas of conduct, culture, citizenship and
customer satisfaction, as well as Barclays’
reputation and events that occur which may
impact the trust in our brand.
The Board receives information about, and
engages with, our various stakeholders
throughout the year and one of the most
important dates in our calendar is our Annual
General Meeting, which gives the Board an
opportunity to meet our shareholders and
hear their views. During the year the Board is
kept informed of shareholder views through
regular updates from the Head of Investor
46 Barclays PLC Annual Report 2017
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Governance: Directors’ report Governance: Directors’ report
Who we are – Board of Directors
Board of Directors
Barclays understands the importance of having a Board with the right balance of skills,
experience and diversity, and the composition of the Board is regularly reviewed by the Board
Nominations Committee. The skills and experience of the current Directors and the value
they bring to the Barclays Board are highlighted below.
Full biographies can be accessed online via
home.barclays/investorrelations
John McFarlane
Chairman
Appointed:
1 January 2015
Sir Gerry Grimstone
Deputy Chairman
and Senior
Independent Director
Appointed:
1 January 2016
Relevant skills and experience
Sir Gerry brings to the Board a wealth of investment
banking, financial services and commercial experience
gained through his senior roles at Schroders and his
various board positions. Sir Gerry has global business
experience across the UK, Asia, the Middle East and
the US. Sir Gerry has significant experience as a
non-executive director and chairman. He is currently
the chairman of Standard Life Aberdeen plc,
independent non-executive board member of Deloitte
NWE LLP, board adviser to the Abu Dhabi Commercial
Bank and the lead non-executive at the Ministry of
Defence.
Other current appointments
Financial Services Trade and Investment Board
Committees
Nominations, Reputation (Chairman)
Mike Ashley
Non-executive
Appointed:
18 September 2013
Relevant skills and experience
Mike has deep knowledge of auditing and associated
regulatory issues, having worked at KPMG for over
20 years, where he was a partner. Mike was the lead
engagement partner on the audits of large financial
services groups including HSBC, Standard Chartered
and the Bank of England. While at KPMG, Mike was
Head of Quality and Risk Management for KPMG
Europe LLP, responsible for the management of
professional risks and quality control. He also held
the role of KPMG UK’s Ethics Partner.
Other current appointments
ICAEW Ethics Standards Committee; International
Ethics Standards Board for Accountants; Chairman,
Government Internal Audit Agency; Charity
Commission
Committees
Audit (Chairman), Nominations, Risk, Reputation
Relevant skills and experience
John is Chairman of Barclays PLC and Barclays Bank
PLC. He is a senior figure in global banking and
financial services circles having spent over 40 years
in the sector.
John is currently chairman of TheCityUK and a
member of the Financial Services Trade and
Investment Board and the European Financial Round
Table. Other current non-executive directorships
include Westfield Corporation, Old Oak Holdings
Limited and The International Monetary Conference.
John was previously chairman of Aviva plc where he
oversaw a transformation of the company FirstGroup
plc, and the Australian Bankers Association. He was
also a non-executive director of The Royal Bank of
Scotland, joining at the time of the UK Government
rescue. Prior to that he was CEO of Australia and
New Zealand Banking Group Limited for 10 years,
group executive director of Standard Chartered
and head of Citibank in the UK.
Other current appointments
Member of Cranfield School of Management Advisory
Board; Member of Institut International d’Etudes
Bancaires; Member of the President’s Committee
Confederation of British Industry
Committees
Nominations (Chairman)
Jes Staley
Group Chief
Executive
Appointed:
1 December 2015
Relevant skills and experience
Jes joined Barclays as Group Chief Executive on
1 December 2015. He has nearly four decades of
extensive experience in banking and financial services.
He worked for more than 30 years at JP Morgan, initially
training as a commercial banker, later advancing to the
leadership of major businesses involving equities, private
banking and asset management and ultimately heading
the company’s Global Investment Bank. Jes is currently
a member of the Institute of International Finance and
formerly served as managing partner at BlueMountain
Capital. These roles have provided him with a vast
experience in leadership and he brings a wealth of
investment banking knowledge to Barclays’ Board.
Other current appointments
None
Committees
None
Tim Breedon CBE
Non-executive
Appointed:
1 November 2012
Relevant skills and experience
Tim joined Barclays after a distinguished career with
Legal & General, where, among other roles, he was
the group chief executive until June 2012. Tim’s
experience as a CEO enables him to provide challenge,
advice and support to the executive on performance
and decision-making.
Tim brings to the Board extensive financial services
experience, knowledge of risk management and UK
and EU regulation, as well as an understanding of the
key issues for investors.
Other current appointments
Marie Curie; Chairman, Apax Global Alpha Limited;
Chairman, The Northview Group
Committees
Audit, Nominations, Remuneration, Risk (Chairman)
Sir Ian Cheshire
Non-executive
Appointed:
3 April 2017
Relevant skills and experience
Sir Ian joined Barclays in April 2017 as a non-executive
Director and the Chairman of Barclays UK. From his
lengthy executive career including his time as Group
Chief Executive of Kingfisher plc, Sir Ian brings to the
Board substantial business experience particularly in
the international retail sector, as well as experience in
sustainability and environmental matters. He holds
strong credentials in leadership as well as being highly
regarded by the Government for his work with various
Government departments.
Other current appointments
Business Disability Forum President’s Group;
Debenhams plc; Maisons du monde; Menhaden plc;
lead non-executive director for the Government
Committees
Nominations
Mary Francis CBE
Non-executive
Appointed:
1 October 2016
Relevant skills and experience
Mary has extensive board-level experience across
a range of industries. She is a non-executive director
of Swiss Re Group and Ensco plc and was formerly
senior independent director of Centrica and a
non-executive director of the Bank of England, Aviva
and Alliance & Leicester. She held senior executive
positions in the UK Treasury and Prime Minister’s
Office and in the City as Director General of the
Association of British Insurers. She brings to Barclays
strong understanding of the interaction between
public and private sectors and skills in strategic
decision-making and all aspects of board governance.
Other current appointments
Advisory Panel of The Institute of Business Ethics
Committees
Remuneration, Reputation
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Barclays PLC Annual Report 2017 47
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Who we are – Board of Directors
Crawford Gillies
Non-executive
Appointed:
1 May 2014
Tushar Morzaria
Group Finance
Director
Appointed:
15 October 2013
Mike Turner CBE
Non-executive
Appointed:
1 January 2018
Relevant skills and experience
Crawford has extensive business and management
experience, gained with Bain & Company and
Standard Life plc. These roles have provided him
with experience in strategic decision-making and
knowledge of company strategy across various
sectors and geographical locations.
Crawford is currently senior independent director
of SSE plc. He has also held board and committee
chairman positions during his career, notably as
chairman of the remuneration committees of
Standard Life plc and MITIE Group PLC.
Other current appointments
Chairman, The Edrington Group Limited
Committees
Audit, Nominations, Remuneration (Chairman)
Reuben Jeffery III
Non-executive
Appointed:
16 July 2009
Relevant skills and experience
Tushar joined Barclays in 2013 having spent the
previous four years in senior management roles
with JP Morgan Chase, most recently as the CFO
of its Corporate & Investment Bank. Throughout his
time with JP Morgan he gained strategic financial
management and regulatory relations experience.
Since joining the Barclays Board he has been a driving
influence on the Group’s cost reduction programme
and managing the Group’s capital plan, particularly
in response to structural reform.
Other current appointments
Member of the 100 Group main committee
Committees
None
Dambisa Moyo
Non-executive
Appointed:
1 May 2010
Relevant skills and experience
Mike has considerable business and board-level
experience gained from his lengthy career with
BAE Systems PLC where he was CEO as well as his
non-executive positions. He has a strong commercial
background and experience in strategy and
operational performance culture. Mike brings
significant leadership and strategic oversight
experience to the Board, particularly from his roles
as chairman of Babcock International Group PLC
and GKN Plc.
Other current appointments
Member of the UK Government’s Apprenticeship
Ambassadors Network
Committees
Reputation
Company Secretary
Stephen Shapiro
Appointed:
1 November 2017
Relevant skills and experience
Stephen was appointed Company Secretary in
November 2017 having previously served as the
Group Company Secretary and Deputy General
Counsel of SABMiller plc. Prior to this, he practised
law as a partner in a law firm in South Africa, and
subsequently in the UK. Stephen has extensive
experience in corporate governance, legal, regulatory
and compliance matters. Stephen has also previously
served as Chairman of the ICC UK’s Committee on
Anti-Corruption as well as on working groups of the
GC100, providing business input into key areas of
legislative and policy reform.
Relevant skills and experience
Reuben has extensive financial services experience,
particularly within investment banking and wealth
management, through his role as CEO and president
of Rockefeller & Co. Inc. and Rockefeller Financial
Services Inc. and his former senior roles with
Goldman Sachs, head of the European Financial
Institutions Group. His previous government roles in
the US, including as chairman of the Commodity
Futures Trading Commission and as an under
Secretary of State, provide Barclays’ Board with insight
into the US political and regulatory environment.
Other current appointments
Financial Services Volunteer Corps; The Asia
Foundation
Committees
Nominations, Risk
Matthew Lester
Non-executive
Appointed:
1 September 2017
Relevant skills and experience
Matthew joined Barclays as a non-executive Director
in September 2017 and contributes strong financial
management and regulatory experience to the Board,
having held a number of senior finance roles across a
range of business sectors, including financial services.
Most recently was chief financial officer of Royal Mail
Group. Matthew’s financial expertise enables him
to analyse effectively complex reporting and risk
management processes. He is currently a non-
executive director of Man Group plc and Capita plc,
where he also chairs the audit and risk committees of
both companies.
Other current appointments
None
Committees
Audit, Risk
Relevant skills and experience
Dambisa is an international economist and
commentator on the global economy, having
completed a PhD in economics. Dambisa has a
background in financial services and a wide
knowledge and understanding of African economic,
political and social issues, in addition to her
experience as a director of companies with complex,
global operations. She served as a non-executive
director of SABMiller plc (2009-2016) and Seagate
Technology plc (2015-2017).
Other current appointments
Chevron Corporation; Barrick Gold Corporation
Committees
Remuneration, Reputation
Diane Schueneman
Non-executive
Appointed:
25 June 2015
Relevant skills and experience
Diane joined Barclays after an extensive career at
Merrill Lynch, holding a variety of senior roles,
including responsibility for banking, brokerage
services and technology provided to the company’s
retail and middle market clients, and latterly for IT,
operations and client services worldwide. She brings
a wealth of experience in managing global,
cross-discipline business operations, client services
and technology in the financial services industry.
Diane is a member of the board of Barclays US LLC,
Barclays’ US intermediate holding company and chair
of Barclays Services Limited.
Other current appointments
None
Committees
Audit, Risk
48 Barclays PLC Annual Report 2017
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Governance: Directors’ report
Governance: Directors’ report
Who we are – Group Executive Committee
Group Executive Committee
Biographies for Jes Staley, Group Chief Executive, and Tushar Morzaria, Group Finance
Director, who are members of the Group Executive Committee, which is chaired by
Jes Staley, can be found on pages 47 and 48.
Paul Compton
Group Chief
Operating Officer
Bob Hoyt
Group General
Counsel
Tim Throsby
President, Barclays
International and
Chief Executive
Officer, Corporate
and Investment Bank
Ashok Vaswani
CEO, Barclays UK
Laura Padovani
Interim Group Chief
Compliance Officer
C S Venkatakrishnan
Chief Risk Officer
Tristram Roberts
Group Human
Resources Director
Group Executive Committee meetings are also
attended on a regular basis by the Chief
Internal Auditor, Sally Clark, and by an
ex-officio member, drawn from senior
management. The current ex-officio member
is Barry Rodrigues, Head of Barclaycard
International.
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Barclays PLC Annual Report 2017 49
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report What we did in 2017
Board report
The role of the Board
The Board of Directors is responsible for promoting the highest standards of corporate governance in Barclays.
Further details about our corporate governance framework, policies and Board responsibilities can be found online at
home.barclays/corporategovernance
We act in a way that we consider promotes
the success of Barclays for the benefit of
shareholders as a whole, and are accountable
to the shareholders for creating and delivering
sustainable value. It is our responsibility as the
Board to ensure that management not only
delivers on short-term objectives, but
promotes the long-term growth of Barclays.
Our corporate governance framework embeds
what we believe are the right culture, values
and behaviours throughout the Group and
supports our role in determining strategic
objectives and policies.
In addition to setting strategy and overseeing
its implementation, we are also responsible
for ensuring that management maintains an
effective system of internal control. An
effective system of internal control should
provide assurance of effective and efficient
operations, internal financial controls and
compliance with law and regulation. In
meeting this responsibility, we consider what
is appropriate for the Group’s business and
reputation, the materiality of financial and
other risks and the relevant costs and benefits
of implementing controls. See page 82 for
further details on those systems of controls.
The Board is the decision-making body for
matters that, owing to their strategic, financial
or reputational implications or consequences,
are considered significant to the Group.
A formal schedule of powers reserved to the
Board ensures that our control of these key
decisions is maintained. A summary of the
matters reserved to the Board can be found
at home.barclays/corporategovernance. It
includes the approval of appointments to the
Board, Barclays’ strategy, financial statements,
capital expenditure and any major
acquisitions, mergers or disposals.
Board Committees
The main Board Committees are the Board
Audit Committee, the Board Nominations
Committee, the Board Remuneration
Committee, the Board Reputation Committee
and the Board Risk Committee. Pursuant
to authority granted under our Articles of
Association, each Board Committee has had
specific responsibilities delegated to it by the
Board. Further information on the role and
activities of each of the Board Committees
can be found in this report on pages 53 to 79
and pages 114 to 115, and in their individual
terms of reference, which have been
approved by the Board and are available at
home.barclays/corporategovernance.
In addition, the Regulatory Investigations
Committee was formed in 2012 and focused
on providing Board-level oversight of
regulatory investigations. In 2017, this
Committee was disbanded with residual
matters being brought under the oversight
of the Board Audit Committee or falling
directly under the Board’s oversight, as
appropriate.
You can read more about what the Board and
each of the Board Committees did during 2017
on the following pages.
Board Governance Framework
Barclays Board
The Board is responsible for creating and sustaining
shareholder value, through setting and overseeing the
implementation of Barclays’ strategy
Board Audit
Committee
Board Nominations
Committee
Board Remuneration
Committee
Board Reputation
Committee
Board Risk
Committee
■ Reviews accounting policies
■ Reviews the composition
■ Sets principles and
and financial reports
of the Board
■ Monitors the internal
control environment
■ Considers the adequacy and
scope of the internal and
external audit
■ Reviews and monitors the
Group’s whistleblowing
policies
■ Recommends the
appointment of new
Directors
■ Considers succession plans
for the Chairman and Group
Chief Executive
■ Oversees the annual Board
effectiveness review
parameters of remuneration
for Barclays
■ Considers Barclays’ conduct
and reputational risk issues
and exposures
■ Monitors and recommends
financial and operational
risk appetite
■ Considers and approves
■ Reviews and approves
remuneration for executive
Directors and senior
executives
■ Oversees employee share
schemes
Barclays’ overall citizenship
strategy
■ Oversees Barclays’ approach
to customer and regulatory
matters
■ Monitors the financial and
operational risk profile
■ Reviews limits for types of
financial and operational
risk
See page 53 for
further information.
See page 75 for
further information.
See page 93 for
further information.
See page 69 for
further information.
See page 64 for
further information.
50 Barclays PLC Annual Report 2017
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Governance: Directors’ report During 2017, the Board focused on a number of specific areas, outlined in the table below,
in line with Barclays’ three strategic goals and eight Principal Risks:
Board allocation of time* (%)
4
1
Strategic goals
St Have strong foundations in place
Ac Accelerate the completion of restructuring
Bu Build the Barclays of the future
Principal risks
Cr Credit
Ma Market
Tr Treasury and capital
Op Operational
Mo Model
Re Reputation
Co Conduct
Le Legal
Strategy formulation and monitoring
Debated and provided input to management on the formulation of overall Group strategy, and
reflected on the Group strategy with longer-term views on what could be done to accelerate
returns and build capital. The topics covered include:
■■ potential growth opportunities, and key trends and risks, for Barclays UK and Barclays
International
■■ constraints and risks to strategy execution, including economic assumptions, expected
regulatory requirements on capital and solvency ratios, anticipated changes to accounting
rules including IFRS 9, investor expectations, and potential impacts for clients and customers
■■ a strategic approach to costs optimisation, including analysing the impact on costs of
different structural initiatives such as product redesign and automation
■■ impact of continuing legacy conduct issues on capital requirements and profit targets
■■ options for the location of Barclays’ operations in Europe, driven by the EU Referendum result.
Discussed regular updates from the Group Chief Executive on the progress being made against
the Group’s 2017 execution priorities and capital targets, received insights on stakeholder,
employee and cultural matters (including results from employee opinion surveys), and updates
on items of focus for the Group Executive Committee.
Considered the strategy, and assessed the progress of execution of strategy, in the businesses
within each of Barclays UK and Barclays International.
Monitored the progress of the sell down of the Group’s remaining interest in Barclays Africa
Group Limited.
Monitored the progress of the rundown and subsequent closure of Barclays Non-Core.
Monitored the progress of the Group’s execution of its structural reform programme – see the
case study on page 52 for further details.
Monitored the potential implications of the UK’s preparations to leave the EU following the EU
Referendum result; approved and monitored progress of the expansion of Barclays Bank Ireland’s
operations in preparation for Brexit – see the case study on page 52 for further details.
Finance (including capital and liquidity)
Debated and approved the Group’s Medium Term Plan for 2017-2019.
Regularly assessed financial performance of the Group and its main businesses through reports
from the Group Finance Director.
Reviewed and approved Barclays’ financial results prior to publication, including approving final
and interim dividends.
Discussed market and investor reaction to Barclays’ strategic and financial results
announcements, with insights provided by the Head of Investor Relations.
Provided input, guidance and advice to senior management on the high-level shape of Barclays’
2018-2020 Medium Term Plan and subsequently approved the final plan.
3
2
2017
2016
1 Strategy formulation and
implementation monitoring
2 Finance (including capital and
liquidity)
3 Governance and risk
(including regulatory issues)
4 Other (including compensation)
47
15
35
3
* Based on scheduled Board meetings
55
17
26
2
Strategic goals
Principal risks
St Ac Bu
Cr Ma Tr Op Mo Re Co Le
St Ac Bu
Cr Ma Tr Op Mo Re Co Le
St Ac Bu
Cr Ma Tr Op Mo Re Co Le
Ac Bu
Ac Bu
St Ac Bu
St Ac Bu
St Ac Bu
St Ac Bu
St Bu
St Bu
Tr Op Re Le
Tr Op Re Le
Tr Op Re Le
Ma Tr Op Re Le
Cr Ma Tr Mo Co Le
Cr Ma Tr Mo Co Le
Cr Ma Tr Re
Re
St Ac Bu
Cr Ma Tr Mo Co Le
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Barclays PLC Annual Report 2017 51
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report What we did in 2017
Board report
Governance and risk (including regulatory issues)
Debated and approved the 2017 risk appetite for the Barclays Group
Regularly assessed Barclays’ overall risk profile and emerging risk themes, hearing directly from
the Chief Risk Officer and the Chairman of the Board Risk Committee
Received reports on Barclays’ operational and technology capability, including specific updates
on cyber risk capability and the strategy for technology and infrastructure services
Approved the Group’s 2017 Recovery Plan and US Resolution Plan
Invited representatives of Barclays’ UK and US regulators to meetings to enable the Board to
hear first-hand about regulatory expectations and their specific views on Barclays
Considered and debated proposals for the establishment of a programme to further enhance
Barclays’ management information framework across all businesses and entities within the
Group
Discussed and received regular updates directly from the Chief Controls Officer on the Group’s
internal controls and framework, and monitored progress of the Barclays Internal Control
Enhancement Plan (the programme for remediation of identified risk and control issues)
Considered regular updates from the Group General Counsel on the legal and regulatory risks
and issues facing Barclays – refer to note 29 in the financial statements
Considered matters relating to Board succession and approved appointments to the Board and
Board Committees
Received and considered regular updates from the Chairmen of the Board’s principal Board
Committees on the matters discussed at Board Committee meetings. See the reports of each
Board Committee set out on the following pages for further details
Received regular updates (following the establishment of each respective board) from the Chairs
of the Barclays UK and Barclays International divisional boards and the Group Service Company
Considered updates on views of major shareholders, particularly in the period leading up to the
2017 Annual General Meeting
Discussed the Board and Committee governance framework in the context of structural reform,
and considered significant developments in UK corporate governance and other corporate
governance matters
Considered the results of the 2016 Board effectiveness review and proposed action plan, and
considered the process for and findings of the 2017 Board effectiveness review. See page 78 for
further details of this process and the findings for 2017
Other (including compensation)
Considered progress on Barclays’ talent and succession planning (and hosted receptions for key
talent within the Group), and received updates on the Bank’s diversity and inclusion initiatives,
including from the Chairman of the Board Nominations Committee
Considered and approved the 2017 incentive funding pools for the Group and allocation among
each business and function – see the Remuneration report on pages 93 to 116 for further details
Strategic goals
Principal risks
St Bu
St Bu
St Bu
St Bu
Cr Ma Tr Mo Co
Cr Ma Tr Op Mo Re Co Le
Op Mo Re Le
Ma Tr
St Ac Bu
Tr Op Re Co Le
St Bu
St Bu
Op Mo
Op Mo Re Co Le
St Ac Bu
Tr Re Co Le
St Ac Bu
Cr Ma Tr Op Mo Re Co Le
St Ac Bu
St Bu
Re
Re
St Ac Bu
Op Co
St Bu
St Bu
Op Re Co
Op Re Co
Governance in action – Structural reform and Brexit
Execution of structural reform
The execution of our structural reform
programme was a significant focus for the
Group in 2017 as we move towards the legal
entity stand up of our ring-fenced bank in
2018. Building on from the work carried out
in 2016, the Board continued to closely
monitor and evaluate progress on the
execution of the programme in 2017. Specific
matters addressed by the Board included the
following:
■■ overseeing the establishment of the Group
Service Company, which was launched on
1 September 2017
■■ monitoring the stakeholder
communications plan (including, in
particular, the communications plan for
customers and employees)
■■ considering regular updates on migrating
sort codes with a focus on any potential
impact on customers and clients
■■ overseeing and approving various transfers
of assets and liabilities among Barclays
Group entities including establishing a
committee to provide appropriate
Board-level oversight of the processes
involved
■■ with the support of the Board Nominations
Committee, debating the composition of,
and appointments to each of, the boards
of Barclays UK, Barclays International and
the Group Service Company and
discussing the appropriate governance
arrangements for the new Group structure.
Preparations for Brexit
Another area of focus for the Board was
preparations for the impact of the UK’s exit
from the EU. Barclays has created an internal
programme specifically in relation to the
planning and preparation for Brexit. The
Board debated potential EU hubs for Barclays’
European operations and decided to pursue
expansion in Ireland where we have been
operating for over 40 years and have an
existing banking licence held by Barclays
Bank Ireland. Specific matters considered by
the Board included debating the feasibility of
a significant expansion of Barclays Bank
Ireland’s operations, the transfer of capital
and resources to Barclays Bank Ireland and
assessing the progress being made with
applications for the necessary regulatory
licensing requirements with the relevant
authorities.
The successful completion of the Group’s
structural reform programme and further
progress on our Brexit plans will continue to
be areas of focus for the Board in 2018.
52 Barclays PLC Annual Report 2017
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Governance: Directors’ report Governance: Directors’ report
What we did in 2017
Board Audit Committee report
Solid progress has been made in turning the controls
enhancement programme into a ‘business as usual’
activity, with an emphasis on achieving sustainable
progress.
Dear Fellow Shareholders
In writing this report I have reflected on how
Barclays has been working to embed the
significant strategic changes put in place
during 2016 while responding to new
challenges driven by the external landscape,
in particular the delivery of structural reform
and preparation for Brexit.
As I reported in 2017, the Committee
continues to consider a critical part of its role
to be ensuring that the commitment to
strengthening Barclays’ control environment is
maintained throughout this transformational
period. My Committee colleagues and I have
been encouraged by the increased rigour
applied to oversight of the Group control
environment following the creation of the
Chief Controls Office at the end of 2016. This
has given the Committee greater clarity and
transparency regarding thematic control
environment issues impacting the Group, and
has helped to highlight areas of the business
where there may be a concentration of issues
and where focus on remediation is required.
Regular updates on the overall control
environment framework have also continued
to be provided to the Board over the course of
the year, underlining the importance that the
Board of Barclays places on this programme
of activity.
Solid progress has been made in turning the
controls enhancement programme into a
‘business as usual’ activity, with an emphasis
on achieving sustainable progress. The
Committee has observed heightened focus
and attention across the organisation on the
importance of having robust processes in
place across the business to self-identify
controls issues and ensure that there are
effective remediation plans in place for which
senior management are accountable. The
embedding of the Chief Controls Office as part
of the first line of management within the
organisation has also been helpful in
delineating more clearly for the organisation
the respective roles of the second and third
lines of defence. The Chief Controls Office has
taken over the co-ordination of the Risk and
Control Self-Assessment process and this will
continue to be an area of focus in 2018 as
management develops a more detailed,
granular self-assessment process which
should assist in proactively identifying controls
which require remediation. Further details
may be found in the Risk management and
internal control section on page 82.
The Committee has continued to engage with
senior management regarding areas of
controls weaknesses in their businesses and
has received presentations from a number
of different areas of the organisation on the
actions taken to address unsatisfactory
audit reports.
In assessing control issues for disclosure in
the Annual Report, the Committee has
continued to apply similar definitions to those
used for assessing internal financial controls
for the purposes of Sarbanes-Oxley. The
conclusion we have reached is that there are
no control issues that are considered to be a
material weakness, which merit specific
disclosure.
The Committee has continued to oversee
the performance and effectiveness of internal
and external audit, the main independent
assurance mechanisms that serve to protect
shareholders’ interests.
I continue to hold regular meetings with the
Chief Internal Auditor and members of her
senior management team to ensure I am
aware of current work programmes and any
emerging issues. I also agreed the Chief
Internal Auditor’s objectives and the
outcomes of her performance assessment
and remuneration. The Committee also held
a networking event with Barclays Internal
Audit (BIA) during 2017, enabling Committee
members to meet on a less formal basis with
senior members of the BIA management
team.
During 2017, the Committee continued to
monitor closely the implementation of the
action plan to address the recommendations
arising from the review undertaken by
the PRA of BIA to increase its effectiveness.
The Chartered Institute of Internal Auditors
requires an independent external review of
internal audit functions to be carried out at
least every five years and during 2017, the
Committee commissioned an independent
external quality assessment of BIA, further
details of which may be found on page 61.
The Committee was satisfied with the
conclusions drawn in the report, while noting
that there were a number of areas for
potential development. The Committee
considered that the need for a period of
stability and consolidation within BIA would
be particularly important to embedding
existing initiatives and the Committee will
continue to monitor this and other
recommendations during 2018. In preparation
for structural reform, BIA has aligned its audit
planning and reporting to the new legal entity
structure.
The Committee continued to exercise its
responsibility for ensuring the integrity of
Barclays’ published financial information
by debating and challenging the critical
judgements and estimates made by
management. The exercise of appropriate
judgement in preparing the financial
statements is critical in ensuring that Barclays
reports to its shareholders in a fair, balanced
and transparent way. During the course of
2017, the Committee oversaw Barclays’
transition to KPMG as Barclays’ statutory
auditor which was approved by shareholders
at the 2017 Annual General Meeting. The lead
audit partner is Guy Bainbridge who has held
this role since KPMG’s appointment as the
Group’s auditor. KPMG has brought fresh
challenge and insight not only on accounting
judgements and policies but also on financial
controls which the Committee has found
valuable. The report that follows sets out
details of the material matters considered by
the Committee since my last report. One of
the key developments in accounting policy in
2017 has been Barclays’ preparation for the
implementation of the IFRS 9 impairment
standard on 1 January 2018. The Committee
reviewed the guidance note to non-executive
Directors from the PRA in relation to IFRS 9
implementation and was comfortable that
the areas highlighted by the PRA were being
addressed. Further details of the Committee’s
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Barclays PLC Annual Report 2017 53
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Last year’s review commented on the need
to strengthen the depth of financial and
accounting expertise on the Committee via
new appointments, which I am pleased was
addressed through the appointment of
Matthew Lester to the Committee when he
joined the Board of Barclays in September
2017. The review also highlighted the need to
ensure that the way in which the Committee
works with the Board Reputation and Board
Risk Committees continues to capture all
significant issues effectively while minimising
any overlap. I continued to work closely with
my fellow Board Committee chairmen during
2017, particularly with the Board Risk
Committee Chairman in order to clarify the
responsibility of the respective committees for
operational risk issues, which each Committee
has a role in overseeing.
You can read more about the outcomes of the
Board effectiveness review on page 78.
Looking ahead
In 2018, in addition to overseeing
management’s progress in continuing to
embed the role of the Chief Controls Office
and the Group’s management of controls
remediation, the Committee will be focusing
on some significant accounting issues,
including in particular, monitoring the impact
of IFRS 9 and the resultant disclosures. The
Committee is looking forward to working with
the audit committees of Barclays UK and
Barclays International as we discharge our
responsibilities and focus on ensuring efficient
and effective coverage of the business under
the new group structure. We have already
agreed an allocation of responsibilities, and
embedding the necessary reporting and
information flows across the three audit
committees to ensure all of them can
discharge their responsibilities efficiently
will be a key area of focus.
Mike Ashley
Chairman, Board Audit Committee
21 February 2018
What we did in 2017
Board Audit Committee report
consideration of the judgements and financial
impacts relating to the implementation of the
new standard may be found in the
‘Governance in action’ section of the
Committee report on page 63.
I have continued to hold the role of
Whistleblower’s Champion, a position
required by the FCA to be held at Board level.
As champion, I continue to have specific
responsibility for the integrity, independence
and effectiveness of the Barclays’ policies and
procedures on whistleblowing, including the
procedures for protecting employees who
raise concerns from detrimental treatment.
As Whistleblower’s Champion and as
Chairman of the Committee, I have been
involved in overseeing the implementation of
the suggested enhancements following the
benchmarking review undertaken in 2017 at
the request of the Board of Barclays.
Responsibility for the oversight of litigation,
investigation and competition matters has
transitioned to the Committee, in line with the
Committee’s existing responsibility for the
oversight of matters related to disclosure and
provisioning. The Committee has received
regular updates on these matters from the
Group General Counsel, with matters of
particular significance to the Group continuing
to be subject to oversight by the Board
of Barclays.
I attended meetings of the IHC audit
committee to gain a first-hand insight into
the issues being addressed by that committee
and have held regular meetings with the
chairmen-elect of the Barclays UK and
Barclays International audit committees.
The chairmen or chairmen-elect of all those
entities have attended at least one Committee
meeting during 2017. I also met frequently
with other members of senior management,
including the Group Finance Director, and
continued my engagement with Barclays’
regulators both in the UK and US. I have
reported regularly on the activities of the
Committee to the Board of Barclays.
Committee performance
The Committee’s performance during 2017
was assessed as part of an internal committee
effectiveness review. The conclusion of my
Board colleagues and standing attendees at
Committee meetings was that the Committee
is regarded as operating effectively and the
Board takes assurance from the quality of the
Committee’s work. It is considered well
constituted with the right balance of skills and
experience. The main area identified for
improvement was the need to manage a
demanding agenda efficiently so that time is
allocated to the most significant items for
discussion.
Committee allocation of time (%)
6
1
5
2
3
4
1 Control issues
2 Business control environment
3 Financial results
4 Internal audit matters
5 External audit matters
6 Other (including governance
and compliance)
2017
11*
15
33
25†
8
2016
23
19
36
11
6
8
4
* The time allocation in 2017 has reduced following
the streamlining of the reporting of control issues
through the Chief Controls Office.
† The increased time allocation to internal audit
matters in 2017 reflects the role of the Committee
in (i) overseeing the recommendations arising
from the review undertaken by the PRA of Barclays
Internal Audit to increase its effectiveness, and
(ii) the independent external quality assessment of
Barclays Internal Audit which was commissioned
by the Committee in 2017.
Committee composition and meetings
The Committee is composed solely of
independent non-executive Directors, with
membership designed to provide the breadth
of financial expertise and commercial acumen
it needs to fulfil its responsibilities. Its
members as a whole have experience of the
banking and financial services sector in
addition to general management and
commercial experience. Mike Ashley, who is
the designated financial expert on the
Committee for the purposes of the US
Sarbanes-Oxley Act, is a former audit partner
who during his executive career acted as lead
engagement partner on the audits of a
number of large financial services groups.
Following the Board’s finding that the
Committee could be strengthened by the
appointment of an additional member with
direct accounting and auditing experience,
Matthew Lester was appointed to the Board
and Committee with effect from 1 September
2017. During his executive career, Matthew
held a number of senior finance roles across a
range of business sectors, including financial
services, and most recently was the Chief
Financial Officer of Royal Mail Group. You can
find more details of the experience of
Committee members in their biographies on
pages 47 and 48.
The Committee met 10 times in 2017 and the
chart above shows how it allocated its time.
Meetings are generally arranged well in
advance and are scheduled in line
with Barclays’ financial reporting timetable.
One additional meeting was arranged to
select an appropriate service provider for the
independent review of Barclays Internal Audit
and to undertake an early review of particular
issues relevant to the financial statements.
Committee meetings were attended by
management, including as required the Group
54 Barclays PLC Annual Report 2017
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Governance: Directors’ report Chief Executive, Group Finance Director, Chief
Internal Auditor, Chief Controls Officer, Chief
Risk Officer, Chief Operating Officer, Group
General Counsel and Head of Compliance, as
well as representatives from the businesses
and other functions. The lead audit partner
of KPMG (the Group’s external auditor),
Guy Bainbridge, attended all Committee
meetings since January 2017. The Committee
held a number of private sessions with each
of the Chief Internal Auditor or the lead
audit partner, which were not attended by
management. The lead audit partner of
PwC, the Group’s previous external auditor,
attended meetings until the end of February
2017 to deliver its final audit report to the
Committee on the 2016 financial statements
before PwC resigned as the Group’s statutory
auditor.
Member
Mike Ashley
Tim Breedon
Crawford Gillies
Diane Schueneman*
Matthew Lester (from 1 September 2017)†
Meetings attended/eligible to attend
10/10
10/10
10/10
8/10
1/3
* Did not attend due to personal circumstances.
† Did not attend owing to existing commitments with
other boards (the Committee meeting dates were set
before Matthew joined the Board).
Committee role and responsibilities
The Committee is responsible for:
■■ assessing the integrity of the Group’s
financial reporting and satisfying itself that
any significant financial judgements made
by management are sound
■■ evaluating the effectiveness of the Group’s
internal controls, including internal financial
controls
■■ scrutinising the activities and performance
of the internal and external auditors,
including monitoring their independence
and objectivity
■■ overseeing the relationship with the Group’s
external auditor
■■ reviewing and monitoring the effectiveness
of the Group’s whistleblowing procedures
■■ overseeing significant legal and regulatory
investigations, including the proposed
litigation statement for inclusion in the
statutory accounts.
The Committee’s terms of
reference are available at
home.barclays/corporategovernance
The Committee’s work
The significant matters addressed
by the Committee during 2017 and in
evaluating Barclays’ 2017 Annual Report
and financial statements, are described on
the following pages.
Financial statement reporting issues
The Committee’s main responsibility in
relation to Barclays’ financial reporting is
to review with both management and the
external auditor the appropriateness of
Barclays’ financial statements, including
quarterly results announcements and
half-year and annual financial statements
and supporting analyst presentations, with
its primary focus being on:
■■ the quality and acceptability of accounting
policies and practices
■■ any correspondence from financial
reporting regulators in relation to Barclays’
financial reporting
■■ material areas where significant judgements
have been made, along with any significant
assumptions or estimates, or where
significant issues have been discussed with
or challenged by the external auditor
■■ an assessment of whether the Annual
Report, taken as a whole, is fair, balanced
and understandable and provides the
information necessary for shareholders to
assess Barclays’ position and performance,
business model and strategy.
Accounting policies and practices
The Committee discussed reports from
management in relation to the identification
of critical accounting judgements and key
sources of estimation uncertainty, significant
accounting policies and the proposed
disclosure of these in the 2017 Annual Report.
Following discussions with both management
and the external auditor, the Committee
approved the critical accounting judgements,
significant accounting policies and
disclosures, which are set out in Note 1,
‘Significant accounting policies’, to the
consolidated financial statements.
There was one significant change in
accounting policy during the period which
was the early adoption of IFRS 9 (Financial
Instruments) in relation to own credit,
resulting in the recognition of fair value
movements through the Statement of
Comprehensive Income. Further information
regarding this change can be found in note 1,
to the consolidated financial statements. Two
new significant accounting standards became
effective from 1 January 2018, IFRS 9
(Financial Instruments) and IFRS 15 (Revenue
Recognition). Further information regarding
these changes can be found in note 1, to the
consolidated financial statements. During
2017, the Committee was regularly updated on
Barclays’ preparations for the implementation
of IFRS 9, in particular in relation to the new
expected loss model which represents a
fundamental change in approach to
impairment. The Committee discussed with
management the key technical decisions and
interpretations required and Barclays’
approach to these. Further details of the
Committee’s role in overseeing the Group’s
IFRS 9 preparations can be found on page 63,
‘Governance in action’.
Financial reporting regulators and Barclays
The Committee from time to time considers
comment letters and papers from external
bodies including the SEC and the Financial
Reporting Council (FRC). In that regard, the
Committee considered the following:
■■ the FRC’s Year-End Advice Letter to Audit
Committee Chairs and Finance Directors
which highlighted key developments for
2017/18 annual report
■■ the FRC’s Annual Review of Corporate
Reporting which summarised key
characteristics of good corporate reporting
for the 2017/18 reporting year
■■ the PRA note of advice to non-executive
Directors regarding IFRS 9 implementation
which set out a series of questions for
consideration to ensure audit committees
were well prepared for the transition and its
implications.
The Committee sought to ensure that Barclays
took due account of the matters raised in the
letters and papers described above in its
external reporting and has sought to enhance
and clarify relevant disclosures.
The Committee from time to time considers
comment letters from the SEC in relation to its
reviews of Barclays’ Annual Report and other
publicly filed financial statements. Such
comment letters and Barclays’ responses are
made publicly available by the SEC on its
website, sec.gov, once it has closed each such
review. Barclays received one comment letter
from the SEC during 2017 requesting
clarification from the SEC in relation to its
2017 half year filing. Barclays responded to
clarify the queries raised by the SEC. The letter
did not raise any material concerns or
disclosure items.
Significant judgements and estimates
The significant judgements and estimates and
actions taken by the Committee in relation to
the 2017 Annual Report and financial
statements are outlined below. The significant
judgements and estimates are broadly
comparable in nature to prior years. Each of
these matters was discussed with the external
auditor during the year and, where
appropriate, have been addressed in the
Auditor’s Report on pages 228 to 233.
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Barclays PLC Annual Report 2017 55
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report What we did in 2017
Board Audit Committee report
Area of focus
Reporting issue
Role of the Committee
Conclusion/action taken
Conduct provisions
(refer to Note 27 to the
financial statements)
Barclays makes certain
assumptions and estimates,
analysis of which underpins
provisions made for the costs
of customer redress, such as
for Payment Protection
Insurance (PPI).
Legal, competition
and regulatory
provisions
(refer to Notes 27 to
29 to the financial
statements)
Valuations
(refer to Notes 14 to 18
to the financial
statements)
Barclays is engaged in various
legal, competition and regulatory
matters. The extent of the impact
on Barclays of these matters
cannot always be predicted, but
matters can give rise to
provisioning for contingent and
other liabilities depending on the
relevant facts and circumstances.
The level of provisioning is subject
to management judgement on the
basis of legal advice and is
therefore an area of focus for
the Committee.
Barclays exercises judgement in
the valuation and disclosure of
financial instruments, derivative
assets and certain portfolios,
particularly where quoted market
prices are not available, including
the Group’s Education, Social
Housing and Local Authority
(ESHLA) portfolio.
■■ Regularly analysed the judgements and
estimates made with regard to Barclays’
provisioning for PPI claims, taking into
account forecasts and assumptions
made for PPI complaints and actual
claims experience for Barclays and the
industry as a whole, including the
volume of invalid PPI claims.
■■ Debated the impact on the future range
of provisions arising from (i) the FCA’s
introduction of August 2019 as the
time-bar on claims, (ii) the PPI marketing
campaign, and (iii) the progress of the
proposed fee cap on the submission of
PPI complaints by claims management
companies which is being considered by
the UK Parliament.
■■ Evaluated proposed additional provisions
for PPI, considering whether the total
provision is within the modelled range
of future outcomes, and whether the
external auditor agreed with
management’s analysis and approach.
■■ Monitored the position on provisions
for alternative PPI (card protection and
payment break plan insurance) and
considered whether further provisions
were required.
■■ Evaluated advice on the status of
current legal, competition and
regulatory matters.
■■ Assessed management’s judgements
and estimates of the levels of provisions
to be taken and the adequacy of those
provisions, based on available
information and evidence.
■■ Considered the adequacy of disclosure,
recognising that any decision to set
provisions involves significant
judgement.
■■ Evaluated reports from Barclays
Valuations Committee, with particular
focus on the matters below.
■■ Monitored the valuation methods
applied by management to significant
valuation items, including the ESHLA
portfolio, a valuation disparity with a
third party in respect of a specific long
dated derivative portfolio, and the
approach to the marking of Own Credit.
■■ Monitored and discussed the impact of
negative interest rates on derivative
valuation.
■■ Considered the treatment of the
re-integration of Non-Core residual
operations into the core business.
The Committee and management
continue to monitor closely any
changes in customer or claims
management companies’ behaviour in
light of the FCA time-bar and
marketing campaign and the ongoing
impact of the Plevin case. Having
regard to the actual claims experience
over 2017 the Committee agreed with
management’s assessment that the
current provision of £1,600m was
appropriate. The Committee noted that
this estimate remains subject to
significant uncertainty in particular
regarding the level of valid customer
claims that may be received in the
period to August 2019. In this context
the Committee was satisfied that
sensitivities to the key variables were
appropriately disclosed.
The Committee discussed provisions
and utilisation. Having reviewed the
information available to determine
what was both probable and could
be reliably estimated, the Committee
agreed that the level of provision at
the year end was appropriate. The
Committee also considered that the
disclosures made provided the
appropriate information for investors
regarding the legal, competition and
regulatory matters being addressed
by the Group.
The Committee discussed these
matters and agreed that a minor
modification be made to the valuation
of the specific long dated derivative
portfolio where there existed significant
valuation disparity. This did not result
in a material change to the fair value
recorded by the Group. The Committee
noted that, following efforts by
management to restructure derivative
agreements impacted by negative
interest rates, any residual uncertainty
was now insignificant.
56 Barclays PLC Annual Report 2017
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Governance: Directors’ report Area of focus
Reporting issue
Role of the Committee
Conclusion/action taken
Impairment
(refer to Note 7 to the
financial statements)
Where appropriate, Barclays
models potential impairment
performance, allowing for certain
assumptions and sensitivities,
to agree allowances for credit
impairment, including agreeing
the timing of the recognition of
any impairment and estimating
the size, particularly where
forbearance has been granted.
Tax
(refer to Note 10 to the
financial statements)
Barclays is subject to taxation in a
number of jurisdictions globally
and makes judgements with
regard to provisioning for tax at
risk and on the recognition and
measurement of deferred
tax assets.
Long-term viability
(refer to Note 41 to the
financial statements)
The Directors are required to make
a statement in the Annual Report
as to the long-term viability of
Barclays. The Committee provides
advice to the Board on the form
and content of the statement,
including the underlying
assumptions.
The Committee reviewed model
adjustments made by management
to ensure that impairment allowances
were set at appropriate and adequate
levels. The Committee reviewed the
impairment charge in Barclaycard US
arising in the third quarter from the
asset sale in the first quarter. The
Committee also reviewed three
material single name charges in
the Corporate Bank.
The Committee agreed that the
provision levels for impairment
were appropriate.
The Committee reviewed Barclays’
global tax risk and associated
provisions for the full year and noted
that the level of tax provisions
remained at about the same level,
although the amount of gross tax risk
was assessed as slightly reduced.
In relation to the treatment of deferred
tax assets the Committee noted that
those due to US tax losses (£1,520m)
are forecast to be utilised by 2019
which is significantly earlier than the
first expiry date of 2028.
The Committee agreed with
management’s view that it was
appropriate not to take account of any
potential future BEAT liabilities in the
measurement of the deferred tax
assets. It noted that this would be in
line with recent US GAAP
pronouncements and as disclosed,
management is also continuing to
assess the full impact to the Group
of the complex provisions in the new
US legislation.
The Committee agreed that the
appropriate timeframe for the viability
statement continued to be three years.
Taking into account the assessment
by the Board Risk Committee of stress
testing results and risk appetite, the
Committee agreed to recommend
the viability statement to the Board
for approval.
■■ Assessed impairment experience against
forecast and whether impairment
provisions were appropriate.
■■ Evaluated credit impairment reports
(reviewed by the Group Impairment
Committee) presented by the Chief
Risk Officer.
■■ Considered a report from the Chief Risk
Officer on the position in the US Cards
portfolio and monitored the position to
determine whether increase in
impairment would be required.
■■ Considered a report from the Group
Impairment Committee on the adequacy
of loan impairment allowances as at
31 December 2017, including assessing
internal and external trends,
methodologies and key management
estimates.
■■ Evaluated the appropriateness of tax risk
provisions to cover existing tax risk.
■■ Confirmed the forecasts and
assumptions supporting the recognition
and valuation of deferred tax assets was
in line with Barclays’ Medium Term Plan
(MTP).
■■ Monitored the impact to Barclays of the
new US framework for tax legislation
covering a broad range of tax proposals
which was enacted on 22 December
2017 and which had a substantial impact
on the measurement of the Group’s US
deferred tax assets. The Committee also
considered the potential impact of the
Base Erosion Anti-abuse Tax (BEAT)
which was introduced as part of the
new legislation.
■■ Evaluated at year end a report from
management setting out the view of
Barclays’ long-term viability. This report
was based on Barclays’ MTP and covered
forecasts for capital, liquidity and
leverage, including forecast performance
against regulatory targets, outcomes of
the stress test of the MTP and forecast
capital and liquidity performance against
stress hurdle rates, funding and liquidity
forecasts and an assessment of global
risk themes and the Group’s risk profile.
■■ Considered the viability statement in
conjunction with Barclays’ risk
statements and strategy/business model
disclosures.
■■ Addressed feedback from investors, the
FRC and other stakeholders on viability
statements in general.
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Barclays PLC Annual Report 2017 57
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report What we did in 2017
Board Audit Committee report
Area of focus
Reporting issue
Role of the Committee
Conclusion/action taken
Fair, balanced and
understandable
reporting
(including country-by-
country reporting and
Pillar 3 reporting)
Barclays is required to ensure
that its external reporting is fair,
balanced and understandable.
The Committee undertakes an
assessment on behalf of the Board
in order to provide the Board with
assurance that it can make the
statement required by the UK Code
on Corporate Governance.
■■ Assessed through discussion with and
challenge of management, including
the Group Chief Executive and Group
Finance Director, whether disclosures in
Barclays’ Annual Report and other
financial reports were fair, balanced and
understandable.
■■ Evaluated reports from Barclays’
Disclosure Committee on its assessment
of the content, accuracy and tone of
the disclosures.
■■ Established through reports from
management that there were no
indications of fraud relating to financial
reporting matters.
■■ Evaluated the outputs of Barclays’
internal control assessments and
Sarbanes-Oxley s404 internal control
process.
■■ Assessed disclosure controls and
procedures.
■■ Confirmed that management had
reported on and evidenced the basis on
which representations to the external
auditors were made.
Having evaluated all of the available
information and the assurances
provided by management, the
Committee concluded that the
processes underlying the preparation
of Barclays’ published financial
statements, including the 2017 Annual
Report and financial statements, were
appropriate in ensuring that those
statements were fair, balanced and
understandable.
In assessing Barclays’ financial results
statements over the course of 2017, the
Committee specifically addressed and
provided input to management on the
disclosure and presentation of:
■■ the classification of Barclays’ holding
in Barclays Africa Group Limited as
an available for sale asset with effect
from 1 June 2017
■■ the closure of the Barclays Non-Core
business and the reintegration of the
remaining businesses and portfolio
■■ the Group Finance Director’s
presentations to analysts
■■ the level of segmental reporting.
The Committee recommended to the
Board that the 2017 Annual Report and
financial statements are fair, balanced
and understandable.
58 Barclays PLC Annual Report 2017
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Governance: Directors’ report Other significant matters
Apart from financial reporting matters the
Committee has responsibility for oversight of
the effectiveness of Barclays’ internal controls,
the performance and effectiveness of BIA and
the performance, objectivity and
independence of the external auditor. The
most significant matters considered during
2017 are described in the table below.
Area of focus
Matter addressed
Role of the Committee
Conclusion/action taken
Internal control
Read more about the
Barclays’ internal
control and risk
management
processes on page 82.
The effectiveness of
the overall control
environment, including
the status of any
material control issues
and the progress of
specific remediation
plans.
■■ Evaluated and tracked the status of the
most material control issues identified by
management through regular reports from
the Chief Controls Officer, assessed against
the new Controls Maturity Model created as
part of the Barclays Internal Controls
Enhancement Programme (BICEP).
■■ Evaluated the status of specific material
control issues and associated remediation
plans, including in particular those relating
to Model risk, resilience, cyber, compliance,
technology, credit risk, transaction operations
and data management which remained open
as at December 2017 and which were
reported as ‘on track’ to return to satisfactory
status within agreed timeframes.
■■ Considered the second line of defence role
in the oversight of operational risk controls,
including financial controls over operational
risk.
■■ Evaluated reports on the internal control
environment from the external auditor.
■■ Discussed lessons learned from specific
control incidents and how these could be
applied to Barclays’ business globally.
■■ Assessed the progress of the enhancements
being made to Barclays’ Risk and Control
Self-Assessment (RCSA) process.
■■ Clarified the role and responsibilities of the
Committee in relation to the split of
responsibility for operational risk between the
Committee and the Board Risk Committee.
The effectiveness of the
control environment
in each individual
business, including the
status of any material
control issues and the
progress of specific
remediation plans.
■■ Assessed reports on individual businesses
and functions on their control environment,
questioned the heads of the relevant
businesses or functions on control concerns
and scrutinised any identified control failures
and closely monitored the status of
remediation plans or workstreams to enhance
the respective control environments.
■■ Received updates directly from senior
management, and scrutinised action plans,
in relation to remediation plans following
unsatisfactory audit findings.
■■ Reviewed updates from management on the
Designated Market Activity (DMA)
remediation plan which addresses Barclays’
regulatory commitments to the Fed and other
US and UK regulators in relation to sales and
trading practices across the FX, Rates and
other markets related business areas.
The Committee welcomed the positive change
in approach that the BICEP programme had
driven across the business, notably that the
first line of defence was now more focused on
proactively self-identifying control issues
rather than waiting for them to be highlighted
by the second or third lines of defence. The
Committee continued to emphasise the
importance of a disciplined self-assessment
by management.
The Committee provided feedback on the
reporting of material control issues,
requesting further detail regarding completion
dates, key milestones and current status for
significant remediation projects to enable
closer monitoring and help drive
accountability at the appropriate management
level.
The Committee challenged the application of
the lessons learned process in view of the low
level of coverage of significant control
incidents. Management has taken steps to
enhance the process and ensure compliance.
Going forward this will be tracked by the Chief
Controls Office.
The Committee has continued to use the
output from the RCSA process in its review
of the control environment. While providing
a reasonable overview of the control
environment, the Committee welcomes
management’s plans to put in place a more
granular process which should provide greater
visibility on controls requiring remediation and
associated risks. This approach was piloted in
2017 and will be rolled out across the Group
in 2018.
The Committee received deep dive control
environment presentations from Barclays
International and Barclays UK. These provided
further detail of management’s assessment of
the business unit control environment and key
areas of focus, including key controls hot
spots for the businesses.
The Committee also received a number of
presentations from business heads following
unsatisfactory audit reports. The Committee
challenged the business regarding their role in
identifying the control issues and requested
confirmation from management regarding the
remediation programme, timeframe and
accountability for delivery and which are
subsequently monitored.
The Committee was encouraged that the
level of resources being devoted to the DMA
programme now shows that it is on track to
meet its milestones.
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Barclays PLC Annual Report 2017 59
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report What we did in 2017
Board Audit Committee report
Area of focus
Matter addressed
Role of the Committee
Conclusion/action taken
The effectiveness of the
control environment
in the Chief Operating
Office (COO) and the
status and remediation
of any material control
issues.
The adequacy of the
Group’s arrangements
to allow employees
to raise concerns in
confidence without
fear of retaliation and
the outcomes of any
substantiated cases.
Internal audit
The performance of
BIA and delivery of the
internal audit plan,
including scope of
work performed, the
level of resources and
the methodology and
coverage of the
internal audit plan.
■■ Scrutinised on a regular basis the COO
control environment, taking the opportunity
to directly challenge and question functional
leaders, including the Chief Operating Officer
on the progress of remediation plans.
■■ Clarified the Committee’s ongoing
responsibility for the oversight of controls
matters relating to the Group Service
Company.
■■ The Committee received a deep dive control
environment presentation from the Chief
Information Officer regarding Technology
control issues.
■■ Considered the results of the ‘Your View’
Survey in relation to employee views on their
ability to safely speak up in their business/
function and whether they could report
instances of dishonest or unethical behaviour
without fear.
■■ Received an update on enhancements to
Barclays’ whistleblowing programme
following the announcement of the PRA/FCA
investigations and the outcome of the
independent review that was commissioned
by the Board.
■■ Monitored instances of retaliation reports and
whether any instances had been substantiated.
■■ Monitored whistleblowing metrics, including
case load and case ageing.
■■ Scrutinised and agreed internal audit plans
and methodology and deliverables for 2017
and the first half of 2018, including reviewing
the number of audits for delivery following the
alignment of the Audit Universe to Barclays’
new structure following structural reform.
■■ Monitored BIA’s response to feedback
received from the PRA as part of its review of
internal audit, including independence and
impact, quality and weight of resources,
productivity and methodology.
■■ Monitored delivery of the agreed audit plans,
including assessing internal audit resources
and hiring levels and any impacts on the audit
plan and reviewing the reasons for the
postponement of audits in greater depth.
■■ Debated audit risk appetite and issue
validation.
■■ Tracked the levels of unsatisfactory audits,
including discussing the time taken to issue
audit reports and the reasons for any delays.
■■ Discussed BIA’s assessment of the
management control approach and control
environment in Barclays UK, Barclays
International and the functions.
■■ Evaluated the outcomes from BIA’s annual
self-assessment.
■■ Commissioned an independent external
review of BIA. The reviewer was selected as a
result of a tender process also run by the
Committee.
The Committee was pleased to note
continuing progress over 2017 to address
control issues in accordance with the agreed
timescales.
The Committee discussed the importance of
ongoing dialogue and regular training to
ensure that the route for escalations was clear
and cases were directed to the relevant team
for investigation and resolution.
The Committee supported the focus on
training both to colleagues on the channels
available for, and also managers on how to
handle, whistleblowing issues. The Committee
also emphasised the importance of sharing
positive outcomes of whistleblowing incidents
where possible.
The Committee was pleased to note that
volumes of cases remain proportionate to
Barclays’ size and footprint.
As Whistleblowing Champion, the Chairman
of the Committee made an annual report to
the Board on whistleblowing matters.
The Committee received semi-annual
thematic controls reports from BIA and a
quarterly operational report during 2017.
The Committee reiterated its support for BIA’s
recruitment plans which reflected significant
activity during 2017 to ensure appropriate
audit coverage to support the focus on BIA
quality across the audit cycle. The Committee
Chairman provided input into the recruitment
of the two key roles of Head of Internal Audit
in Barclays UK and Barclays International.
The Committee observed that the issues arising
from unsatisfactory audits indicated that there
was still work to do in embedding the required
level of control consciousness across the Group
and ensuring that control exceptions were
highlighted clearly in management reporting.
The Committee also requested that senior
management support BIA in holding
individuals accountable for failure to remediate
risks effectively where they had failed BIA
validation.
The Committee confirmed that it was satisfied
with the outcome of the self-assessment of BIA
performance and the independent external
review, both of which evidenced that the
function generally conforms to the standards set
by the Institute of Internal Auditors. It further
confirmed that it felt able to rely on the work of
BIA in discharging its own responsibilities.
The Committee is providing oversight over the
actions arising from the external review. See
page 61 opposite for further details of the review.
60 Barclays PLC Annual Report 2017
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Governance: Directors’ report Area of focus
Matter addressed
Role of the Committee
Conclusion/action taken
■■ Met with key members of the KPMG audit
team to discuss the 2017 audit plan and agree
areas of focus.
■■ Assessed regular reports from KPMG on the
progress of the 2017 audit and any material
accounting and control issues identified.
■■ Discussed KPMG’s feedback on Barclays’
critical accounting estimates and
judgements.
■■ Discussed KPMG’s draft report on certain
control areas and the control environment
ahead of the 2017 year end.
■■ Discussed the approach to KPMG’s annual
report to the PRA which will be issued
following completion of the 2017 audit.
■■ Considered the draft SOX controls report and
the draft audit opinion.
■■ BIA’s purpose and remit is clearly defined
and the function is positioned appropriately
within the governance framework of the
organisation/its role as an objective third
line of defence. This role has been
supported by the clearer delineation of the
first line role of the newly created Chief
Controls Office
■■ the focus on increased headcount in BIA
will help drive audit capacity and capability
through enhanced specialist skills/
knowledge. Deloitte reported that BIA cares
about its people and has created a
supportive environment in which to work
■■ while there are opportunities to improve
BIA’s impact, they are able to deliver
effective feedback on the operation of
controls that address key risks.
The report paid close attention to the matters
raised in the 2016 PRA letter regarding BIA,
and Deloitte met with the PRA as part of its
review. The Committee was satisfied with the
conclusions drawn in the report, while noting
the potential development areas identified, in
particular, extending the use of data analytics.
BIA has drawn up an action plan in response
to the review and the Committee will continue
to monitor the delivery of this plan.
External auditor
Following an external audit tender in 2015,
PwC was replaced in 2017 as Barclays’
statutory auditor by KPMG. Guy Bainbridge of
KPMG is Barclays’ senior statutory auditor
with effect from the audit for the 2017
financial year.
The Committee approved the audit plan and
the main areas of focus.
The Committee also approved the principal
services agreement and terms of engagement
in connection with KPMG’s appointment as
the Group’s auditors.
Read more about the Committee’s role in
assessing the performance, effectiveness and
independence of the external auditor and the
quality of the external audit below.
Assessing external auditor effectiveness,
auditor objectivity and independence and
non-audit services
The Committee is responsible for assessing
the effectiveness, objectivity and
independence of the Group’s auditor, KPMG
and in 2017 the Committee was particularly
concerned to ensure that the external auditor
transition period was managed effectively.
This responsibility was discharged throughout
the year at formal Committee meetings,
during private meetings with KPMG and
through discussions with key executive
stakeholders. In addition to the matters noted
above, during 2017 the Committee:
■■ approved the terms of the audit
engagement letter and associated fees, on
behalf of the Board
■■ discussed and agreed revisions to the Group
policy on the Provision of Services by the
Group Statutory Auditor and regularly
analysed reports from management on the
non-audit services provided to Barclays
■■ evaluated and approved revisions to the
Group policy on Employment of Employees
or Workers from the Statutory Auditor and
ensured compliance with the policy by
regularly assessing reports from
management detailing any appointments
made
■■ was briefed by KPMG on critical accounting
judgements and estimates
■■ assessed any potential threats to
independence that were self-identified and
reported by KPMG
■■ reviewed the report on KPMG issued by the
FRC’s Audit Quality Review team.
External audit
The work and
performance of KPMG
The Committee also covered the following
matters:
■■ tracked the progress of specific work being
done to enhance Barclays’ financial crime
controls, including the function’s
investigation capabilities, in particular in
relation to prevention and detection
activities. The Committee also assessed the
Group Money Laundering Officer’s annual
report
■■ assessed the status of the programme in
place to ensure Barclays’ compliance with
client assets (CASS) regulatory
requirements, including approving the
annual client assets audit report and
discussing the potential impact of structural
reform on client assets
■■ evaluated the outcomes of the assessment
of the Committee’s performance and any
areas of Committee performance that
needed to be enhanced
■■ reviewed and updated its terms of
reference, recommending them to the
Board for approval.
In addition to these matters, as highlighted
above in the section of the table headed
‘Internal audit’ the Committee commissioned
an independent review of BIA which was
undertaken by Deloitte during the second half
of 2017. The Chartered Institute of Internal
Auditors requires an independent external
review of internal audit functions to be carried
out at least every five years. Following a
selection process, the Committee
commissioned Deloitte to conduct this review
reporting directly to the Committee. The
report concluded that:
■■ BIA demonstrates general conformance
with the relevant standards and guidelines
■■ BIA has an effective core audit methodology
which reflects investment in agile ways of
working and data analytics which has
helped to drive continuous improvement.
In this respect it is aligned with or ahead
of peers
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Barclays PLC Annual Report 2017 61
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report begin. Services where the fees are expected to
be £250,000 or higher must be approved by
the Committee as a whole. All expenses and
disbursements must be included in the fees
calculation. The thresholds remained the
same following the annual review of the
Policy in 2017.
During 2017, all engagements where expected
fees met or exceeded the above thresholds
were evaluated by either the Committee
Chairman or the Committee as a whole who,
before confirming any approval, assured
themselves that there was justifiable reason
for engaging the auditor and that its
independence and objectivity would not be
threatened. No requests to use KPMG were
declined in 2017 (2016: one). On a quarterly
basis, the Committee scrutinised details of
individually approved and pre-approved
services undertaken by KPMG in order to
satisfy itself that they posed no risk to
independence, either in isolation or on an
aggregated basis. For the purposes of the
Policy, the Committee has determined that any
pre-approved service of a value of under
£50,000 is to be regarded as clearly trivial in
terms of its impact on Barclays’ financial
statements and has required the Group
Financial Controller to specifically review and
confirm to the Committee that any pre-
approved service with a value of £50,000-
£100,000 (or up to £25,000 for tax advisory
and tax planning services) may be regarded
as clearly trivial. The Committee undertook a
review of pre-approved services at its meeting
in December 2017 and satisfied itself that
such pre-approved services were clearly trivial
in the context of their impact on the financial
statements.
The fees payable to KPMG for the year ended
31 December 2017 amounted to £48m, of
which £10m (2016: £17m) was payable in
respect of non-audit services (KPMG was
appointed as the Group’s statutory auditor
from the financial year beginning 1 January
2017). A breakdown of the fees payable to the
Auditor for statutory audit and non-audit
work can be found in Note 42. Of the £10m of
non-audit services provided by KPMG during
2017, the significant categories of
engagement, i.e. services where the fees
amounted to more than £500,000, included:
■■ audit-related services: services in
connection with CASS audits (while the
CASS audit fell within the Auditor’s scope of
services, the fees for such services did not
form part of the global fee arrangements
and therefore required separate Board Audit
Committee approval pursuant to the Policy)
■■ quality assurance: support in connection
with reports on the internal controls
applicable to IBOR submission processes
■■ transaction support: ongoing attestation
and assurance services for treasury and
capital markets transactions to meet
regulatory requirements, including
regular reporting obligations and
verification reports.
The fees paid to PwC for non-audit work
during 2017, in the period before they resigned
as the Group’s statutory auditor, and after
they had resigned but before they were
non-independent of certain Group entities
(and therefore still fell within the Policy), were
£3m (2016: £8m). Significant categories of
engagement approved in 2017 included:
■■ transaction support: ongoing support for
treasury and capital markets transactions,
including providing comfort and accounting
letters to meet trust deed and regulatory
obligations (this ongoing support
transitioned to KPMG during 2017).
The Committee also reviewed the level of
consultancy spend with PwC during 2017,
which it had asked to be monitored in the
immediate period after they stepped down as
the Group’s auditors. Work with an estimated
value of £1m was awarded to PwC during the
year (this was in addition to the £3m in fees
paid to PwC for non-audit services referred
to above).
The Statutory Audit Services for
Large Companies Market Investigation
(Mandatory Use of Competitive Tender
Processes and Audit Committee
Responsibilities) Order 2014
An external audit tender was conducted in
2015 and the decision was made to appoint
KPMG as Barclays’ external auditor with effect
from the 2017 financial year, with PwC
resigning as the Group’s statutory auditor
at the conclusion of the 2016 audit.
Barclays 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.
What we did in 2017
Board Audit Committee report
KPMG’s performance, independence and
objectivity during 2017 were formally assessed
at the beginning of 2018 by way of a
questionnaire completed by key stakeholders
across the Group. The questionnaire was
designed to evaluate KPMG’s audit process
and addressed matters including the auditor
transition, quality of planning and
communication, technical knowledge, the
level of scrutiny and challenge applied and
KPMG’s understanding of the business. In
addition, KPMG have nominated a senior
partner on the audit team reporting to the
Senior Statutory Auditor to have specific
responsibility for ensuring audit quality. The
Committee therefore met with the partner
concerned without the Senior Statutory
Auditor in order to receive a report on his
assessment of audit quality.
Taking into account the results of all of the
above, the Committee considered that KPMG
maintained their independence and objectivity
and the audit process was effective.
Non-audit services
In order to safeguard the Auditor’s
independence and objectivity, Barclays 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
Group audit. The 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 Policy therefore
included Barclays Africa Group Limited up
until the point of accounting deconsolidation.
The core principle of the Policy is that
non-audit services (other than those legally
required to be carried out by the Group’s
Auditor) should only be performed by the
Auditor in certain, controlled circumstances.
The Policy sets out those types of services that
are strictly prohibited and those that are
allowable in principle. Any service types that
do not fall within either list are considered by
the Committee Chairman on a case by case
basis, supported by a risk assessment
provided by management.
Under the Policy, the Committee has
pre-approved all allowable services for which
fees are less than £100,000, or less than
£25,000 for tax advisory and tax planning
services. However, all proposed work,
regardless of the fees, must be sponsored by a
senior executive and recorded on a centralised
online system, with a detailed explanation of
the clear commercial benefit arising from
engaging the auditor over other potential
service providers. The audit firm engagement
partner must also confirm that the
engagement has been approved in
accordance with the Auditor’s own internal
ethical standards and does not pose any
threat to the Auditor’s independence or
objectivity. All requests to engage the Auditor
are assessed by independent management
before work can commence. Requests for
allowable service types in respect of which the
fees are expected to meet or exceed the above
thresholds must be approved by the Chairman
of the Committee before work is permitted to
62 Barclays PLC Annual Report 2017
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Governance: Directors’ report Governance in action – Preparation for IFRS 9
A significant activity for the Committee
during 2017 has been overseeing the
Group’s preparation for the implementation
of IFRS 9.
IFRS 9 Financial Instruments is effective from
1 January 2018 and replaces the IAS 39
accounting standard. The new standard sets
out the recognition and measurement
requirements for financial instruments
and has three parts: classification and
measurement of financial assets, the
requirements for impairment of financial
assets and a hedge accounting model that
is designed to more closely reflect risk
management. As permitted, Barclays intends
to continue with the existing IAS 39 hedge
accounting model. The new impairment
accounting model however has a significant
impact on Barclays and the changes are
complex and wide ranging; classification and
measurement also results in a number of
much less significant changes. IFRS 9 has
therefore been the subject of significant
regulatory and market focus. Barclays has
worked with the industry and regulators to
agree a transitional framework for regulatory
capital and disclosures and has taken note
of the best practice recommendations they
have issued for the management of the
transition to the new standard.
The Committee received regular updates on
the status, judgements and financial impacts
relating to the implementation of IFRS 9
during 2017 and the first quarter of 2018. It
has overseen the steps required for Barclays’
transition to the new standard, in particular
the delivery into production of the models
and controls which are required for its
implementation. Throughout the process,
the Committee emphasised to management
the importance of developing the models
to support business decision making to
manage risk and ensure appropriate
customer outcomes. The Committee
reviewed the internal governance and
validation processes in Risk and Finance and
received regular updates from KPMG on
their assurance work. The Committee also
received reports from BIA following the
audits undertaken in respect of the IFRS 9
programme, with a number of further audits
planned for 2018. The Committee also
reviewed the key estimates made by
management in considering future
economic scenarios and the criteria for
determining when significant credit
deterioration is observed.
In line with its terms of reference, the
Committee has been closely involved in the
review of all material external financial
reporting relating to IFRS 9 and is focused
on ensuring clarity, completeness and
appropriateness of the Group’s disclosures,
particularly given the complexity and
technical challenges of this standard. The
Committee reviewed the best estimate
impact on the Group which was disclosed
in Barclays’ third quarter results and the
updated IAS 8 disclosures included in the
2017 financial statements.
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Barclays PLC Annual Report 2017 63
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Board Risk Committee report
The Committee continued to monitor UK economic
trends, consumer behaviour and portfolio performance,
and a prudent approach to lending was maintained.
Dear Fellow Shareholders
The focus of the Committee during 2017 has
continued to be on assessing the impact of
important macroeconomic and market
developments on the risk profile of the Group.
Credit risk management during 2017 was
primarily concerned with the level of exposure
to consumer debt both in the UK and US. In
the UK, the Committee in 2016 had accepted
the recommendation of management to
pursue a conservative approach to managing
growth and balances in credit card debt. This
had been prompted by the rising level of
personal debt in the UK and concerns of
weaker growth and higher inflation resulting
from the country’s vote to leave the European
Union. This theme persisted in 2017, as the
Committee continued to monitor UK economic
trends, consumer behaviour and portfolio
performance, and a prudent approach to
lending was maintained. In the US, in late
2016, there had been nascent signs of
weakness in the consumer credit portfolio. The
Committee had requested management to
perform detailed analyses of the balances and,
based on this work, approved in early 2017 the
sale of a proportion of the weaker segments of
the portfolio. This action, along with increased
conservatism during the year in lending and
portfolio quality, has moderated the impact on
Barclays of increasing delinquencies among US
credit card borrowers being seen among US
credit card lenders.
While the impairment performance of the
Bank was largely within plan, wholesale credit
performance in the UK was slightly weaker
than in the US. The Bank experienced higher
impairment in its corporate lending book in
the UK from the default of certain borrowers
in the service sector. In the US, improved
economic conditions, and higher energy
prices resulted in favourable corporate
impairment trends compared to 2016.
In recent years, the Committee has been closely
supervising the strengthening of the capital
position of the Bank. Progress continued in
2017 as the Bank’s capital ratios continued to
improve. In assessing the adequacy of the
Bank’s capital position, the Committee took
into account current financial performance, the
impact of expected regulatory developments
(including structural reform), and estimates of
the costs of resolving past conduct and
litigation issues. Likewise, the Committee is
pleased that the liquidity risk in the Bank has
been closely monitored and strengthened over
the past year.
An important role of the Committee each year
is to recommend the risk appetite of the Bank
to the Board: its ability to earn an appropriate
return while being able to withstand shocks in
the market and economic environment. In
addition, the Committee monitors closely the
assessment of the Bank’s performance under
a variety of regulatory stress tests. We
evaluate not just the outcome of these
analyses but the means by which they are
performed, particularly the assessment of
model risk. These efforts increased in 2017, as
the Bank prepared for the first stress test of
the US Intermediate Holding Company, in
addition to completing the newly introduced
Biennial Exploratory Scenario for the Bank of
England stress test.
The Committee assesses external conditions
as part of establishing risk appetite. These
remain challenging and our objective was to
position the Bank conservatively to deal with
economic uncertainty. Key themes that
developed during 2017 with potential to have
a significant first order impact on Barclays’
businesses included heightened political and
economic risk in the UK in the backdrop of
Brexit negotiations, increased geopolitical risk
impacting the delicately poised global
economy, and a shortage of new transaction
flow in leveraged finance underwriting driving
tighter terms. Other emerging risks with
potential to impact Barclays include UK
property price stress and volatility in financial
markets after a long period of quiescent asset
appreciation. The Committee maintains
regular oversight of exposure to the key risk
themes it has identified and actions taken by
management in response.
During the year, the Committee also evaluated
the financial and capital impacts of
operational risk. The Committee has noted,
and encouraged, the efforts by management
to improve the Risk and Control Self-
Assessment programme in Operational risk.
This work is important in an environment of
heightened cyber risk and increased
operational complexity as the Bank
implements structural reform.
As in past years, the Committee reviewed the
execution by management of material
regulatory programmes and initiatives. These
included the BCBS239 effort to improve the
quality and reliability of data and information,
and IFRS 9, a new standard for the estimation
of credit impairment.
Committee performance
The performance of the Committee during
2017 was assessed as part of an internal
annual Committee effectiveness review. The
conclusion of my Board colleagues was that
the Committee is considered to operate
effectively and that the Board continues to
have a high degree of confidence in the
diligence and coverage of the Committee.
Feedback from the review indicated that the
Committee was both effective and influential
in identifying areas of risk where Barclays
needs to change its performance or adjust its
risk profile.
One of the areas identified for improvement
was to consider whether the Committee
would benefit from deeper expertise by
including a member with a risk function
management background and we will give
further consideration to this in 2018. The
review also highlighted the need to ensure
that the way in which the Committee works
with the Board Reputation and Board Audit
Committees continues to capture all
significant issues effectively while minimising
any overlap. I continued to work closely with
my fellow Board Committee Chairmen during
2017, particularly with the Board Audit
Committee Chairman in order to clarify the
responsibility of each committee in relation to
64 Barclays PLC Annual Report 2017
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Governance: Directors’ report
Member
Tim Breedon
Mike Ashley
Reuben Jeffery
Diane Schueneman
Matthew Lester (from 1 September 2017)
Steve Thieke (to 10 May 2017)
Meetings attended/eligible to attend
9/9
9/9
9/9
9/9
3/3
3/3
Committee role and responsibilities
The Committee’s main responsibilities include:
■■ reviewing and recommending to the Board
the Group’s financial and operational risk
appetite
■■ monitoring the Group’s financial and
operational risk profile
■■ commissioning, receiving and considering
reports on key financial and operational risk
issues.
The Committee’s terms of reference
are available at
home.barclays/corporategovernance
operational risk matters during the year which
each Committee has a role in overseeing. We
will work to embed this further in 2018. The
Committee will also focus on ensuring there is
a framework in place to ensure clear allocation
of responsibilities regarding the Committee’s
interaction with the risk committees of
Barclays UK and Barclays International under
the new Group structure.
You can read more about the outcomes of the
Board effectiveness review on page 78.
Looking ahead
2018 is important for Barclays as it completes
the restructuring required under the structural
reform programme. As a result, the firm will
have two important subsidiary legal entities in
Barclays UK, the core domestic franchise in the
UK, and Barclays International, the Corporate
and Investment Banking and international
consumer businesses of the firm. These will be
in addition to the US Intermediate Holding
Company, which is part of Barclays
International. The Committee will pay close
attention to the executive’s management of
risk within and across these entities.
We expect that credit and employment
conditions in the UK will continue to be
uncertain, as future trade and economic
arrangements with the EU take shape. In the
US, the impact of the corporate tax reform on
the health of companies and consumers will
need assessment. Lastly, the Committee will
continue to monitor the risk to Barclays from
volatility in financial markets, which have
experienced many years of steady asset
appreciation.
Tim Breedon
Chairman, Board Risk Committee
21 February 2018
Committee allocation of time (%)
4
1
3
2
1 Risk profile/risk appetite
(including capital and liquidity
management)
2 Key risk issues
3 Internal control/risk policies
4 Other (including remuneration
and governance issues)
2017
2016
53
26
12
9
52
26
8
14
Committee composition and meetings
The Committee is composed solely of
independent non-executive Directors. Details
of the skills and experience of the Committee
members can be found in their biographies on
pages 47 and 48.
The Committee met nine times in 2017, with
two of the meetings held at Barclays’ New
York offices. The chart above shows how the
Committee allocated its time during 2017.
Committee meetings were attended by
management, including the Group Chief
Executive, Group Finance Director, Chief
Internal Auditor, Chief Risk Officer, Barclays’
Treasurer and Group General Counsel, as well
as representatives from the businesses and
other representatives from the Risk function.
Representatives from Barclays’ external
auditor, KPMG, and until March 2017,
representatives from the outgoing external
auditor, PwC, also attended meetings.
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What we did in 2017
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The Committee’s work
The significant matters addressed by the Committee during 2017 are described below:
Area of focus
Matter addressed
Role of the Committee
Conclusion/action taken
Risk appetite and
stress testing, i.e. the
level of risk the Group
chooses to take in
pursuit of its business
objectives, including
testing whether the
Group’s financial
position and risk
profile provide
sufficient resilience to
withstand the impact
of severe economic
stress.
The risk context to
Medium Term Plan
(MTP), the financial
parameters and
constraints and mandate
and scale limits for
specific business risk
exposures; the Group’s
internal stress testing
exercises, including
scenario selection and
financial constraints,
stress testing themes and
the results and
implications of stress
tests, including those run
by the Bank of England
(BoE).
The trajectory to
achieving required
regulatory and internal
targets and capital and
leverage ratios.
Capital and funding,
i.e. having sufficient
capital and financial
resources to meet the
Group’s regulatory
requirements and its
obligations as they fall
due, to maintain its
credit rating, to
support growth and
strategic options.
Political and economic
risk, i.e. the impact on
the Group’s risk profile
of political and
economic
developments and
macroeconomic
conditions.
The potential impact on
the Group’s risk profile of
political developments,
such as elections in other
European countries, as
well as continuing to
monitor the impact of the
aftermath of the UK’s EU
Referendum.
■■ Assessed the risk context for the 2017 MTP,
including general economic and financial
conditions and how these had been reflected
in planning assumptions.
■■ Debated the assumptions, parameters and
results of the internal stress test of the risk
appetite of the 2017 MTP.
■■ Discussed and agreed mandate and scale
limits for Credit, Market and Treasury and
capital risk.
■■ Evaluated the BoE annual cyclical stress test
results, and the results of a stress test under
the BoE biennial exploratory scenario.
■■ Observed and debated regulatory and market
reaction to the publication of BoE stress test
results.
■■ Considered and approved internal stress test
themes and the financial constraints and
scenarios for stress testing risk appetite for
the 2018 MTP.
■■ Considered the Federal Reserve Board’s
feedback on the US Intermediate Holding
Company’s Comprehensive Capital Analysis
and Review (CCAR) capital plan following the
submission of the CCAR stress test results.
■■ Debated, on a regular basis, capital
performance against plan, tracking the capital
trajectory, any challenges and opportunities
and regulatory policy developments.
■■ Assessed, on a regular basis, liquidity
performance against both internal and
regulatory requirements.
■■ Regularly monitored capital and funding
requirements on a legal entity basis.
■■ Assessed the possible implications of
litigation and investigations on the Group’s
liquidity position, including a review of the
Bank’s liquidity risk control framework.
■■ Monitored the funding risk and capital
volatility associated with the Barclays
pension scheme.
■■ Monitored progress on actions to mitigate
the risk of the potential impact of negative
interest rates in the UK on Barclays.
■■ Monitored the potential impacts of Brexit,
including a ‘hard’ Brexit.
■■ Considered trends in the UK economy,
including risk of inflation amid negative real
wage growth.
■■ Continued to monitor the risks relating to
South Africa while Barclays still had control
of Barclays Africa Group Limited (BAGL).
■■ Monitored Barclays’ exposures to certain
products, and with particular focus on
redenomination risk, and the risk of a single
country leaving the Euro.
The Committee recommended the
proposed risk appetite for 2017 to the Board
for approval, although noted that this may
need to be revisited to take account of
the impact of IFRS 9 in due course. It
encouraged management to make further
progress on enhancing infrastructure used
to conduct the internal stress test. The
Committee approved the 2017 annual
stress test results for submission to the
BoE, including the range of management
actions and overlays designed to mitigate
risk impacts.
Similarly, the Committee approved the
results of the stress test under the BoE
biennial exploratory scenario and
recommended that the results should
be taken into consideration for strategy
projections.
In recommending the internal stress test
and risk appetite for the 2018 MTP, the
Committee noted and considered that the
severity of the internal stress test had been
higher than normal, which provided added
resilience to the various challenges for the
MTP, such as macroeconomic issues.
The Committee supported the forecast
capital and funding trajectory and the
actions identified by management to
manage the Group’s capital position. It
approved the proposed capital and liquidity
processes for Barclays UK for submission to
the regulator as part of its banking licence
application.
The Committee considered and approved
the Group capital adequacy assessment
together with the methodologies and
results of the reverse stress testing for the
submission of the 2017 Internal Capital
Adequacy Assessment Process (ICAAP) as
well as the Group’s 2017 Individual Liquidity
Adequacy Assessment Process (ILAAP).
Following the further sell-down of the
equity stake in BAGL and the subsequent
proportionate regulatory consolidation,
the Committee agreed that South Africa
should be removed as an ongoing risk
theme, although it continued to maintain
oversight of any emerging risk. It also
agreed to remove negative interest rates
as a key risk theme on the basis that the
actions previously identified and agreed to
mitigate the risk were nearing completion.
The Committee suggested that monitoring
geopolitical risks in Europe should be
broadened to include other regions, but
requested that China continue to be
reported as a separate geopolitical
risk theme.
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Matter addressed
Role of the Committee
Conclusion/action taken
Credit risk, i.e. the
potential for financial
loss if customers fail to
fulfil their contractual
obligations.
Conditions in the UK
housing market,
particularly in London and
the South East; levels of
UK consumer
indebtedness, particularly
in the context of the risk
of inflation and negative
real wage growth; and the
performance of the UK
and US Cards businesses,
including levels of
impairment.
■■ Continued to assess and monitor conditions
in the UK property market in case of signs of
stress.
The Committee focused on effective
collections capability as an important tool
of risk management.
The Committee encouraged management
to carry on with its conservative approach
to UK lending.
The Committee approved changes to the
risk appetite levels for US Cards.
The Committee requested more granular
detail of the impact of strategy changes on
risk limits and oversight.
■■ Evaluated how management was tracking
and responding to rising levels of consumer
indebtedness, particularly unsecured credit in
both the UK and US.
■■ Discussed the PRA’s statement on consumer
credit and unsecured lending in the UK, and
considered Barclays’ response to the PRA
statement.
■■ Scrutinised the performance of the UK and
US Cards businesses, including the level of
impairment.
■■ Reviewed and approved proposals for
frameworks relating to Securities Financial
Limits and Maximum Exposure Governance.
■■ Scrutinised a strategic review of business
activity in the Corporate and Investment
Bank.
The Committee focused its attention on the
financial and capital impacts of operational
risk. In relation to fraud, it encouraged
management to further integrate strategy,
models and operations.
The Committee requested a gap analysis
together with an action plan to remediate
specific weaknesses identified in the
internal audit in relation to modelling.
The Committee assessed during the year
the Group’s risk management capability in
the form of a Risk Capability Scorecard and
reviewed and approved proposals for the
external third party evaluation which was
scheduled to be performed in early 2018.
Operational risk,
i.e. costs arising from
human factors,
inadequate processes
and systems or
external events.
Risk framework and
governance
The Group’s operational
risk capital requirements
and any material changes
to the Group’s operational
risk profile and
performance of specific
operational risks against
agreed risk appetite.
■■ Tracked operational risk key indicators via
regular reports from the Head of Operational
Risk.
■■ Debated specific areas of emerging risks,
including conduct risk, cyber, execution risk,
technology and data, including the controls
that had been put in place for managing and
avoiding such risks.
The frameworks, policies
and talent and tools in
place to support effective
risk management and
oversight.
■■ Monitored progress on the implementation
of an enhanced modelling framework,
including receiving updates from Barclays
Internal Audit on findings in relation to
specific modelling processes.
■■ Tracked the progress of significant risk
management projects, including the progress
on achieving compliance with the Basel
Committee for Banking Supervision 239
(BCBS239) regulation for risk data
aggregation principles as well as the roll out
of the Risk and Control Self-Assessment
(RCSA) process across the Group. Please see
the ‘Governance in action’ box on page 68
for further details about the Committee’s role
in overseeing the RCSA process.
■■ Assessed risk management matters raised by
Barclays’ regulators and the actions being
taken by management to respond.
■■ Endorsed Legal risk and Model risk, as new
Principal Risks under the Enterprise Risk
Management Framework (ERMF), forming
part of the Committee’s roles and
responsibilities in future.
■■ Reviewed the implementation of the ERMF
during 2017 which had been designed to
address feedback from the PRA following a
review of the ERMF.
Remuneration
The scope of any risk
adjustments to be taken
into account by the Board
Remuneration Committee
when making
remuneration decisions
for 2017.
■■ Debated, in a joint meeting with the Board
Reputation Committee, the Risk function’s
view of 2017 performance, making a
recommendation to the Board Remuneration
Committee on the financial and operational
risk factors to be taken into account in
remuneration decisions for 2017.
The Committee discussed the report of the
Chief Risk Officer and considered the
proposal put forward in relation to the
impact of relevant risk factors in
determining 2017 remuneration decisions,
noting that it should also include positive
events such as the 2017 Banking Standards
Board report which had reported
improvements on 2016.
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In addition, the Committee also covered the
following matters in 2017:
■■ assessed Barclays’ exposures to the
leveraged finance market, general
conditions in that market and approved
an updated leveraged finance framework
which would be submitted annually to
the Committee for approval
■■ was briefed by PwC on main risk issues
identified during the 2016 year-end audit,
specifically impairment, post-model
adjustments, forbearance control issues,
key valuation judgements (including in
relation to the ESHLA portfolio), and key
assumptions used in the pension scheme
liabilities
■■ requested and evaluated a report on
partnership programmes in the US Cards
business with a focus on risk profile and
credit quality
■■ considered a report on the effectiveness of
the Committee and any areas of the
Committee’s performance that could be
improved
■■ reviewed and updated its terms of
reference, recommending them to the
Board for approval.
Governance in action –
Risk and Control Self-
Assessment programme
A key focus of the Committee in 2017 was
oversight of the implementation of a revised
Risk and Control Self-Assessment (RCSA)
programme. The RCSA enhancement
programme was established as part of
Barclays’ commitment to the effective
management the Group’s Operational risk
and extend both the scope of coverage
across a wider range of risks, and also
improve the granularity of management’s
risk and control assessments of business
processes. The programme is the firm-wide
process led approach for management to
identify and regularly assess material
inherent risks and their associated controls,
in order to mitigate these risks and reduce
the likelihood and/or severity of losses to
the firm from a Risk event.
In 2017, a number of pilot RCSAs were rolled
out across the Group in addition to the
regular RCSA process, which was also
enhanced. Improvements were also made in
the assessment of inherent risk values and
the aggregation process for risk and control
assessments across risk types. During the
year, the Committee reviewed progress in
terms of the RCSAs completed across the
Group, and also considered the next steps
in the review process and the results of the
residual risk assessments. Based on the
results of the pilot RCSAs undertaken, the
Committee was satisfied that the process will
improve management’s understanding of
the risk and control environment, so they can
prioritise and remediate ineffective controls
where required.
Following completion of the pilot RCSA
programme, the Committee considered the
ways in which the RCSA programme could
be enhanced for the wider implementation
of the programme in 2018. The Committee
considered specific revisions of the 2017
RCSA programme with the aim of:
■■ improving the identification of inherent
risk, control effectiveness and residual
risk by going into detail at a more
granular process level
■■ increasing the degree of independent
challenge provided by all Three Lines of
Defence
■■ increasing the granularity of
assessments for a further set of pilot
RCSAs to estimate inherent risk at
activity level by risk type, together with
the identification and assessment of
detailed operating controls by activity
and residual risk.
The Committee will continue to work with
management in 2018 on further refining
and enhancing the RCSA programme.
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What we did in 2017
Board Reputation Committee report
The Committee has been well positioned during 2017,
a time of significant organisational change for the Group,
to ensure that our people, whether within Barclays UK,
Barclays International or the Group Service Company,
continue to demonstrate behaviours and conduct that
are consistent with the Barclays Values.
One of the key challenges faced by the
Committee is how to maintain oversight of
Group Conduct and Culture matters as a
whole, without overlooking the cultural
differences that, naturally and quite rightly,
exist between our different operating
businesses and support functions. During the
year the Committee actively discussed this
challenge and, in an attempt to address this,
I rebalanced the Committee’s agenda by
introducing business and functional ‘Deep
Dive’ sessions into each meeting. The Deep
Dives allow the Committee to understand the
conduct, culture and customer satisfaction
issues being faced in specific areas of the
business and the actions undertaken to
address them. While consideration of our
well-refined dashboards and Reputation risk
reports ensure that Group-level metrics,
challenges and initiatives remain clearly visible
and subject to Committee consideration and
challenge. You can read about some of the
Deep Dives undertaken by the Committee
during 2017 on the following pages.
A significant output from the Committee
during 2017 resulted from discussions around
Barclays’ historic commitments to the
financing of certain fossil fuels projects, which
resulted in a decision to develop a more
proactive approach to the management of
sustainability issues across the Barclays
business. I would encourage you to refer to
the ‘Governance in action’ box on page 74 for
further details on this initiative.
Committee performance
Through the process of the annual Board
effectiveness review, which confirmed the
continued effectiveness of the Committee, the
ongoing evolution of the Committee’s role and
the increased impact that it had during the
last year was clearly acknowledged. An area
that the review identified for further
consideration was the continued oversight
of Conduct and Reputation risk matters in the
post-structural reform corporate structure,
which I will ensure is addressed by the
Committee ahead of April 2018.
Looking ahead
Finally, I would like to record my thanks to
Mike Roemer, who stepped down as Group
Chief Compliance Officer in October 2017, for
his outstanding contribution to the work of
the Committee during his tenure in that role.
I would also like to thank Diane de Saint
Victor, who stepped down from the
Committee on her retirement from the Board
in May 2017. I look forward to working with
our new Committee member, Mike Turner
and, subject to regulatory approval, our new
Group Chief Compliance Officer, Laura
Padovani, as we continue to support the
delivery of the Board’s collective vision of the
Barclays Values.
Sir Gerry Grimstone
Chairman, Board Reputation Committee
21 February 2018
Dear Fellow Shareholders
This is my second report to you as Chairman of
the Board Reputation Committee. At the
conclusion of my last report I commented that
the Committee, by way of its membership,
executive engagement and reporting
processes, had built a strong foundation on
which to base its future operations and drive
Barclays to be a governance leader in conduct,
culture and reputation matters. This strong
foundation has ensured that the Committee
has been well positioned during 2017, a time of
significant organisational change for the Group,
to ensure that our people, whether within
Barclays UK, Barclays International or the Group
Service Company, continue to demonstrate
behaviours and conduct that are consistent
with the Barclays Values.
On two occasions during 2017 the Committee
extended an invite to representatives of the
Banking Standards Board (BSB) to present and
discuss the outcomes of their 2016 and 2017
assessments of Barclays. As an independent
third party with insights across the banking
industry as a whole, the Committee attaches
significant value to the insights offered by the
BSB and I would like to extend my personal
thanks to Dame Colette Bowe and her team at
the BSB for their continuing work to promote
the highest standards of behaviour in UK
banking and restore public trust in the sector.
We were encouraged to hear that the results
had generally improved between 2016 and
2017 and were particularly pleased to see how
strongly the Barclays Values still resonate with
our colleagues. The Committee also carefully
considered the BSB’s feedback on results
relating to colleague resilience and you will
find an outline of our discussion on colleague
well-being on page 71.
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Committee allocation of time (%)
1
5
4
3
2
1 Conduct and compliance
2 Culture
3 Customer satisfaction
4 Citizenship
5 Brand and other Reputation risk
* 2016 figures have been rebased according to the
2017
36
20
14
16
14
2016*
33
21
6
13
27
significant matters considered by the Committee in
2017.
Committee role and responsibilities
The principal purpose of the Committee is to:
■■ support the Board in promoting its
collective vision of Barclays’ purpose, values,
culture and behaviours
■■ ensure, on behalf of the Board, the efficiency
of the processes for identification and
management of Conduct and Reputation
risk
■■ oversee Barclays’ conduct in relation to its
corporate and societal obligations, including
setting the guidance, direction and policies
for Barclays’ approach to customer and
regulatory matters and Barclays’ Citizenship
Strategy, including advising the Board and
management on these matters.
The Committee’s terms of reference
are available at
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Committee composition and meetings
The Committee is composed solely of
independent non-executive Directors. During
2017, Diane de Saint Victor stepped down
from the Committee and the Barclays Board
with effect from 10 May 2017.
The Committee met four times during 2017
and the chart on the left shows how it
allocated its time. Committee meetings were
attended by representatives from
management, including the Group Chief
Executive, Chief Compliance Officer, Chief
Internal Auditor, Chief Risk Officer, Group
General Counsel, Group Chief of Staff, Group
HR Director and the Heads of Corporate
Communications, Citizenship and Reputation,
as well as senior representatives from the
businesses and other functions. A
representative from KPMG, Barclays’ external
auditor, attended each Committee meeting
during the year and representatives from the
BSB attended two meetings during 2017.
Member
Sir Gerry Grimstone
Mike Ashley
Mary Francis
Dambisa Moyo
Diane de Saint Victor (to 10 May 2017)
Meetings attended/eligible to attend
4/4
4/4
4/4
4/4
1/1
The Committee’s work
The significant matters addressed by the Committee during 2017 are described below:
Area of focus
Conduct risk
Matter addressed
Role of the Committee
Conclusion/action taken
Monitoring the risks that can arise
from the inappropriate supply of
financial services, including
instances of wilful or negligent
misconduct.
■■ Discussed updates from management
on Conduct risk and considered
performance against Conduct risk
indicators at each meeting.
■■ Discussed the specific Conduct risks
associated with certain business areas
and the status of initiatives in place to
address those risks and further
strengthen the culture of the business.
■■ Received reports from Barclays Internal
Audit (BIA) in respect of internal audit
activities on conduct risk management
matters, including details of any
unsatisfactory audit reports and
remediation steps identified.
■■ Discussed and approved the Conduct
Risk Framework, with Conduct risk
having been identified as a Principal Risk
under the Barclays Enterprise Risk
Management Framework (ERMF).
■■ Received forward looking information on
regulatory developments, including the
issuance of new consultations by
regulators, that might have a Conduct
risk impact on Barclays in the future.
■■ Approved the annual Compliance Plan.
■■ Considered and approved the proposed
methodology for calculating Conduct
risk adjustments to incentive pools.
In line with its recategorisation under the
ERMF, the Committee adopted Board-
level oversight of financial crime risk and
conducted a Deep Dive into this area.
The Conduct dashboard report was
updated to include financial crime
information and metrics, and the
Committee was encouraged by
management’s open and transparent
approach to engaging with regulators on
financial crime matters.
The Committee considered the differing
regulatory requirements placed on the
UK and US Cards businesses and have
suggested that a ‘Barclays view’ should
overlay the requirements of local
regulations to ensure that all retail facing
businesses within the Group operate
within a framework that prioritises the
concept of ‘Treating Customers Fairly’.
During discussion of the realignment of
businesses between Barclays UK and
Barclays International, the Committee
encouraged management to take
advantage of opportunities presented by
structural reform to address some areas
of Conduct risk by harmonising policies
and operations, in areas such as
collections and affordability assessments.
The Committee considered an update
from BIA on the use of Conduct risk
information by legal entities within the
Group and their assessment of reporting
mechanisms and the escalation of issues
up the organisational hierarchy.
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Governance: Directors’ report Area of focus
Matter addressed
Role of the Committee
Conclusion/action taken
Cultural progress
Reviewing management’s
progress on embedding a
values-based culture across the
organisation.
■■ Debated Culture dashboards presented
at each meeting and the progress being
made to embed cultural change across
Barclays globally.
■■ Received regular updates on colleague
engagement metrics and the results of
employee YourView surveys and
considered proposed changes to the
YourView methodology.
■■ Approved the adaption of the Culture
dashboard to include the monitoring of
cultural attributes across the firm.
■■ Considered and discussed with
representatives of the BSB the results of
their 2016 and 2017 Annual Reviews of
Barclays.
■■ Considered a Deep Dive analysis on
culture within Barclaycard UK, including
the process and challenges of integrating
the UK Cards business into Barclays UK.
■■ Considered feedback from the FCA on
the Conduct and Culture dashboards.
■■ Received information on management’s
initiatives to improve colleague
well-being and resilience, including
actively encouraging employees to work
dynamically and providing a supportive
environment in which colleagues feel
able to talk about the impacts of stress
and mental health concerns.
■■ Considered draft disclosures on the
Gender Pay Gap within the Group and
industry comparators.
Through consideration of the Culture
dashboards and YourView results,
the Committee was encouraged by the
consistently strong sustainable
engagement scores achieved
throughout 2017. Improvements have
been made in the area of colleague
enablement, however the Committee
appreciated management’s
acknowledgement that further
improvement is still required in this
area, notably in terms of reducing
perceived bureaucracy throughout
the organisation.
The Committee discussed the
importance of a culture in which
colleagues feel able to speak up and
raise concerns. Particular attention has
been paid to whistleblowing metrics
throughout the year and, on
recommendation of the Committee,
the YourView survey system now
contains a direct link to Barclays’
whistleblowing resources with the
intention of further encouraging and
supporting employees to report
instances of unethical or inappropriate
behaviour.
Additional and more detailed
information is becoming available to
the Committee, by way of reporting on
cultural attributes, on what employees
perceive to be the most prevalent
facets of Barclays’ organisational
culture. It is intended that this
information be used to monitor
attainment of a set of desired attributes
and facilitate further discussion and
action in order to achieve this.
By way of discussion of the FCA’s
feedback on Barclays’ dashboards,
the Committee acknowledged that the
dashboards are just one of a number
of key management information tools
used to set its agenda and facilitate an
ongoing discussion with management
on culture which leads, in some cases,
to deliberate actions being taken by
the Group and business executive
committees.
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Barclays PLC Annual Report 2017 71
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report What we did in 2017
Board Reputation Committee report
Area of focus
Matter addressed
Role of the Committee
Conclusion/action taken
Customer satisfaction Ensuring fair outcomes for
customers by monitoring
complaints volumes, the standard
and quality of complaints handling
processes and other relevant
metrics.
■■ Debated Complaints dashboards and
performance against key indicators at
each meeting.
■■ Gave consideration to the impact that
matters, such as an effective
communication channel, have on
customer complaints volumes.
■■ Considered the quality of the processes
in place to address and resolve customer
complaints.
■■ Monitored trends in the underlying
causes of complaints and considered
forward looking analysis to identify
events (both industry-wide and
Barclays-specific) which could influence
the volume and timings of complaints.
■■ Considered the differing complaints
profiles of the Barclays UK and Barclays
International businesses and the actions
being undertaken to positively improve
the customer journey by utilising
complaints management information
(MI).
■■ Requested further insight into the first
line management of customer
complaints and conducted a Deep Dive
into Barclays UK’s complaints handling
processes (Barclays UK receives the
majority of Barclays’ customer
complaints given its retail focus).
■■ Requested additional Deep Dives on
areas of the Barclays International
business that have a retail customer base
and considered the complaints profiles
of those businesses.
■■ Considered the progress being made by
relevant businesses to improve their
respective net promoter score (NPS).
The Committee was pleased to see a
general downward trend in the number
of complaints received by Barclays
during 2017.
While the Committee still receives a
Group-wide report on complaints,
underlying reporting has been refined
in line with organisational changes to
ensure the Committee receives a clear
view on the complaints metrics of
Barclays UK and Barclays International
respectively. The Committee made
recommendations to management, in
the context of the structural reform
programme, in respect of ensuring a
consistent ‘Barclays’ customer
experience is received by retail clients
whether they are being serviced by
Barclays UK or Barclays International.
The Committee developed its
understanding of how complaints MI is
mapped by Barclays UK in order to
identify root causes and received
information on the strategic initiatives
being undertaken to address them. The
Committee’s Deep Dive also led to
further refinement of the Barclays UK
Complaints dashboards to include
complaints volumes by channel. The
analysis of the data revealed a high
level of customer satisfaction with
Barclays’ online bank offering.
The Committee was pleased to see an
increase in Barclays UK’s NPS during
the course of 2017 and support
management’s objective of further
increasing NPS to ensure Barclays UK
remains competitive against challenger
and start-up banks.
In relation to Barclays International’s
business areas, the Committee was
encouraged to hear that complaints
volumes were at an all-time low
within Barclaycard US but noted
management’s desire to improve the
business’s net promoter score against
key US competitors. The Committee
also considered the approach being
taken by Barclays Partner Finance to
identify potential areas of future
complaints and proactively reaching
out to customers to resolve issues
before complaints arise.
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Governance: Directors’ report Area of focus
Citizenship
Matter addressed
Role of the Committee
Conclusion/action taken
Monitoring progress against the
Shared Growth Ambition
(Barclays’ Citizenship plan for
2016-2018) and the effectiveness
of policy statements on Citizenship
matters.
The Committee was very pleased to see
that Citizenship metrics demonstrate a
high level of colleague pride in the
contribution Barclays makes to the
community and society.
The Committee is very encouraged by
management’s decision to dedicate
resource to financial crime, skills and
employability and digital empowerment
initiatives that provide benefits not only
to Barclays and its customers, but to
the banking industry and UK
population more generally.
Read more about Barclays’ approach
to Citizenship on pages 21 and 22.
■■ Considered the Citizenship dashboards
presented at each meeting and assessed
status updates on the Shared Growth
Ambition.
■■ Reviewed Barclays’ ratings and relative
peer ranking in external Environmental
Social Governance (ESG) benchmarks
and tracked external perceptions on
Citizenship through stakeholder and
media analysis.
■■ Received information on new Citizenship
initiatives such as the #Digisafe
campaign which aims to educate
individuals to better protect themselves
against digital fraud.
■■ Received an update from Barclays’ Global
Head of Financial Crime in respect of the
function’s development of intelligence-
led initiatives to combat fraud.
■■ Reviewed and recommended the
approval of Barclays’ Statement on
Modern Slavery.
Reputation and brand Ensuring that the Barclays brand
■■ Reviewed Reputation risk updates
is proactively managed and
Reputation risks and issues are
identified and managed
appropriately.
from management, receiving specific
information on those issues deemed
to constitute the most significant
Reputation risks and issues in each
quarter.
■■ Regularly evaluated the measures being
taken to enhance the Barclays brand and
to understand, and propose action to
improve, where appropriate, external
perceptions of the Bank.
■■ Considered whether the process for
identifying, managing and overseeing
Reputation risk was functioning
effectively.
The Committee approved the
Reputation Risk Framework, confirming
that Reputation risk is now a Principal
Risk under the ERMF. Significant
discussion also took place in respect
of the correlation between cultural
indicators, conduct outcomes and
Reputation risk.
The Committee requested further
refinement of the Reputation risk
reporting received to include sentiment
analysis of media coverage and metrics
on Barclays’ social media presence.
The Corporate Relations priorities
for 2017 were pre-approved by the
Committee and fulfilment of those
priorities kept under review throughout
the year. This process improved
management’s ability to more
effectively understand and monitor
external perceptions of Barclays among
key stakeholders.
The Committee requested that
management undertake work to
further refine the components of
Reputation risk, clarify the process for
identifying risks, enhance management
oversight and give consideration to
how the overall process can be better
communicated.
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GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report What we did in 2017
Board Reputation Committee report
The Committee also covered the following
matters:
■■ received a report on management’s annual
review of the effectiveness of compliance
with the Volcker Rule (restrictions on
proprietary trading and certain fund
investments by banks operating in the US)
■■ received a report from management on
Barclays’ Swap Dealer Annual Compliance
Report
■■ discussed the outcome of an externally
facilitated review on Barclays’ compliance
with the recommendations of the Task
Force on Climate-Related Financial
Disclosures (TCFD) and its comparative
performance against its peers.
■■ approved, from a Reputation risk
perspective, a proposal to restructure
certain intra-group shareholdings and
enhance capital utilisations
■■ assessed and discussed a report on the
Committee’s performance
■■ reviewed and updated its terms of
reference.
Read more about Barclays’ risk
management on pages 119 and 120 and
in our Pillar 3 Report, which is available
online at barclays.com/annualreport
Governance in action –
Responding to stakeholder
concerns
During the year, the Committee gave
consideration to Barclays’ exposure to
environmental, social and sustainability
matters through its business relationships
and challenged management to establish a
more formal and proactive approach to
documenting policy positions and
guidelines in relevant sectors.
In response to recommendations from the
Committee, management commenced
work to review Barclays’ involvement and
practices in certain ‘sensitive sectors’ and
is in the process of drawing up proposals
for sector-specific policies that will
articulate the forward-looking intentions of
Barclays in these areas. The Committee will
be reviewing and approving these policies
during 2018 and look forward to reporting
on their content and implementation in
next year’s Annual Report.
The Committee considers that the
establishment of sector-specific policies
and guidelines will be a significant step in
further enhancing the role that Barclays
plays in the wider business community and
believe they will improve the quality of the
Company’s future reporting on climate
change and other matters of social and
environmental interest.
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Governance: Directors’ report Governance: Directors’ report
What we did in 2017
Board Nominations Committee report
In 2017 we made significant progress towards our new
Group governance structure in preparation for
structural reform and the stand up of our ring-fenced
bank in 2018, with appointments having been made to
both the Barclays UK and Barclays International
divisional boards.
Looking ahead
In 2018 we look forward to the execution of
our new Group structure and to the
implementation of robust processes providing
clear, consistent and effective corporate
governance for the Group post-structural
reform. Throughout this period of change,
the Committee will continue to ensure that
we have the right people leading the strategic
direction of Barclays, motivating colleagues
and sustaining our business over the long
term.
John McFarlane
Chairman, Board Nominations Committee
21 February 2018
Dear Fellow Shareholders
In 2017 we made significant progress towards
our new Group governance structure in
preparation for structural reform and the
stand up of our ring-fenced bank in 2018, with
appointments having been made to both the
Barclays UK and Barclays International
divisional boards. We are delighted to
welcome the new directors to those boards,
led by Sir Gerry Grimstone as Chairman of
Barclays International (subject to regulatory
approval) and Sir Ian Cheshire as Chairman of
Barclays UK (which will become our ring-
fenced bank). We continued to refine the
details of how the Group Board will interact
with those boards and the boards of our other
strategically significant subsidiaries, building
on the Governance Guiding Principles we
created in 2016. We look forward to working
collaboratively with them to ensure that the
roles and responsibilities of each board are
clear, while providing effective governance of
the Group and protection of shareholder
interests.
In view of the significant changes to our
Group corporate structure, and always bearing
in mind the long-term strategy of the Group,
the Committee continues to regularly consider
our Board composition and succession plans,
ensuring it comprises the right balance of
diversity, skills and experience to provide the
strategic oversight needed to steer the
business of the Group. We conducted
searches for non-executive Directors in 2017
and were pleased to appoint Matthew Lester
and Mike Turner CBE to the Board, in addition
to the appointment of Sir Ian Cheshire.
Matthew, Mike and Sir Ian each bring with
them significant board-level experience and
you can find out more about their background
and relevant skills and experience that they
bring to the Board in their profiles on pages 47
and 48.
I have previously emphasised that it is a key
part of our role to be satisfied that there are
proper processes in place for executive
succession, and this continues to remain
another key consideration of the Committee.
We closely monitored the status and progress
of the Barclays Talent and Succession strategy,
providing input and guidance to management
to ensure we attract and retain the best talent
for the Group. As a Committee, we also
discuss ways in which we can develop and
nurture high performing individuals within
senior management to strengthen our
succession pipeline, including the use
of ex-officio posts to relevant executive
committees to give those individuals
exposure to Group matters and leadership.
Our people are the driving force in sustaining
our business and we firmly believe in the
benefits of having a diverse workforce. I am
proud to see the number and variety of
diversity and inclusion initiatives we have at
Barclays to develop and support colleagues,
and ultimately to encourage them to grow
their careers with us. While we recognise that
diversity is not only about gender, it is
nevertheless an important element of diversity
and we have set ourselves a target of 33%
female representation on the Board by 2020,
which as a Board we remain committed to
achieving. Please see page 79 for further
information about our approach to diversity at
both Board and Group Executive Committee
levels.
Committee performance
The performance of the Committee was
assessed as part of the annual Board
effectiveness review and I am pleased to
report that the results show that it is
performing effectively, with the role and
responsibilities of the Committee clear and
well understood. One area identified for
consideration is that the Committee should be
mindful of ensuring that all non-executive
Directors receive the same flow of information
in relation to decisions and discussions by the
Committee, which I will address in my updates
to the Board as Chairman of the Board
Nominations Committee, and outside of
scheduled Board meetings to the extent
appropriate. The report on the Board
effectiveness review can be found on page 78.
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Barclays PLC Annual Report 2017 75
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report What we did in 2017
Board Nominations Committee report
Committee allocation of time (%)
5
1
2
4
3
1 Corporate governance matters
2 Board and Committee
composition
3 Succession planning and talent
4 Board effectiveness
5 Other
2017
8
2016
20
42
33
11
6
36
31
8
5
Committee composition and meetings
The Committee is composed solely of
independent non-executive Directors. John
McFarlane, as Chairman of the Board, is also
Chairman of the Committee. Mike Ashley, Tim
Breedon, Crawford Gillies, and Sir Gerry
Grimstone, being the Chairmen of each of the
other Board Committees, and Sir Ian Cheshire
(as Chairman of Barclays UK) and Reuben
Jeffery III, are also members of the Committee.
Details of the skills and experience of the
Committee members can be found in their
biographies on pages 47 and 48.
During 2017 there were three meetings of the
Committee, including one held at Barclays’
New York offices. Attendance by members at
Committee meetings is shown below and the
chart to the left shows how the Committee
allocated its time. Committee meetings were
attended by the Group Chief Executive, with
the Group HR Director, the Head of Talent, and
the Global Head of Diversity and Inclusion
attending as appropriate.
Meetings attended/eligible to attend
Member
John McFarlane
Mike Ashley
Tim Breedon
Crawford Gillies
Sir Gerry Grimstone
Reuben Jeffery III
Sir Ian Cheshire (from 9 May 2017)
3/3
3/3
3/3
3/3
3/3
3/3
0/1*
* Sir Ian Cheshire did not attend owing to prior
commitments, but his views and comments were
made available to, and considered by, the Committee.
Committee role and responsibilities
The principal purpose of the Committee is to:
■■ support and advise the Board in ensuring
that the composition of the Board and its
Committees is appropriate and enables
them to function effectively
■■ examine the skills, experience and diversity
on the Board and plan succession for key
Board appointments, planning ahead to
deal with upcoming retirements and to fill
any expected skills gaps
■■ provide Board-level oversight of the Group’s
talent management programme and
diversity and inclusion initiatives
■■ agree the annual Board effectiveness review
process and monitor the progress of any
actions arising
■■ ensure the Board has appropriate corporate
governance standards and practices in
place and keep these under review to
ensure they are consistent with best
practice.
The Committee’s terms of reference
are available at
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The Committee’s work
The significant matters addressed by the Committee during 2017 are described below:
Area of focus
Matter addressed
Role of the Committee
Conclusion/action taken
Board and Board
Committee
composition
The membership of the Barclays
PLC Board and the current and
future composition of the Board
and its Committees.
■■ Reviewed the Board skills matrix and
discussed the key skills and experience
needed on the Board in the context of
future strategic direction, including any
areas requiring strengthening for skills
and succession and conducted a search
for non-executive Directors.
■■ Considered the skills and composition
of the Board in a post-structural reform
environment.
■■ Reviewed the membership, size and
composition of Board Committees.
The Committee identified the need to
appoint an additional non-executive
Director with chairman or CEO experience
to add further depth to the Board.
During the year it recommended for
appointment to the Board Mike Turner
CBE, Sir Ian Cheshire (brought on as
Chairman of Barclays UK) and Matthew
Lester (following the Committee’s
previous recommendation of an additional
non-executive Director with accounting
and auditing experience). The Committee
agreed that a search would be conducted
for an additional female non-executive
Director to promote diversity of gender on
the Board and in recognition of the
Board’s commitment to achieving 33%
female representation on the Board by
2020.
The Committee agreed to review the role,
purpose and composition of the Group
Board once the Barclays UK and Barclays
International Boards were fully
constituted and operational boards. It
noted that changes to Board Committee
membership may take place once those
boards, as well as the Group Service
Company board, were operational so that
a holistic view can be taken on
appropriate memberships and cross-
memberships of boards and committees.
Please refer to page 77 for more details
of the Board’s approach to the
recruitment of new Directors.
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Governance: Directors’ report Area of focus
Matter addressed
Role of the Committee
Conclusion/action taken
Board composition of
Barclays UK and
Barclays International
in preparation for the
legal entity stand up
in 2018 under the
structural reform
programme
The composition of the Barclays
UK and Barclays International
divisional boards.
■■ Considered the board skills matrix for
Barclays UK and Barclays International.
■■ Considered updates on the
establishment of boards of Barclays UK
and Barclays International and discussed
the suitability of potential candidates
identified to join those boards.
The Committee, in reviewing the skills
matrices for Barclays UK and Barclays
International following appointments
to those boards, is of the view that
there do not appear to be any skills
gaps across the two boards, subject to
the recruitment of a non-executive
Director with retail banking experience
to the Barclays UK board. It discussed
opportunities for interaction between
the Barclays PLC, Barclays UK and
Barclays International boards and
agreed to consider opportunities for
engagement at board and committee
level going forward.
Executive succession
planning and talent
management
Succession planning and talent
management at Group Executive
Committee level.
■■ Considered updates on, and progress
being made against, Barclays’ Talent
and Succession strategy, including
monitoring diversity within the talent
pipeline.
■■ Discussed updates from the Group HR
Director on Group Executive Committee
succession plans, including assessing
emergency cover, the existing talent
pipeline and any potential gaps.
■■ Considered individuals identified as
potential Group Executive Committee
successors and discussed next steps for
their development.
■■ Considered the succession plans for the
most critical business unit and functional
roles and discussed how to develop the
high performing individuals identified.
The Committee welcomed the progress
made in the Group Executive
Committee succession planning, but
noted that there was further work to be
done in ensuring we are able to recruit
and retain the best talent for the Group.
It noted that the boards of Barclays UK
and Barclays International, once
established, would be able to take a
more granular view of succession to
some of the roles. The Committee also
discussed the use of ex officio posts to
both the Group Executive Committee
and business executive committees to
give senior individuals exposure to
Group matters as a further way of
developing those individuals to ensure
a healthy pool of potential candidates
in the succession pipeline.
In addition, the Committee covered the
following matters:
■■ considered the results of, and the action
plan in respect of, the 2016 Board
effectiveness review and the process for the
2017 Board and Committee effectiveness
review
■■ reviewed and confirmed the effectiveness
of the processes for authorising Directors’
conflicts of interests and Directors’
induction and training
■■ considered a report on the effectiveness of
the Committee
■■ reviewed the Committee’s terms of
reference.
Appointment and re-election of Directors
Board and Board Committee composition
is a standing item for consideration at each
Committee meeting. This includes the
consideration of potential new non-executive
Director appointments, both in respect of
planned succession for known retirements
and as a result of the ongoing review of the
skills and experience needed on the Board in
order for it to continue to operate effectively.
The Committee frequently considers a skills
matrix for the Board, which identifies the core
competencies, skills, diversity and experience
required for the Board to deliver its strategic
aims and govern the Group effectively. Certain
attributes identified in the skills matrix have a
target weighting attached to them and these
are regularly updated over time to reflect the
needs of the Group. The Committee reviews
the skills matrix when considering a new
appointment to the Board, as well as
reviewing the current and expected Board and
Board Committee composition. This helps to
determine a timeline for proposed
appointments to the Board.
When recruiting a new non-executive Director,
the specific skills that are needed are
identified, for example, an individual with
international experience, or recent history
serving on a particular board committee.
The Charter of Expectations contains the key
competencies and skills expected of non-
executive Directors, and these, in addition
to other details such as expected time
commitment, will be included in an individual
specification. The Committee as a whole then
considers curriculum vitae and references for
potential candidates. Any candidates who are
shortlisted will be interviewed by members
of the Committee and, if applicable, key
shareholders and Barclays’ regulators may be
asked to provide feedback on the proposed
appointment. The Board is updated on the
progress of the recruitment and interview
process, and any feedback from the interviews
is provided to the Board alongside a
recommendation for appointment.
Executive search firms Egon Zehnder and
Buchanan Harvey were instructed to assist
with the search for non-executive Directors
during 2017. Neither firm has any other
connection to Barclays, other than to provide
recruitment services. Open advertising for
Group Board positions was not used in 2017,
as the Committee believes that targeted
recruitment is the optimal way of recruiting
for Board positions. Both of the firms used for
non-executive Director recruitment have
signed up to the Voluntary Code of Conduct
for Executive Search Firms, which include
measures designed to improve gender
diversity on boards.
In 2017, Barclays announced the appointments
of Sir Ian Cheshire, Matthew Lester and Mike
Turner CBE as non-executive Directors, with
each Director bringing specific skills and
experience to fill the role previously identified
by the Committee as well as all having
extensive board-level experience (see pages
47 and 48 for details of each Director’s
experience and background). Diane de Saint
Victor and Steve Thieke both stood down
from the Board with effect from the end of the
2017 AGM.
The Directors in office at the end of 2017 were
subject to an effectiveness review, as
described on page 78. Based on the results of
the review the Board accepted the view of the
Committee that each Director proposed for
election or re-election continues to be
effective and that they each demonstrated the
level of commitment required in connection
with their role on the Board and the needs of
the business.
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Barclays PLC Annual Report 2017 77
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report What we did in 2017
Board Nominations Committee report
Review of Board and Board Committee
effectiveness
Process
Each year, an evaluation is conducted on the
effectiveness of the Board, the Board
Committees and individual Directors. Full
external evaluations of Board effectiveness have
been undertaken in the past two years. In view
of the impending new Group corporate
structure, following which another external
evaluation will be carried out once the structure
has had time to settle, the Board decided to
focus this year’s review on individual Director
performance to monitor the Board’s progress
and to inform the agenda of the next full
external review process.
Independent Board Evaluation facilitated the
effectiveness review for 2016 and was engaged
again to conduct the 2017 Board review, also
again led by Ffion Hague. Independent Board
Evaluation is an independent external
consultancy with no other connection to
Barclays. Consistent with previous years, Ffion
Hague carried out interviews with the Directors
to obtain feedback on the effectiveness of the
Board throughout 2017.
Independent Board Evaluation issued a report
to the Board on the findings of the
effectiveness review. In addition, the
Chairman was provided with a report and
feedback on the performance of each of the
Directors, and the Senior Independent
Director received a report on the Chairman.
Following consideration of the findings of the
2017 Board and Committee effectiveness
reviews, the Directors remain satisfied that the
Board and each of the Board Committees are
operating effectively.
Outcomes of 2017 review
Board performance is considered to be improving,
with more effective and insightful questions being
asked in Board debates and a better balance being
struck between support and challenge. In
particular, the Directors were positive about:
■■ the preparations for structural reform
■■ project execution, such as the remediation
of control issues and preparations for Brexit
■■ the recruitment of high quality new Board
members and members for the boards of
Barclays UK and Barclays International.
The Directors were also pleased with progress
on strengthening the senior executive team
and deepening relationships between
Directors and key executives. The executive
team feels well supported by the Board and is
grateful for that support.
Business performance is a concern for Board
members, and the Board is focused on
improving this within the Group. This will be a
particular area of focus in 2018. The
restructuring of the Group in April 2018 is also
a significant focus for the Group and regarded
as a major challenge. The Board is cognisant
of the challenges of ensuring the new Group
corporate structure is effective and efficient,
and is conscious of the need to maintain good
governance overall and minimise duplication.
The interaction between the Group Board and
the boards of our strategically significant
subsidiaries will be closely monitored and
thought will be given to identifying
opportunities for engagement with subsidiary
board members to develop and maintain a
good working relationship. The impact of the
new structure on Board work and governance
will be a key area of review for the 2018
external evaluation of the Board.
Committee effectiveness
The 2017 Board Committee effectiveness
review was carried out internally, led by the
Company Secretary. A questionnaire was
circulated to all Committee members with a
report of the findings of the effectiveness
review provided to the Chair of each
Committee as well as an update to the Board.
The conclusion from the Committee reviews is
that the Committees are working well, and
you can read more about the findings for each
Board Committee within each Committee
Chairman’s letter.
Progress against 2016 findings
Following the 2016 Board effectiveness review facilitated by Independent Board Evaluation, a number of findings were identified and the summary
below sets out the Board’s progress against those actions in 2017.
2016 findings
Actions taken/findings in 2017
Board priorities
Create regular broad-based risk oversight Board sessions
to allow Directors to look across the risk spectrum.
Schedule a debate on the role of the Board and non-
executive Directors and link the conclusions to revised Board
objectives to help focus the Board’s agenda.
Board/executive
relationship
Positive and constructive relations between the Board
and the new management team were reported.
Time was scheduled for free-ranging discussion around risk,
strategy and the Bank’s long term plan during the Board’s
annual strategy session.
The review reported that Board discussion was more focused
and struck a balance between support and challenge.
The review found that the relationship between the Board and
executive management deepened during 2017, with executive
management feeling well supported.
Optimise
communication
and collaboration*
Continue to optimise the information flow between
Directors in the run-up to structural reform in 2018.
The Chairman continued to hold meetings with non-executive
Directors ahead of Board meetings to brief them on current issues.
Consider agreeing common values for the Group and
the banking subsidiary boards in the new structure.
Board
appointment
process
Continue to refine the Board skills matrix to ensure it aligns
with the Group’s strategy and informs the succession plan for
key Board roles. Implement more regular reporting to the Board
on potential non-executive Directors under consideration.
Director
induction
Continue to enhance the Director induction process with a
focus on providing broader governance training to anyone
who has not previously served on a UK PLC board.
Reporting
to the Board†
Review reporting arrangements on strategy implementation
and review the KPIs or dashboard reports for key initiatives.
Notes
* In 2016 this finding was named ‘Greater awareness of Board Committee work’.
† In 2016 this finding was named ‘Dealing more strategically with global regulation’.
Further principles and practices were developed for
interaction between the Board and the boards of Barclays UK
and Barclays International, building on the Governance
Guiding principles created in 2016.
The Board skills matrix and succession plan were kept under
review, with separate skills matrices established for the
Barclays UK and Barclays International boards. Board
members were updated on recruitment progress and details
of potential candidates.
The induction programme was reviewed to factor in tailored
governance training for new Directors and was extended also
to directors of Barclays UK, Barclays International and the
Group Service Company.
The form and content of reporting to the Board was reviewed
and refreshed by management to ensure that the Board is
provided with appropriate management information on
strategy and execution priorities.
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Governance: Directors’ report Diversity on the Board and Group Executive Committee
The Board continues to have regard to
the Hampton-Alexander Review
recommendations to improve gender
diversity among FTSE leadership teams and
the Parker Review recommendations on the
ethnic diversity of UK boards.
With regard to ethnic diversity, the Board
considers that Barclays is currently
well-positioned in terms of representation at
Board level and also at Group Executive
Committee level when taking into account
the Parker Review definition (being
“individuals of Black, East Asian, Latin
American, Middle Eastern or South Asian
ethno-cultural backgrounds”). The Board
will continue to monitor the overall diversity
of our leadership pipeline to ensure we are
attracting the broadest spectrum of leaders
to Barclays.
During 2017, the Committee received regular
updates from the Global Head of Diversity
and Inclusion covering the full spectrum of
Barclays’ diversity and inclusion agenda,
including the actions being taken regarding
dynamic working, colleague inclusion,
workforce diversity, mental health awareness
and social mobility. The Committee is
pleased with the progress being made and
discussed ways in which inclusion might be
tracked. Management is continuing to work
on drawing together indicators across the
Group to develop a metric to measure
progress on inclusion.
Further details about the current
diversity balance of the Board can be
found on page 46. More details on
Barclays diversity and inclusion strategy and
the progress made can be found on page 89.
The Committee recognises the importance
of ensuring that there is broad diversity
inclusive of, but not limited to, gender,
ethnicity, geography and business
experience on the Board, while continuing to
recommend all appointments based on
merit in the context of the skills and
experience required. Barclays’ approach to
Board diversity is set out in full in the Board
Diversity Policy, which can be found online
at home.barclays/corporategovernance.
Our Board Diversity Policy recognises that a
truly diverse Board will include and make
good use of the differences in skills,
experience, background, race, gender and
other distinctions brought by each Director,
with such differences being considered in
determining the optimum composition of
the Board. When executive search firms are
engaged to assist with the recruitment of a
new Director, diversity is identified as a key
factor. In addition, the external Board
evaluation considered diversity when
assessing the effectiveness of the Board. The
Barclays Board target of 33% female
representation among Directors by 2020 is
formally reflected in the Board Diversity
Policy as well as being noted in the Board
skills matrix. Noting the current gender
diversity balance on the Board, and
as mentioned earlier in this report, the
Committee has commissioned the
recruitment of a further female non-
executive Director to strengthen the diversity
of gender on the Board. Further details
about the current diversity balance of the
Board can be found on page 46.
The Committee is also mindful of the current
gender diversity balance of the Group
Executive Committee, but is satisfied with
the overall level of diversity across that
Committee standing at 33% and with the
percentage of women among the direct
reports of Group Executive Committee
members strengthening our succession
pipeline. Further, Barclays is committed to
achieving 33% female representation among
the Group Executive Committee and their
direct reports by 2020, and is currently
reporting 25% female representation among
this population. In 2017, the Group Executive
Committee continued the initiative
introduced by the Group Chief Executive in
2016 of having one ex-officio position on the
Committee to broaden the scope of
perspectives and contributions made, with
each appointee serving for a four-month
rotation.
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Barclays PLC Annual Report 2017 79
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report How we comply
UK Corporate Governance Code (the Code)
As Barclays is listed on the London Stock
Exchange we apply the main principles of
the Code and comply with the Code’s
provisions. A copy of the Code can be
found at frc.org.uk. Corporate Governance
in Barclays contains a full description of
our corporate governance practices and
is available online at home.barclays/
corporategovernance. For the year ended
31 December 2017, and at the date of this
report, we are pleased to confirm that we
complied in full with the Code.
Disclosure Guidance and
Transparency Rules
By virtue of the information included in this
Governance section of the Annual Report
we comply with the corporate governance
statement requirements of the FCA’s
Disclosure Guidance and Transparency Rules.
Certain additional information that is required
to be disclosed pursuant to DTR7.2.6 can be
found on pages 85 to 88.
New York Stock Exchange (NYSE)
Barclays is permitted by NYSE rules to follow
UK corporate governance practices instead
of those applied in the US. However, any
significant variations must be explained in
Barclays’ Form 20-F filing, which can be
accessed from the Securities and Exchange
Commission’s EDGAR database or on our
website, home.barclays.
Leadership
As highlighted earlier in this report, the Board
of Directors is responsible for promoting the
highest standards of corporate governance
in Barclays. We act in a way that we consider
promotes the success of Barclays for the
benefit of shareholders as a whole, and are
accountable to the shareholders for creating
and delivering sustainable value. We are
responsible for setting strategy and overseeing
its implementation, and also ensuring that
management maintains an effective system
of internal control.
For further information about the role of the
Board and its responsibilities, together with
the Board governance framework, please see
page 50.
Roles on the Board
Executive and non-executive Directors share
the same duties and are subject to the same
constraints. However, in line with the
principles of the Code, a clear division of
responsibilities has been established. The
Chairman is responsible for leading and
managing the work of the Board, while
responsibility for the day-to-day management
of Barclays has been delegated to the Group
Chief Executive. The Group Chief Executive is
supported in this role by the Group Executive
Committee. Further information on
membership of the Group Executive
Committee can be found on page 49.
As a Board we have set out our expectations
of each Director in Barclays’ Charter of
Expectations. This includes role profiles and
the behaviours and competencies required for
each role on the Board, namely the Chairman,
Deputy Chairman, Senior Independent
Director, non-executive Directors, executive
Directors and Committee Chairmen. The
Charter of Expectations is reviewed annually
to ensure it remains relevant and up to date.
It is published on home.barclays/
corporategovernance to ensure that there is
complete transparency of the standards we
set for ourselves.
Attendance
As members of the Board of Directors we are
expected to attend every Board meeting. In
2017, we attended both scheduled and
additional Board meetings, as recorded in the
table below. The Chairman met privately with
the non-executive Directors ahead of each
scheduled Board meeting, and if, owing to
exceptional circumstances, a Director was not
able to attend a Board meeting they ensured
that their views were made known to the
Chairman in advance of the meeting.
Board attendance
Independent
Scheduled
meetings
eligible
to attend
Scheduled
meetings
attended
%
attendance
Additional
meetings
eligible
to attend
Additional
meetings
attended
%
attendance
Group Chairman
John McFarlane
Executive Directors
Tushar Morzaria
Jes Staley
Non-executive Directors
Mike Ashley
Tim Breedon CBE
Sir Ian Cheshire
Mary Francis CBE
Crawford Gillies
Sir Gerry Grimstone
Reuben Jeffery III
Matthew Lester
Dambisa Moyo
Diane Schueneman
Mike Turner CBE*
Former Directors
Diane de Saint Victor
Steve Thieke
Secretary
Stephen Shapiro
Former Secretaries
Lawrence Dickinson
Claire Davies
On appointment
Executive Director
Executive Director
Independent
Independent
Independent
Independent
Independent
Senior Independent Director
Independent
Independent
Independent
Independent
Independent
Independent
Independent
8
8
8
8
8
6
8
8
8
8
3
8
8
–
3
3
2
1
5
8
8
8
8
8
5
8
8
8
8
3
8
8
–
3
3
2
1
5
100
100
100
100
100
83
100
100
100
100
100
100
100
n/a
100
100
100
100
100
7
4
4
7
7
4
7
7
7
7
1
7
7
–
3
3
–
1
6
7
4
4
7
6
4
7
7
7
7
1
7
7
–
3
3
–
1
6
100
100
100
100
86
100
100
100
100
100
100
100
100
n/a
100
100
n/a
100
100
Note
* Mike Turner CBE joined the Board with effect from 1 January 2018. As part of his induction programme, he attended the December 2017 Board meeting.
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Governance: Directors’ report Board Committee cross-membership
The table below shows the number of cross-memberships of our non-executive Directors across our Board Committees.
Board Audit
Committee
Board Nominations
Committee
Board Remuneration
Committee
Board Reputation
Committee
Board Risk Committee
Board Reputation Committee
Board Remuneration Committee
Board Nominations Committee
4
1
2
3
3
2
2
1
2
1
Effectiveness
Composition of the Board
In line with the requirements of the Code,
a majority of the Board are independent
non-executive Directors. The Board currently
comprises a Chairman, who was independent
on appointment, two executive Directors and
eleven non-executive Directors. We consider
the independence of our non-executive
Directors annually, using the independence
criteria set out in the Code and by reviewing
performance against behaviours that we have
identified as essential in order to be considered
independent. As part of this process, the
Board keeps under review the length of tenure
of all Directors, which is a factor that is
considered as part of its deliberations when
determining independence of our non-
executive Directors. The independence criteria
can be found in Corporate Governance in
Barclays at
home.barclays/corporategovernance.
The Board Nominations Committee considers
Board succession planning and regularly
reviews the composition of the Board and the
Board Committees to ensure that there is an
appropriate balance and diversity of skills,
experience, independence and knowledge.
The size of the Board is not fixed and may be
revised from time to time to reflect the
changing needs of the business and the Board
Nominations Committee will consider the
balance of skills and experience of current
Directors when considering a proposed
appointment.
Each year we carry out an effectiveness review
in order to evaluate our performance as a
Board, as well as the performance of each of
the Board Committees and individual
Directors. This annual review assesses
whether each of us continues to discharge
our respective duties and responsibilities
effectively and is considered when deciding
whether individual Directors will offer
themselves for election or re-election at the
AGM. More information on the 2017 Board
effectiveness review can be found on page 78.
Our biographies containing our relevant skills
and experience, Board Committee membership
and other principal appointments can be
found on pages 47 and 48. Details of changes
to the Board in 2017 and year to date are
disclosed on page 85.
The service contracts for the executive
Directors and the letters of appointment for
the Chairman and non-executive Directors are
available for inspection at our registered office.
Time commitment
We are expected to allocate sufficient time
to our role on the Board in order to discharge
our responsibilities effectively. This includes
attending, and being well-prepared for, all
Board and Board Committee meetings, as well
as making time to understand the business,
meet with executives and regulators, and
complete ongoing training. As stated in our
Charter of Expectations, time commitment is
agreed with each non-executive Director on
an individual basis. Set out below is the
average expected time commitment for the
role of non-executive Directors and the other
non-executive positions on the Board. For
these additional positions there is an
expectation that, in order to effectively fulfil
extra responsibilities, additional time
commitment is required.
Role
Chairman
Deputy
Chairman
Senior
Independent
Director
Non-
executive
Director
Committee
Chairmen
Expected time commitment
80% of a full time position
At least 0.5 days a week
As required to fulfil the role
30 days a year (membership of
one Board Committee included,
increasing to 40 days a year
if a member of two Board
Committees)
At least 60 days a year
(including non-executive
Director time commitment)
The Chairman must commit to expend
whatever time is necessary to fulfil his duties
and, while this is expected to be equivalent to
80% of a full time position, his Chairmanship
of the Group, and leadership of the Board,
has priority over other business commitments.
In exceptional circumstances, we are all
expected to commit significantly more time
to our work on the Board.
Induction
On appointment to the Board, all Directors
receive a comprehensive induction which is
tailored to the new Director’s individual
requirements. The induction schedule is
designed to quickly provide the new Director
with an understanding of how the Group
works and the key issues that it faces. The
Company Secretary consults the Chairman
when designing an induction schedule, giving
consideration to the particular needs of the
new Director. When a Director is joining a
Board Committee the schedule includes an
induction to the operation of that committee.
On completion of the induction programme,
the Director should have sufficient knowledge
and understanding of the nature of the
business, and the opportunities and
challenges facing Barclays, to enable them to
effectively contribute to strategic discussions
and oversight of the Group.
Following their appointment in 2017, Sir Ian
Cheshire, Matthew Lester and Mike Turner
CBE received induction programmes on
joining the Board. In line with normal practice,
they met with the Company Secretary, the
current non-executive Directors and members
of the Group Executive Committee and certain
other senior executives.
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Training and development
In order to continue to contribute effectively
to Board and Board Committee meetings,
Directors are regularly provided with the
opportunity to take part in ongoing training
and development and can also request
specific training that we may consider
necessary or useful. As part of our annual
performance review with the Chairman, we
discuss any particular development needs that
can be met through either formal training or
meeting with a particular senior executive. In
2017, Directors received ongoing training in
relation to legal and regulatory developments,
including in relation to the requirements of,
and responsibilities under, the UK Senior
Managers Regime.
Conflicts of interest
In accordance with the Companies Act 2006
and the Articles of Association the Board has
the authority to authorise conflicts of interest.
Directors are required to declare any potential
or actual conflicts of interest that could
interfere with their ability to act in the best
interests of the Group. The Company
Secretary maintains a conflicts register, which
is a record of actual and potential conflicts,
together with any Board authorisation of the
conflict. The authorisations are for an
indefinite period but are reviewed annually by
the Board Nominations Committee, which also
considers the effectiveness of the process for
authorising Directors’ conflicts of interest. The
Board retains the power to vary or terminate
the authorisation at any time.
Information provided to the Board
The Role Profile for the Chairman, as set out in
our Charter of Expectations, confirms his
responsibility for ensuring that members of
the Board receive accurate, timely and
high-quality information. In particular, we
require information about Barclays’
performance to enable us to take sound
decisions, monitor effectively and provide
advice to promote the success of the
Company. Working in collaboration with the
Chairman, the Company Secretary is
responsible for ensuring good governance and
consults Directors to ensure that good
information flows exist and that the Board
receives the information it requires in order to
be effective.
Throughout the year both the executive
Directors and senior executives keep the
Board informed of key developments in the
business through regular reports and updates.
These are in addition to the presentations that
the Board and Board Committees receive as
part of their formal meetings. Directors are
able to seek independent and professional
advice at Barclays’ expense, if required, to
enable Directors to fulfil their obligations as
members of the Board.
Accountability
Risk management and internal control
The Directors are responsible for ensuring that
management maintains an effective system
of risk management and internal control and
for assessing its effectiveness. Such a system
is designed to identify, evaluate and manage,
rather than eliminate, the risk of failure to
achieve business objectives and can only
provide reasonable and not absolute
assurance against material misstatement
or loss.
Barclays is committed to operating within a
strong system of internal control that enables
business to be transacted and risk taken
without exposing itself to unacceptable
potential losses or reputational damage.
Barclays has an overarching framework that
sets out the Group’s approach to internal
governance, The Barclays Guide, which
establishes the mechanisms and processes by
which management implements the strategy
set by the Board to direct the organisation,
through setting the tone and expectations
from the top, delegating its authority and
assessing compliance.
A key component of The Barclays Guide is
the Enterprise Risk Management Framework
(ERMF). The purpose of the ERMF is to
identify and set minimum requirements in
respect of the main risks to achieving the
Group’s strategic objectives and to provide
reasonable assurance that internal controls
are effective. The key elements of the Group’s
system of internal control, which is aligned to
the recommendations of The Committee of
Sponsoring Organizations of the Treadway
Commission, Internal Control – Integrated
Framework (2013 COSO), are set out in the
risk control frameworks relating to each of
the Group’s Principal Risks. As well
as incorporating our internal requirements,
these reflect material Group-wide legal and
regulatory requirements relating to internal
control and assurance.
Effectiveness of internal controls
Key controls are assessed on a regular basis
for both design and operating effectiveness.
Issues arising out of business risk and control
assessments and other internal and external
sources are examined to identify pervasive
themes. Where appropriate, control issues are
reported to the Board Audit Committee (BAC).
In addition, the BAC receives regular reports
from management, BIA and the Finance,
Compliance and Legal functions covering, in
particular, financial controls, compliance and
other operational controls.
Risk management and internal
control framework
The ERMF is the Group’s internal control
framework, which is refreshed annually.
There are eight Principal Risks under the
ERMF: Credit risk, Market risk, Treasury and
capital risk, Operational risk, Model risk,
Reputation risk, Conduct risk and Legal risk.
The BAC formally reviews the system of
internal control and risk management
annually. Throughout the year ended
31 December 2017 and to date, the Group
has operated a system of internal control that
provides reasonable assurance of effective
operations covering all controls, including
financial and operational controls and
compliance with laws and regulations.
Processes are in place for identifying,
evaluating and managing the Principal Risks
facing the Group in accordance with the
‘Guidance on Risk Management, Internal
Control and Related Financial and Business
Reporting’ published by the Financial
Reporting Council.
The review of the effectiveness of the system
of risk management and internal control is
achieved through a four-step approach which
is centred on reviewing the effectiveness of
The Barclays Guide and its component parts:
1. Control meetings of the business and
functional executive committees monitor,
review and challenge the effective
operation of key risk management and
control processes, including the results of
audits and reviews undertaken by BIA
(which include assessments of the control
environment and management control
approach) and examinations and
assessments undertaken by our primary
regulators, on an ongoing basis as part of
the system of risk management and
internal control. The remediation of issues
identified within the control environment is
regularly monitored by management and
the BAC.
2. Testing of the control meetings, held by
the executive committees, provides
assurance that the committees are
effectively overseeing the control
environment and associated risk
management and internal control
processes.
3. The owners of the key governance
processes which comprise The Barclays
Guide undertake a review to confirm that
processes have been implemented.
4. The annual review of the system of risk
management and internal control brings
together the results of the activities
completed in steps 1 to 3 to ensure that
each of the key processes have been
effectively reviewed.
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Governance: Directors’ report 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 2017. 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 2017.
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 197 to 204.
Changes in internal control over
financial reporting
There have been no changes in the Group’s
internal control over financial reporting that
occurred during the period covered by this
report which have materially affected or
are reasonably likely to materially affect
the Group’s internal control over
financial reporting.
Remuneration
The Board has delegated responsibility
for the consideration and approval of the
remuneration arrangements of the Chairman,
executive Directors, other senior executives
and certain Group employees to the Board
Remuneration Committee. The Board as a
whole, with the non-executive Directors
abstaining, considers annually the fees paid
to non-executive Directors. Information on
the activities of the Board Remuneration
Committee in 2017 can be found in the
Remuneration report on pages 93 to 116,
which forms part of the corporate
governance statement.
Regular reports are made to the Board
covering risks of Group-level significance.
The Board Risk Committee and the Board
Reputation Committee examine reports
covering the Principal Risks as well as reports
on risk measurement methodologies and risk
appetite. Further details of risk management
procedures and potential risk factors are given
in the Risk review and risk management
sections on pages 117 to 204.
Controls over financial reporting
A framework of disclosure controls and
procedures is in place to support the approval
of the Group’s financial statements. Specific
governance committees are responsible for
examining the Group’s financial reports and
disclosures to ensure that they have been
subject to adequate verification and comply
with applicable standards and legislation.
These committees report their conclusions
to the BAC which debates its conclusions
and provides further challenge. Finally,
the Board scrutinises and approves results
announcements and the Annual Report, and
ensures that appropriate disclosures have
been made. This governance process ensures
that both management and the Board are
given sufficient opportunity to debate and
challenge the Group’s financial statements
and other significant disclosures before they
are made public.
Management’s report on internal control
over financial reporting
Management is responsible for establishing
and maintaining adequate internal control
over financial reporting. Internal control over
financial reporting is a process designed under
the supervision of the principal executive
and principal financial officers to provide
reasonable assurance regarding the reliability
of financial reporting and the preparation of
financial statements for external reporting
purposes in accordance with International
Financial Reporting Standards (IFRS) as
adopted by the European Union and issued by
the International Accounting Standards Board
(IASB). Internal control over financial reporting
includes policies and procedures that pertain
to the maintenance of records that, in
reasonable detail, accurately and fairly reflect
transactions and dispositions of assets;
provide reasonable assurances that
transactions are recorded as necessary to
permit preparation of financial statements
in accordance with IFRS and that receipts
and expenditures are being made only in
accordance with authorisations of
management and the respective Directors;
and provide reasonable assurance regarding
prevention or timely detection of unauthorised
acquisition, use or disposition of assets
that could have a material effect on the
financial statements.
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Barclays PLC Annual Report 2017 83
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report How we comply
Stakeholder engagement
Investor engagement
The Board is committed to promoting
effective channels of communication with
our shareholders and upholding good
corporate governance as a means of building
stronger and more engaged relationships
with them. Our comprehensive Investor
Relations engagement with the market helps
us to understand investor views about
Barclays, which are communicated
regularly to the Board. Our shareholder
communication guidelines, which underpin
all investor engagement, are available on our
website at home.barclays/investorrelations.
Institutional investors
In 2017, our Investor Relations engagement
with institutional investors took place
throughout the year, both following our
quarterly results as well as outside of the
reporting cycle. This allowed the opportunity
for existing and potential new investors to
engage with Barclays regularly, promoting
dialogue on longer-term strategic
developments as well as on the recent
financial performance of the Group.
The Directors, in conjunction with the senior
executive team and Investor Relations,
participated in varied forms of engagement,
including investor meetings, seminars and
conferences across many geographic
locations, reflecting the diverse nature of our
equity and debt institutional ownership.
Divisional management also presented
extensively to investors, promoting greater
awareness and understanding of our
operating businesses.
During 2017, discussions with investors were
focused on the completion of our
restructuring, including the sell-down of our
interest in Barclays Africa Group Limited to
14.9% and the closure of Non-Core in June,
as well as our revised Group financial targets
and our plans to achieve them within the
specified timelines. Investors were also kept
informed about progress on structural
reform, in particular the set up of the UK
ring-fenced bank, which we expect to take
place in the second quarter of 2018.
Investor meetings focused on corporate
governance also took place throughout the
year, with the Chairman, Senior Independent
Director, other Board representatives and the
Company Secretary.
We held conference calls/webcasts for our
quarterly results briefings and an in-person
presentation for our 2016 full year results in
March 2017, all hosted by the Group Chief
Executive and Group Finance Director. In
addition, the Group Finance Director held
a quarterly breakfast briefing for sell-side
analysts, with a transcript of the discussions
uploaded to our website. For fixed income
investors we held conference calls at our full
year and half year results, hosted by our
Group Finance Director and Group Treasurer.
The Investor Relations section of our website
is an important communication channel
that enables the effective distribution of
information to the market in a clear and
consistent manner. Executive management
presentations, speeches and, where possible,
webcast replays are uploaded to our website
on a timely basis.
Private shareholders
During 2017, we continued to communicate
with our private shareholders through our
shareholder mailings. Shareholders can also
choose to sign up to Shareview so that they
receive information about Barclays and their
shareholding directly by email. On a practical
level, over 60,000 shareholders did not cash
their Shares Not Taken Up (SNTU) cheque
following the Rights Issue in September
2013. In 2017, we continued the tracing
process to reunite these shareholders with
their SNTU monies and any unclaimed
dividends and by the end of the year, we had
returned approximately £200,000 to our
shareholders, in addition to the £1.65m
returned in 2016 and £2.2m in 2015. Each
year we launch a Share Dealing Service
aimed at shareholders with relatively small
shareholdings for whom it might otherwise
be uneconomical to deal. One option open to
shareholders is to donate their sale proceeds
to ShareGift. As a result of this initiative,
more than £61,000 was donated in 2017,
taking the total donated since 2015 to
over £299,000.
Our AGM
The Board and the senior executive team
continue to consider our AGM as a key date
for shareholder engagement. The AGM
provides us with our main opportunity
to engage with shareholders, particularly
our private shareholders, on the key issues
facing the Group and any questions they may
have. A number of Directors, including the
Chairman, were available for informal
discussion either before or after the meeting.
All resolutions proposed at the 2017 AGM,
which were considered on a poll, were
passed with votes ‘For’ ranging from 85.67%
to 99.95% of the total votes cast.
The 2018 AGM will be held on Tuesday
1 May 2018 at the QEII Conference Centre
in London. The Notice of AGM can be found
in a separate document, which is sent out
at least 20 working days before the AGM
and also made available at
home.barclays/agm. Voting on the
resolutions will again be by poll and the
results will be announced via the Regulatory
News Service and made available on our
website on the same day. We encourage any
shareholders who are unable to attend on
the day to vote in advance of the meeting via
home.barclays/ investorrelations/vote or
through Shareview (shareview.co.uk).
2017 engagement timeline
Reporting events
Q1
Stakeholder engagement
Corporate Governance
engagement ahead of
2017 AGM
2016 full year results
2016 full year
results presentation
and fixed income
conference call/
webcast
Analyst briefing on
2016 results
Q2
Q1 2017 results
announcement
Q1 2017 results
conference call/
webcast
Analyst briefing on
Q1 2017 results
Corporate Governance
engagement ahead of
2018 AGM
2017 half full year
results and fixed
income conference
call/webcast
Analyst briefing on
2017 half year
results
2017 AGM
Q3
2017 half year results
announcement
Q4
Q3 2017 results
announcement
Q3 2017 results
conference call/
webcast
Analyst briefing on
Q3 2017 results
84 Barclays PLC Annual Report 2017
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Governance: Directors’ report Governance: Directors’ report
Other statutory information
The Directors present their
report together with the
audited accounts for the
year ended 31 December
2017.
Other information that is relevant to
the Directors’ report, and which is
incorporated by reference into this report,
can be located as follows:
Employee involvement
Policy concerning the employment
of disabled persons
Financial instruments
Hedge accounting policy
Remuneration policy, including
details of the remuneration
of each Director and Directors’
interests in shares
Corporate governance report
Risk review
Viability statement
Page
89
90
258
246
93
43
117
40
Disclosures required pursuant to Listing
Rule 9.8.4R can be found on the following
pages:
Long-term incentive schemes
Waiver of Director emoluments
Allotment for cash of
equity securities
Waiver of dividends
Page
123
112
297
85
Section 414A of the Companies Act 2006
requires the Directors to present a Strategic
report in the Annual Report and Financial
Statements. The information can be found
on pages 2 to 41.
The Company has chosen, in accordance with
section 414C(11) of the Companies Act 2006,
and as noted in this Directors’ report, to
include certain matters in its Strategic report
that would otherwise be disclosed in this
Directors’ report.
An indication of likely future developments
may be found in the Strategic Report.
The particulars of important events affecting
the Company since the financial year end can
be found in the Strategic report and Note 29,
Legal, competition and regulatory matters.
Profit and dividends
Statutory loss after tax for 2017 was £894m
(2016: profit £2,828m). The final dividend
for 2017 of 2.0p per share will be paid on
5 April 2018 to shareholders whose names
are on the Register of Members at the close
of business on 2 March 2018. With the interim
dividend totalling 1.0p per ordinary share, paid
in September 2017, the total distribution for
2017 is 3.0p (2016: 3.0p) per ordinary share.
The interim and final dividends for 2017
amounted to £509m (2016: £757m).
For 2018, Barclays anticipates resuming a total
cash dividend of 6.5p per share, subject to
regulatory approvals.
Shareholders may have their dividends
reinvested in Barclays by joining the Barclays
PLC Scrip Dividend Programme (the
Programme). The Programme enables
shareholders, if they wish, to receive new
fully-paid ordinary shares in Barclays PLC
instead of a cash dividend, without incurring
dealing costs or stamp duty.
The nominee company of certain Barclays’
employee benefit trusts holding shares in
Barclays in connection with the operation
of the Company’s share plans has lodged
evergreen dividend waivers on shares held by
it that have not been allocated to employees.
The total amount of dividends waived during
the year ended 31 December 2017 was
£0.68m (2016: £2.6m).
Barclays understands the importance of the
ordinary dividend for our shareholders.
Barclays is therefore committed to
maintaining an appropriate balance between
total cash returns to shareholders, investment
in the business, and maintaining a strong
capital position. Going forward, Barclays
intends to pay an annual ordinary dividend
that takes into account these objectives, and
the medium-term earnings outlook of the
Group. It is also the Board’s intention to
supplement the ordinary dividends with
additional returns to shareholders as and
when appropriate.
The Board notes that in determining any
proposed distributions to shareholders,
the Board will consider the expectation
of servicing more senior securities.
Board of Directors
The names of the current Directors of Barclays
PLC, along with their biographical details,
are set out on pages 47 and 48 and are
incorporated into this report by reference.
Changes to Directors during the year are set
out in the table below.
Name
Sir Ian Cheshire
Role
Non-executive
Director
Matthew Lester Non-executive
Director
Mike Turner CBE Non-executive
Diane de
Saint Victor
Stephen Thieke
Director
Non-executive
Director
Non-executive
Director
Effective date of
appointment/
resignation
Appointed
3 April 2017
Appointed
1 September
2017
Appointed
1 January 2018
Retired
10 May 2017
Retired
10 May 2017
Appointment and retirement of Directors
The appointment and retirement of Directors
is governed by the Company’s Articles of
Association (the Articles), the UK Corporate
Governance Code (the Code), the Companies
Act 2006 and related legislation.
The Articles may only be amended by a
special resolution of the shareholders. The
Board has the power to appoint additional
Directors or to fill a casual vacancy among the
Directors. Any such Director holds office only
until the next AGM and may offer himself/
herself for re-election. The Code recommends
that all directors of FTSE 350 companies
should be subject to annual re-election. All
Directors will stand for election or re-election
at the 2018 AGM.
Directors’ indemnities
Qualifying third party indemnity provisions (as
defined by section 234 of the Companies Act
2006) were in force during the course of the
financial year ended 31 December 2017 for the
benefit of the then Directors and, at the date
of this report, are in force for the benefit of
the Directors in relation to certain losses and
liabilities which they may incur (or have
incurred) in connection with their duties,
powers or office. In addition, the Company
maintains Directors’ & Officers’ Liability
Insurance which gives appropriate cover for
legal action brought against its Directors.
Qualifying pension scheme indemnity
provisions (as defined by section 235 of the
Companies Act 2006) were in force during
the course of the financial year ended
31 December 2017 for the benefit of the then
Directors, and at the date of this report are in
force for the benefit of directors of Barclays
Pension Funds Trustees Limited as Trustee
of the Barclays Bank UK Retirement Fund.
The directors of the Trustee are indemnified
against liability incurred in connection with
the company’s activities as Trustee of the
Barclays Bank UK Retirement Fund.
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Barclays PLC Annual Report 2017 85
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Other statutory information
Similarly, qualifying pension scheme
indemnities were in force during 2017 for
the benefit of directors of Barclays Executive
Schemes Trustees Limited as Trustee of
Barclays Bank International Limited Zambia
Staff Pension Fund (1965), Barclays Capital
International Pension Scheme (No.1), and
Barclays PLC Funded Unapproved Retirement
Benefits Scheme. The directors of the Trustee
are indemnified against liability incurred in
connection with the Company’s activities as
Trustee of the schemes above.
Political donations
The Group did not give any money for political
purposes in the UK, the rest of the EU or
outside of the EU, nor did it make any political
donations to political parties or other political
organisations, or to any independent election
candidates, or incur any political expenditure
during the year.
In accordance with the US Federal
Election Campaign Act, Barclays provides
administrative support to a federal Political
Action Committee (PAC) in the US funded by
the voluntary political contributions of eligible
employees. The PAC is not controlled by
Barclays and all decisions regarding the
amounts and recipients of contributions are
directed by a steering committee comprising
employees eligible to contribute to the PAC.
Contributions to political organisations
reported by the PAC during the calendar year
2017 totalled $67,250 (2016: $12,500).
Environment
Barclays focuses on addressing environmental
issues where we believe we have the greatest
potential to make a difference. We focus on
managing our own carbon footprint and
reducing our absolute carbon emissions,
developing products and services to help
enable the transition to a low-carbon
economy, and managing the risks of climate
change to our operations, clients, customers
and society at large.
We invest in improving the energy efficiency
of our operations and offset the emissions
remaining through the purchase of carbon
credits, sourced from verified projects. We
also have a long-standing commitment to
managing the environmental and social risks
associated with our lending practices, which
is embedded into our Credit risk processes.
A governance structure is in place to facilitate
clear dialogue across the business and with
suppliers around issues of potential
environmental and social risk.
We have disclosed global greenhouse gas
emissions that we are responsible for as set
out by the Companies Act 2006 (Strategic
Report and Directors’ Report) Regulations
2013. We provide fuller disclosure on (i)
financing solutions for the lower carbon
economy, (ii) environmental risk management
and (iii) management of our carbon and
environmental footprint in the Barclays
Environmental Social Governance (ESG)
Report available on our website at
home.barclays.com/citizenship. We have
also provided initial disclosures aligned with
the Task Force on Climate-related Financial
Disclosures (TCFD) in the Strategic Report
and ESG Report.
25,627
26,721
29,144
347,165 402,531 479,934
250,897 308,473 342,012
Previous
reporting
year
2016
Previous
Current
reporting
reporting
yeara
year
2015
2017
Global Green House Gas (GHG) Emissionsb
Total CO2e
emissions
(tonnes)
Scope 1 CO2e
emissions
(tonnes)c
Scope 2 CO2e
emissions
(tonnes)d
Scope 3 CO2e
emissions
(tonnes)e
Intensity Ratio
Total Full Time
Equivalent
(Full Time
Equivalent)
Total CO2e
emissions
(tonnes)
per FTEf
Scope 2 CO2e
market-based
emissions
(tonnes)d
298,469 337,483
79,900 76,500
93,989
70,641
67,336
85,800
4.34
5.26
5.59
Notes
a The carbon reporting year for our GHG emissions is
1 October to 30 September. The carbon reporting year
is not fully aligned to the financial reporting year
covered by the Directors’ report.
b The methodology used to calculate our GHG is the
Greenhouse Gas Protocol (GHG): A Corporate
Accounting and Reporting Standard Revised Edition,
defined by the World Resources Institute/World
Business Council for Sustainable Development
(WRI/WBCSD). We have adopted the operational
control approach on reporting boundaries to define
our reporting boundary. Where properties are covered
by Barclays’ consolidated financial statements but
are leased to tenants, these emissions are not included
in the Group GHG calculations. Where Barclays is
responsible for the utility costs, these emissions
are included.
On 1 June 2017, we completed the sale of a 33.7%
stake in Barclays Africa Group Limited (BAGL) resulting
in a non-controlling position. In 2017, we have restated
our GHG emissions through to the 2015 baseline to
account for this and BAGL emissions are not reported
from 2015 onwards in order to ensure accurate
tracking against our 30% carbon reduction
commitment. In addition, we have restated our Scope
3 emissions to remove erroneous air data which was
identified as part of the 2017 reporting process.
c Scope 1 covers direct combustion of fuels and
company owned vehicles (from UK only, which is
the most material contributors). Fugitive emissions
reported in Scope 1 cover emissions from UK,
Americas, Asia Pacific and Europe.
d Scope 2 location and market emissions cover
electricity and steam purchased for own use. Market
based emissions have been reported for 2017 and
2016 only.
e Scope 3 covers indirect emissions from business travel
(global flights and ground transport from the UK,
USA and India. USA and India ground transport covers
onwards car hire only which is provided directly by the
supplier. Ground transportation data (excluding
Scope 1 company cars) covers only countries where
robust data is available directly from the supplier.
f Intensity ratio calculations have been calculated using
location based emission factors only.
Research and development
In the ordinary course of business, the Group
develops new products and services in each of
its business divisions.
Share capital
Share capital structure
The Company has ordinary shares in issue.
The Company’s Articles also allow for the
issuance of Sterling, US Dollar, Euro and Yen
preference shares (preference shares). No
preference shares have been issued as at
19 February 2018 (the latest practicable date
for inclusion in this report). Ordinary shares
therefore represent 100% of the total issued
share capital as at 31 December 2017 and as
at 19 February 2018 (the latest practicable
date for inclusion in this report). Details of the
movement in ordinary share capital during the
year can be found in Note 31 on page 297.
Voting
Every member who is present in person or
represented at any general meeting of the
Company, and who is entitled to vote, has one
vote on a show of hands. Every proxy present
has one vote. The proxy will have one vote for
and one vote against a resolution if he/she
has been instructed to vote for or against the
resolution by different members or in one
direction by a member while another member
has permitted the proxy discretion as to how
to vote.
On a poll, every member who is present or
represented and who is entitled to vote has
one vote for every share held. In the case
of joint holders, only the vote of the senior
holder (as determined by order in the share
register) or his/her proxy may be counted. If
any sum payable remains unpaid in relation to
a member’s shareholding, that member is not
entitled to vote that share or exercise any
other right in relation to a meeting of the
Company unless the Board otherwise
determines.
If any member, or any other person appearing
to be interested in any of the Company’s
ordinary shares, is served with a notice under
section 793 of the Companies Act 2006 and
does not supply the Company with the
information required in the notice, then the
Board, in its absolute discretion, may direct
that that member shall not be entitled to
attend or vote at any meeting of the Company.
The Board may further direct that if the shares
of the defaulting member represent 0.25% or
more of the issued shares of the relevant
class, that dividends or other monies payable
on those shares shall be retained by the
Company until the direction ceases to have
effect and that no transfer of those shares
shall be registered (other than certain
specified ‘excepted transfers’). A direction
ceases to have effect seven days after the
Company has received the information
requested, or when the Company is notified
that an excepted transfer of all of the relevant
shares to a third party has occurred, or as the
Board otherwise determines.
86 Barclays PLC Annual Report 2017
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Governance: Directors’ report Transfers
Ordinary shares may be held in either
certificated or uncertificated form. Certificated
ordinary shares shall be transferred in writing
in any usual or other form approved by the
Company Secretary and executed by or on
behalf of the transferor. Transfers of
uncertificated ordinary shares shall be made
in accordance with the Companies Act 2006
and CREST Regulations.
The Board is not bound to register a transfer
of partly-paid ordinary shares or fully-paid
shares in exceptional circumstances approved
by the FCA. The Board may also decline to
register an instrument of transfer of
certificated ordinary shares unless it is (i) duly
stamped, deposited at the prescribed place
and accompanied by the share certificate(s)
and such other evidence as reasonably
required by the Board to evidence right to
transfer, (ii) it is in respect of one class of
shares only, and (iii) it is in favour of a single
transferee or not more than four joint
transferees (except in the case of executors
or trustees of a member).
In accordance with the provisions of Section
84 of the Small Business, Enterprise and
Employment Act 2015, preference shares may
only be issued in registered form. Preference
shares shall be transferred in writing in any
usual or other form approved by the Company
Secretary and executed by or on behalf of the
transferor. The Company’s registrar shall
register such transfers of preference shares by
making the appropriate entries in the register
of preference shares. Each preference share
shall confer, in the event of a winding up or
any return of capital by reduction of capital
(other than, unless otherwise provided by
their terms of issue, a redemption or purchase
by the Company of any of its issued shares,
or a reduction of share capital), the right to
receive out of the surplus assets of the
Company available for distribution among the
members and in priority to the holders of the
ordinary shares and any other shares in the
Company ranking junior to the relevant series
of preference shares and pari passu with any
other class of preference shares (other than
any class of shares then in issue ranking in
priority to the relevant series of preference
shares), repayment of the amount paid up or
treated as paid up in respect of the nominal
value of the preference share together with
any premium which was paid or treated as
paid when the preference share was issued in
addition to an amount equal to accrued and
unpaid dividends.
Variation of rights
The rights attached to any class of shares may
be varied either with the consent in writing of
the holders of at least 75% in nominal value of
the issued shares of that class, or with the
sanction of a special resolution passed at a
separate meeting of the holders of the shares
of that class. The rights of shares shall not
(unless expressly provided by the rights
attached to such shares) be deemed varied by
the creation of further shares ranking equally
with them or subsequent to them.
Limitations on foreign shareholders
There are no restrictions imposed by the
Articles of Association or (subject to the effect
of any economic sanctions that may be in
force from time to time) by current UK laws
which relate only 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.
Exercisability of rights under an employee
share scheme
Employee Benefit Trusts (EBTs) operate in
connection with certain of the Group’s
Employee Share Plans (Plans). The trustees of
the EBTs may exercise all rights attached to
the shares in accordance with their fiduciary
duties other than as specifically restricted
in the relevant Plan governing documents.
The trustees of the EBTs have informed the
Company that their normal policy is to abstain
from voting in respect of the Barclays shares
held in trust. The trustees of the Global
Sharepurchase EBT and UK Sharepurchase
EBTs may vote in respect of Barclays shares
held in the EBTs, but only as instructed by
participants in those Plans in respect of their
partnership shares and (when vested)
matching and dividend shares. The trustees
will not otherwise vote in respect of shares
held in the Sharepurchase EBTs.
Special rights
There are no persons holding securities that
carry special rights with regard to the control
of the Company.
Major shareholders
Major shareholders do not have different
voting rights from those of other
shareholders. Information provided to the
Company by substantial shareholders
pursuant to the FCA’s Disclosure Guidance
and Transparency Rules are published via a
Regulatory Information Service and is available
on the Company’s website. As at 31 December
2017, the Company had been notified under
Rule 5 of the Disclosure Guidance and
Transparency Rules of the following holdings
of voting rights in its shares.
Number of
Barclays shares
Person interested
The Capital Group
Companies Incb
1,172,090,125
Qatar Holding LLCc 1,017,455,690
BlackRock, Incd
1,010,054,871
% of total
voting
rights
attaching
to issued
share
capitala
6.98
5.99
5.92
Notes
a The percentage of voting rights detailed above was
calculated at the time of the relevant disclosures made
in accordance with Rule 5 of the Disclosure Guidance
and Transparency Rules.
b The Capital Group Companies Inc (CG) holds its shares
via CG Management companies and funds. Part of the
CG holding is held as American Depositary Receipts.
On 14 February 2018, CG disclosed by way of a
Schedule 13G filed with the SEC, beneficial ownership
of 1,167,912,211ordinary shares of the Company as of
29 December 2017, representing 6.8% of that class of
shares.
c Qatar Holding LLC is wholly-owned by Qatar
Investment Authority. On 17 January 2018, Qatar
Holding LLC disclosed by way of a Schedule 13G filed
with the SEC, beneficial ownership of 941,620,690
ordinary shares of the Company as of 31 December
2017, representing 5.52% of that class of shares.
d Total shown includes 2,009,814 contracts for
difference to which voting rights are attached. Part of
the holding is held as American Depositary Receipts.
On 30 January 2018, BlackRock, Inc. disclosed by way
of a Schedule 13G filed with the SEC, beneficial
ownership of 1,145,415,782 ordinary shares of the
Company as of 31 December 2017, representing 6.7%
of that class of shares.
Between 31 December 2017 and
19 February 2018 (the latest practicable
date for inclusion in this report), the Company
was notified that BlackRock, Inc. now holds
990,743,261 Barclays shares, representing
5.80% of the total voting rights attached to
issued share capital.
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Powers of Directors to issue or buy back the
Company’s shares
The powers of the Directors are determined by
the Companies Act 2006 and the Company’s
Articles. The Directors are authorised to issue
and allot shares and to buy back shares
subject to annual shareholder approval at
the AGM. Such authorities were granted by
shareholders at the 2017 AGM. It will be
proposed at the 2018 AGM that the Directors
be granted new authorities to allot and
buy back shares.
In preparing each of the Group and Parent
company financial statements, the Directors
are required to:
■■ assess the Group and Parent company’s
ability to continue as a going concern,
disclosing, as applicable, matters related
to going concern; and
■■ use the going concern basis of accounting
unless they either intend to liquidate the
Group or the Parent company or to cease
operations, or have no realistic alternative
but to do so.
Repurchase of shares
The Company did not repurchase any of its
ordinary shares during 2017 (2016: none). As
at 19 February 2018 (the latest practicable
date for inclusion in this report) the Company
had an unexpired authority to repurchase
ordinary shares up to a maximum of 1,696m
ordinary shares.
Distributable reserves
As at 31 December 2017, the distributable
reserves of Barclays PLC (the Parent company)
were £6,728m and the distributable reserves
of Barclays Bank PLC were £24,021m.
As at the date of this report, Barclays PLC,
Barclays Bank PLC and Barclays Bank UK PLC
(our future ring-fenced bank) intend to carry
out a process in the second half of 2018 to
increase their respective distributable reserves.
Each process will require the relevant
company to obtain shareholder and court
approval, and for Barclays PLC we will be
seeking shareholder approval at our 2018
AGM. In each case, the processes will involve
the conversion of the share premium account
into a distributable reserve, which is a
reclassification within the equity of each
company and will have no regulatory capital
impact. Further information will be included
in the Barclays PLC AGM Notice of Meeting
(please see page 84 for further details about
our AGM and how you can vote).
Change of control
There are no significant agreements to which
the Company is a party that are affected by a
change of control of the Company following
a takeover bid. There are no agreements
between the Company and its Directors or
employees providing for compensation for
loss of office or employment that occurs
because of a takeover bid.
Going concern
The Group’s business activities, 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 and Risk
review and Risk management sections.
The Directors considered it appropriate to
prepare the financial statements of the Group
and Company on a going concern basis.
Disclosure of information to the Auditor
Each Director confirms that, so far as he/she
is aware, there is no relevant audit information
of which the Company’s auditors are unaware
and that each 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 Companies Act
2006 and should be interpreted in accordance
with and subject to those provisions.
Directors’ responsibilities
The following statement, which should be
read in conjunction with the Auditor’s report
set out on page 228 to 233, is made with a
view to distinguishing for shareholders the
respective responsibilities of the Directors and
of the Auditors in relation to the accounts.
The Directors are required by the Companies
Act 2006 to prepare Group and Company
financial statements for each financial year
and, with regards to Group accounts, in
accordance with Article 4 of the IAS
Regulation. The Directors have prepared
Group and Company accounts in accordance
with IFRS as adopted by the EU. Under the
Companies Act 2006, the Directors must not
approve the financial statements unless they
are satisfied that they give a true and fair view
of the state of affairs of the Group and Parent
company and of their profit or loss for that
period.
The Directors consider that, in preparing the
financial statements, the Group and Company
has used appropriate accounting policies,
supported by reasonable judgements and
estimates, and that all accounting standards
which they consider to be applicable have
been followed.
Having taken all the matters considered by
the Board and brought to the attention of the
Board during the year into account, the
Directors are satisfied that the Annual Report
and Financial Statements, taken as a whole,
are fair, balanced and understandable, and
provide the information necessary for
shareholders to assess the Group and
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 Group keep
accounting records which disclose with
reasonable accuracy the financial position
of the Company and the Group and which
enable them to ensure that the accounts
comply with the Companies Act 2006.
The Directors are also responsible for
preparing a Strategic report, Directors’ report,
Directors’ remuneration report and Corporate
governance statement in accordance with
applicable law and regulations.
The Directors are responsible for the
maintenance and integrity of the Annual
Report and Financial Statements as they
appear on the Company’s website. Legislation
in the UK governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
The Directors have a general responsibility for
taking such steps as are reasonably open to
them to safeguard the assets of the Group
and Company and to prevent and detect fraud
and other irregularities.
The Directors, whose names and functions are
set out on pages 47 and 48, 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, on page 4 to 37,
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
21 February 2018
Registered in England.
Company No. 48839
88 Barclays PLC Annual Report 2017
home.barclays/annualreport
Governance: Directors’ report Governance: People
People
As highlighted in ‘Our People and Culture’
on pages 36 and 37, we have continued to
make progress towards increasing the
diversity of our workforce underpinned by
an inclusive culture and engaged
employees. Below provides an overview of
some of the programmes, initiatives and
ways in which we are supporting our
colleagues, which in turn enables us to
support our customers, clients and the
community.
Early careers and apprenticeships
Our Early Careers offering includes graduate,
internship and apprenticeship programmes.
In 2017 we hired over 780 interns and 675
graduates, and since 2012 we have created
over 3,400 apprenticeships. We provide
pathways for progression from apprentice to
graduate supported by recognised
qualifications and, in doing so, help to create
an internal talent pipeline. During 2017, we
launched a new graduate programme across
a number of our business areas to attract the
workforce of the future, and within
Technology and Barclays UK we increased the
number of opportunities for both interns and
graduates.
Internal mobility
By supporting internal mobility across Barclays
and making it simple and easy for colleagues
to move internally, we hope to successfully
retain and develop our internal talent. We have
developed multiple tools and resources for
colleagues to find internal career opportunities
and for managers to find and assess suitable
internal candidates. In 2017 our rate of
internal hiring was 40%, a reduction on 2016,
which can be attributed to factors including
a strategic move to hire externally for specific
skill sets, particularly within Technology, and
a focus on converting temporary staff into
permanent roles.
Leadership and learning
In 2017, a consistent Barclays Leadership
Capability framework launched across the
organisation. Our leadership and learning
solutions are underpinned by this framework
and our values. The Barclays Academies and
our Global Curriculum provide colleagues
with face-to-face, virtual and self-managed
development resources. All new joiners
undertake the ‘Being Barclays’ induction,
providing an in-depth understanding of the
values and expected behaviours through the
Global Code of Conduct (The Barclays Way).
Industrial relations and managing change
Barclays has a long-standing partnership
approach to industrial relations and we value
the relationships we have with over 14 trade
unions, works councils and staff associations
globally. Within the UK we have a formal
partnership with Unite which has been in
place for over 17 years. Following joint review,
the partnership agreement was extended in
2017 for a further five years. As part of the
review, Unite recognition was extended to
cover an additional 1,500 employees.
Throughout 2017, we have continued to have
regular and constructive dialogue with
employee representatives and employees on a
wide range of topics. Earlier this year, as part
of our implementation of structural reform,
we consulted with Unite and employee forums
on the successful transfer of c. 53,000
employees to new legal employing entities. We
seek to avoid compulsory redundancies where
possible and try to find ways in which we can
achieve this during the consultation period.
We continue to place significant emphasis on
voluntary redundancy programmes as well as
internal redeployment through our ‘Internals
First’ programme. We also aim to keep in
touch with former colleagues through the
Barclays Global Alumni Programme.
Performance management
Barclays’ approach to performance
management is key to the delivery of our
strategy and to drive a values-based culture.
Colleagues align their objectives (‘what’ they
will deliver) to business and team goals to
support our strategy and good customer
outcomes. Behavioural expectations (‘how’
they will achieve their objectives) are set in the
context of our values. Our global recognition
programme provides colleagues the
opportunity to recognise the achievements of
those who have demonstrated our values. We
continue to see a year-on-year increase in the
number of colleagues receiving a values
‘Thank You’ message, with over 210,000
messages sent in 2017.
Colleagues are also encouraged to be
involved with the Company’s performance by
participating in our all-employee share plans,
which have been running successfully for
over 10 years. Further details of our approach
to remuneration are included in the
Remuneration report on pages 93 to 116.
Employee communications
Barclays regularly updates employees on the
financial and economic factors affecting the
Company’s performance and the delivery of
the strategy through Group CEO and senior
leader communications, line manager
briefing packs, interviews and talking points
distributed to employees every quarter in
accordance with our financial reporting
calendar. We hold a variety of events for
employees to hear directly from the Group
Executive Committee and employees are kept
regularly informed about what is happening
in their area and across Barclays through
engagement initiatives and communications.
Campaigns and colleague stories throughout
the year highlight our Citizenship work and
how we are supporting our customers, clients
and colleagues.
Diversity and Inclusion
We aim to ensure that employees of all
backgrounds are treated equally and have the
opportunity to be successful. Our 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. Our approach to
building an inclusive work environment is
focused on upskilling our leadership and we
provide a range of development opportunities
including our Unconscious Bias Training
which has been delivered to over 10,000
leaders across Barclays, and Dynamic Working
line manager clinics which have been
attended by over 4,000 leaders.
LGBT
An inclusive culture that enables colleagues
to bring their whole selves to work is built on
having leadership participation and visible role
models. Now in its third year, our Spectrum
Allies campaign has identified over 8,000
leaders globally who have pledged to
challenge homophobia, biphobia and
transphobia in the workplace and provide
support to LGBT colleagues. Through the
‘Your View’ survey we provide colleagues with
the opportunity to identify as being LGBT, with
7% of colleagues identifying as LGBT in 2017.
This year was the fourth consecutive year that
Barclays supported Pride in London as the
headline sponsor. The #lovehappenshere
theme reached over 3 million people across
multiple communications channels and
across the UK over 1,000 Barclays colleagues
participated in regional Pride events across
the UK.
Independent recognition reflects the progress
we are making and the impact of our strategy.
For the fifth consecutive year, Stonewall has
recognised Barclays as one of only 12 Top
Global Employers. The Human Rights
Campaign has awarded Barclays with 100%
on their corporate equity index.
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Barclays PLC Annual Report 2017 89
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report People
Disability
Under the UK Government’s Department
of Work and Pensions Disability Confident
scheme, Barclays has been recognised as a
Disability Confident Leader for our efforts to
support those who have a disability. This year,
alongside PwC, we have further scaled the
‘This is Me in the City’ initiative along with the
Lord Mayor of the City of London. The ‘This Is
Me’ mental health and well-being campaign
now includes over 280 organisations across
London who have pledged to focus on
eliminating the stigma associated with mental
health in their workplace (over 1 million
employees collectively). In 2018, through
these partnerships, we plan to expand ‘This
is Me’ further in the UK. Continuing our
commitment to increase employment of those
with a disability or mental health condition,
this year we expanded our Able to Enable
internship in the UK. This 13-week paid
programme is aimed at recruiting talented
individuals of all ages with a background of
mental health conditions, providing them with
opportunities to gain work experience, learn
new skills and grow their experience and
confidence.
Multigenerational
Our Dynamic Working campaign is relevant to
colleagues at every life stage. It addresses the
diverse needs of a workforce comprised of five
generations, by encouraging the integration
of personal and professional responsibilities
through smarter work patterns. The campaign
is having a positive impact on colleague
engagement with the 59% of colleagues
actively working dynamically in 2017 reporting
5% points higher than the Group sustainable
engagement result. Dynamic Working is also
enabling Barclays to have a positive impact
on the retention of diverse talent, examples
include a 13% improvement in maternity
returners retained after 12 months, and 95%
of those taking Shared Parental Leave
are fathers.
Addressing the changing needs of a
multigenerational workforce will be an
ongoing focus in 2018 but we are pleased that
Working Families UK has recognised Barclays
as one of the top 10 Employers for Working
Families in 2017.
Multigenerational
% 69+ (Veterans/Traditionalists)
2017 (H2)
2016 (H2)
0.03
0.03
% 51 to 69 (Baby Boomers)
14
14
% 39 to 51 (Generation X)
22
23
% 20 to 39 (Generation Y)
% 20 and below (Millennial)
0.06
0.07
62
62
For the purpose of comparability 2016 figures exclude Barclays
Africa Group Limited headcount.
Multicultural
During 2017, the Embracing Us campaign was
launched in celebration of World Cultural Day,
aiming to challenge global stereotypes and
mindsets in relation to nationality, faith,
ethnicity, race and language. During the
campaign our multicultural network, Embrace,
engaged over 15,000 colleagues through
multiple communications channels, leadership
forums and Being Colour Brave development
workshops. Barclays’ Apprenticeship
Programme reflects our commitment to
recruit a diverse workforce. Since the
programme launched, we have focused on
recruiting those who are NEET (Not in
Education, Employment or Training). 19% of
our apprentices identify as Black, Asian and
Minority Ethnic, 8% points higher than the
national apprenticeship average. In addition,
46% of our apprentices are female and 8%
identify as a person with a disability. Through
this scheme we are making a positive impact
on youth unemployment and social mobility.
Permanent employees by region
As at 31 December
United Kingdom
Continental Europe and Middle East
Americas
Asia Pacific
Africa
Total
Gender Pay Gap disclosure
The gender pay gap measures the difference
between the average male pay and the
average female pay as a proportion of the
average male pay. For example, average male
pay of £100 per hour and average female pay
of £85 per hour would indicate a gender pay
gap of 15%. The calculation does not take
into consideration the role that an employee
performs or the seniority of the employee.
As a result, gender pay gaps are often driven
by higher proportions of women than men
in more junior, lower paid roles and fewer
women than men in senior, more highly
paid roles.
Equal Pay legislation in the UK specifically
relates to an employee’s role, making it
unlawful for an employer to pay individuals
differently for performing the same or similar
work. This right for women and men to
receive the same pay for the same, or similar
work, or work of equal value, has been a
requirement under UK law since 1970. Paying
our colleagues fairly and equitably relative to
their role, skill, experience and performance is
central to our global reward structures and
benefits policies, which are reviewed regularly
to ensure that there is no unfair bias in how
employees are paid. At Barclays we are
confident that men and women across our
organisation are paid equally for doing the
same job.
The multicultural profile of the organisation
was acknowledged externally by the City of
London and the Social Mobility Commission
through the Social Mobility Employer Index as
a Top 50 Employer in 2017.
Multicultural
% UK
% US
% Global
32
29
49
47
50
51
Above shows the percentage of underrepresented populations
that make up our global and regional populations.
Underrepresented populations are defined regionally to ensure
inclusion of all groups in the workplace. For the purposes of
comparability 2016 figures exclude Barclays Africa Group Limited
headcount. UK includes Asian, Mixed, Black, Other and
Non-Disclosed and US includes Hispanic/Latino, Asian, Mixed,
Black, Other and Non-Disclosed.
2017
48,700
3,600
10,400
17,200
–
79,900
2016
46,400
4,700
9,700
15,700
42,800
119,300
2015
49,000
7,400
10,600
18,800
43,600
129,400
The difference between the gender pay gap
and equal pay can be illustrated by the fact
that men and women who are paid equally
for the same or similar roles, can still generate
a gender pay gap driven by the relative
proportions of men and women across the
organisation. This is illustrated in graphic B.
Our gender pay gap results shown in graphic
C reflect the distribution of men and women
between corporate grades within Barclays.
As illustrated in graphic A, the percentage of
women in our more senior corporate grades
is lower than the percentage of women at
Barclays overall. This correlates with the
ordinary pay quartile data in graphic C, in
which the entire population is arranged in
order of ordinary pay (fixed pay), from lowest
to highest, and then divided into four equal
sub-populations. The numbers of male and
female employees in each sub-population is
then expressed as a proportion. The ordinary
pay quartiles reflect the high proportions of
women in more junior, lower paid roles
(particularly evident in Barclays UK within
the retail branch network) and the high
proportions of men in senior, highly paid roles
(particularly evident in Barclays International).
90 Barclays PLC Annual Report 2017
home.barclays/annualreport
Governance: People For the purposes of comparability 2016 headcount figures exclude
Barclays Africa Group Limited.
Equal proportion of men and women in highly paid roles,
more women than men in lower paid roles:
Graphic A
Female representation
% female staff – all grades
2017 (H2)
2016 (H2)
% female analysts (B1–B4)
47
48
% female Assistant Vice Presidents
36
36
33
33
% female Vice Presidents
% female Directors
26
25
% female Managing Directors
15
14
The mean pay gap shown in graphic C is the
difference between the average hourly pay of
men and women. The median pay gap is the
difference between the midpoints in the ranges
of hourly pay of men and women. It arranges
the hourly pay rates from highest to lowest
and identifies the hourly pay in the middle of
the range. The mean bonus gap is based on
actual bonuses paid and does not make any
adjustments to the amounts paid to employees
who work a reduced number of hours.
The demographics of our population and the
resulting gender pay gaps emphasise the
importance of maintaining our firm
commitment to increasing female
representation across Barclays, particularly
among the senior leadership population. We
welcome the introduction of gender pay gap
reporting to bring further focus to our
commitment to improving gender diversity – a
commitment that is, and will remain, at the
core of our talent management and leadership
succession processes.
How we are addressing the gender pay gap
We recognise that tackling the gender pay gap
will take time and therefore it is key that we
remain focused on improving gender diversity
through a workplace environment and culture
that supports and empowers women. At
Barclays, our focus goes beyond simply
addressing the gender pay gap and extends
to our internal and external gender equality
commitments. Across both our organisation,
and in the financial services industry, we are
dedicated to enabling women to fulfil their
career aspirations. To achieve this goal and
thereby narrow our gender pay gap, we will
continue to focus on ensuring there is no bias
in the hiring, promotion, development and
retention of women at Barclays.
Equal pay
All roles paid
equally
Gender
pay gap
48.8%
Equal pay
All roles paid
equally
Gender
pay gap
32%
Graphic B Illustrative example of the difference between the gender pay gap and equal pay
Greater proportion of men in highly paid roles,
more women than men in lower paid roles:
Role A
£100k
58
57
Role B
£30k
Average
£86k
£44k
Role A
£100k
Role B
£30k
Average
£65k
£44k
Graphic C
Barclays Gender Pay Gap results
Barclays UK
Barclays International
Service Company
Gender Pay Gap
(fixed pay)
Median
Mean
Median
Mean
Median
Mean
14.2%
26.0%
43.5%
48.0%
29.9%
25.8%
Gender Bonus
Pay Gap
Proportion
of colleagues
receiving a
bonus payment
Gender
proportions
in ordinary
pay quartiles
(fixed pay)
Median
Mean
Median
Mean
Median
Mean
46.9%
60.1%
73.3%
78.7%
24.0%
48.8%
95.2%
93.1%
93.4%
93.7%
92.5%
91.2%
Q4
Q3
Q2
Q1
45%
55%
Q4
19%
81%
Q4
29%
31%
66%
67%
73%
34%
33%
27%
Q3
Q2
Q1
51%
63%
69%
49%
37%
Q3
Q2
Q1
36%
50%
58%
71%
64%
50%
42%
Under the regulations we are required to report our gender pay data for each separate
UK-based legal entity that has at least 250 employees therefore the Barclays PLC data is broken
down by Barclays Bank UK Group PLC (Barclays UK), Barclays Bank PLC (Barclays International)
and Barclays Services Limited (Group Service Company).
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Barclays PLC Annual Report 2017 91
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report People
Gender diversity commitments
As a founding signatory of the HM Treasury
Women in Finance Charter and supporter of
the Hampton-Alexander Review, to support our
commitment to gender equality, we proactively
set gender targets and we have made good
progress towards these targets. Our goal to
improve the percentage of female Managing
Directors and Directors to 26% by the end of
2018 (23% at the end of 2017) has
subsequently expanded with commitments of
33% female representation across our Board of
Directors by 2020 (21% at the end of 2017) and
33% female representation among the Group
Executive Committee and their direct reports
(25% at the end of 2017). Alongside these
targets, Barclays has been focused on and will
continue to develop, a range of extensive
initiatives, programmes and policies to improve
gender diversity. Below are some highlights of
the ways in which we are increasing female
representation at Barclays and enabling women
to fulfil their career aspirations.
Creating new career opportunities
We have expanded our graduate and
apprenticeship programmes, reflecting
our commitment to improve employment
opportunities, tackle societal issues and
attract diverse talent. We have transformed
the way we recruit for our graduate
programmes to drive diversity and inclusion
as students are able to demonstrate ability
and potential throughout the process, so
that recruitment outcomes are based on
performance and not on the basis of subjects
studied, universities attended and previous
work experience. In doing so we hope to
increase the number of female graduate hires
to 50% (40% at the end of 2017, up from 31%
in 2014). For those looking to re-enter the
workforce after taking time out of their
careers, our Encore! Returnship Programme
provides opportunities for experienced
professionals to join a paid programme with a
view to securing a permanent role at Barclays
at the end of the programme. More broadly,
we have policies and practices in place to
ensure that all recruitment decisions are fair
and candidate shortlists are diverse.
Talent management and leadership
development
The creation of ex-officio positions on the
Group Executive Committee and across the
business unit and functional Executive
Committees in 2016 by the Group Chief
Executive, has provided development
opportunities for a number of our high
potential female leaders and has broadened
the scope of the perspectives and decision
making across our leadership teams. Our
Unconscious Bias training, now attended by
over 10,000 leaders, supports the continued
elimination of bias from our people processes,
and successful events that we run each year
such as the Global Women in Leadership
conference and the Enterprise Leaders
Summit focus on building capability and
upskilling leaders.
Internally we are committed to:
Leadership accountability
including gender diversity
targets and the introduction
of a gender task force
Focusing on a more inclusive
work environment to ensure
all colleagues have the
flexibility to achieve personal
and professional goals
Ensuring we are developing
leaders who are equipped to
meet the demands of a more
diverse workforce
Externally we are committed to:
Engaging men globally in
gender equality in partnership
with the United Nations
Providing enhanced
employment opportunities and
attracting diverse candidates
Community impact
2020 Gender diversity commitments
■■ Board of Directors 33%
■■ Leadership 33% (Group ExCo and their direct reports)
Cultural change
■■ Dynamic Working
■■ Progressive parental policies
■■ Barclays’ Win Gender Network
Talent management
■■ Leadership succession planning
■■ Ex-officio leadership roles
■■ Internal mobility
Leadership development
■■ Unconscious bias training
■■ Global Women in Leadership Conference
■■ Enterprise Leaders summits
UN HeForShe
■■ Global Impact Champion
Barclays role models
■■ External engagement of Barclays’ senior women
across Financial Services, IT and STEM
Creating new career opportunities
■■ Encore! Returnship Programme
■■ Expanded Apprenticeship Programme
■■ 50% female graduate hires
Strategic partnerships
■■ Women’s Business Council
■■ 30% Club
Cultural change
Providing a workplace that encourages
colleagues to achieve their personal and
professional goals is key to supporting and
retaining our employees. We aim to do this
through our progressive maternity, paternity,
adoption and shared parental leave policies
which go beyond the statutory requirements,
as well as through our flexible working
campaign Dynamic Working. Dynamic Working
supports colleagues in all stages of their lives in
achieving an optimal work and life balance,
helping them with parenthood, studies, caring
and hobbies. Across Barclays, our Women’s
Initiative Network (Win) provides colleagues
with career development and networking
opportunities including mentoring, career fairs
and senior leader speaker events.
Strategic partnerships
Barclays recognises that gender equality
extends to the communities in which we work,
support and live and greater gender equality is
integral to our long-term investments to drive
societal change. We demonstrate this through
strategic partnerships, external engagement
and leadership commitment, including but not
limited to, our multi-year commitment to the
United Nations HeForShe campaign and our
partnership with the Women’s Business Council.
So what next?
Our existing pipeline of female talent is being
further strengthened through the launch of a
global gender task force, comprising of
leaders from across the organisation who
believe passionately in gender diversity and
who will focus on new and improved
initiatives to further accelerate our progress
against our gender diversity commitments.
We acknowledge that there is still a lot of
work to do, but our determination and
commitment to building a diverse and
inclusive workforce through attracting,
retaining and developing world class
professionals is paramount, and we are
working hard to foster an environment in
which all employees have the opportunity to
succeed, regardless of race, religion or belief,
age, gender, disability, sexual orientation,
gender identity or nationality.
Further details on the gender pay
gap and Barclays commitments to
gender diversity and equality can be found
at home.barclays/diversity
Under the Companies Act 2006, Barclays is
required to report on the gender breakdown of
our employees and ‘senior managers’. Of our
global workforce of 79,900 (45,100 male, 34,800
female), 555 were senior managers (401 male,
154 female), which include Officers of the Group,
certain direct reports of the Chief Executive,
heads of major business units, certain senior
Managing Directors, and directors on the boards
of undertakings of the Group, but exclude
individuals who sit as Directors on the Board of
the Company. The definition of senior managers
within this disclosure has a narrower scope than
the Managing Director and Director female
representation data provided above.
92 Barclays PLC Annual Report 2017
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Governance: People Governance: Remuneration report
Annual statement from the
Chairman of the Board Remuneration Committee
We are committed to pay being aligned to performance,
while ensuring that we are able to attract and retain the
employees critical to delivering our strategy.
Contents
Annual statement
At a glance – performance and pay
for 2017
2017 Group incentives
Remuneration policy for all
employees
Directors’ remuneration policy
Annual report on Directors’
remuneration
Page
93
95
96
97
100
103
Remuneration
Committee members
Chairman
Members
Crawford Gillies
Tim Breedon
Mary Francis
Dambisa Moyo
Dear Fellow Shareholders
As Chairman of the Board Remuneration
Committee, I am pleased to introduce the
Remuneration report for 2017.
As in previous years, we are committed to pay
being aligned to performance, while ensuring
that we are able to attract and retain the
employees critical to delivering our strategy.
The Committee believes that our pay outcomes
for 2017 reflect overall Group performance,
recognising improvements in profit before tax
and significant achievements in restructuring
the Group, while acknowledging the need for
further improvement in returns.
Further details on our performance and the
decisions we have made on remuneration are
outlined below.
Performance and pay
2017 has been a year of significant strategic
progress for the Group, achieving a number of
milestones to deliver a simpler organisation.
These include the sell down of our
shareholding in Barclays Africa Group Limited
(BAGL), the closure of Non-Core and the
launch of the Group Service Company. A great
deal has been accomplished in relation to the
UK ring-fencing requirements, establishing the
necessary entity structure, processes and
governance.
As well as positioning the simplified Group for
growth in 2018, Barclays has achieved a CRD
IV fully loaded Common Equity Tier 1 (CET1)
ratio of 13.3%, within the end state target
range. Group profit before tax is up 10%
from 2016 to £3,541m driven by an £882m
reduction in operating expenses.
Against this background, the Committee
approved a Group incentive pool of £1,506m,
down 2% from 2016. This decision recognises
the strong strategic execution across the
Group, while being clear that Group returns
are not yet where our shareholders, and the
Board, want them to be. The Committee also
recognises the need to ensure that areas of
strong performance within the businesses are
rewarded competitively, with key talent
retained to deliver against our growth strategy
going into 2018 and beyond. This pool also
reflects appropriate adjustments for risk and
conduct matters, which continue to be taken
very seriously by the Committee.
Key remuneration decisions for
executive Directors
The Committee considered the executive
Directors’ performance against the financial
and strategic/non-financial performance
measures which had been set to reflect
company priorities for 2017. Separately,
performance against their personal objectives
was assessed on an individual basis.
Based on Jes Staley’s performance against the
performance measures set at the beginning of
the year, the Committee approved a 2017
bonus of £1,065,000 (48.5% of maximum) of
which 62.4% will be deferred in shares for a
period of up to seven years. The Committee’s
deliberations on his 2017 personal
performance have taken account of delivery
against financial commitments including
achieving the end state target range for the
CET1 ratio as well as improvements to our
cost: income ratio, while recognising that there
is still some way to go in getting returns to
where management, the Board and our
investors expect them to be. The Committee
has also taken account of the early completion
of the strategic restructuring, including the sell
down of BAGL and closure of Non-Core. The
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Governance: Remuneration report
Annual statement from the
Chairman of the Board Remuneration Committee
Fair pay agenda
We are committed to fair pay, ensuring that
all our employees are appropriately and fairly
rewarded for their contributions. This concept
touches on many areas of our work, including
fair pay for the lowest paid in our organisation,
as well as the alignment of executive reward
outcomes with business performance.
Additionally, the Board is committed to
individuals being able to progress through
the organisation based on capability and
performance and irrespective of any other
difference such as gender, age, ethnicity,
religion, sexual orientation or disability. We
take employees’ views into consideration
throughout our deliberations and continue to
review potential approaches to build on this.
Barclays’ commitment to fair pay is illustrated
by the repositioning of the incentive pools
over recent years, during which incentive
funding has been directed to provide more to
junior employees, and our active engagement
on pay matters with our unions to ensure
that our staff are fairly treated across the
organisation. The current 2017–2019 pay deal
with Unite commits to a 7.5% agreed salary
increase budget for the Unite recognised
population and a minimum increase of 10%
for the most junior graded employees over the
course of the three-year deal. Barclays is also
a long-standing supporter of the Living Wage
under which Barclays commits to pay all
UK permanent employees and those UK
employees of third party contractors at least
the current London or UK Living Wage. This is
a commitment which we have also extended
to our UK employed apprentices. By March
2018, the entry level for permanent, non-
apprentice employees will already be above
the Living Wage target level set for 2020 by
the Government, two years early. Similarly,
Barclays will meet the 2020 target level for its
apprentice population by 2019.
Further detail of our activities in relation to fair
pay may be found on pages 98 to 99.
Barclays has published its UK Gender Pay Gap
report for the first time this year in line with
UK requirements and further details can be
found in the People section on pages 90 to 92.
Looking ahead
The Committee continues to monitor with
interest the Government’s proposals in respect
of the UK Corporate Governance Code, which
will be an area of focus for the Committee and
the Board going into 2018.
In relation to fair pay, we have already chosen
to publish our pay ratios on page 110 of
this report, two years in advance of the
Government requirements to reflect the ratios
between the pay of our Group Chief Executive
and our UK employees. We will continue to
review our fair pay policies and practices to
ensure that they remain appropriate as this
important topic continues to evolve.
We will also continue to work on the
remuneration aspects of changes associated
with structural reform, such as the addition of
Remuneration Committees representing
the two main subsidiary businesses.
We will, of course, continue to engage
constructively with regulators, shareholders
and other stakeholders and value the insight
these discussions provide.
Remuneration report
We have provided an ‘At a glance’ summary of
2017 performance and pay on the next page.
The annual report on Directors’ remuneration
provides further details. An abridged version
of the DRP, as approved at the 2017 AGM, is
set out on pages 100 to 102 for information.
In line with the UK regulations, we are seeking
shareholder approval at the 2018 AGM for the
Remuneration report (other than the part
containing the abridged version of the DRP).
Further details can be found in the 2018 AGM
Notice of Meeting.
Crawford Gillies
Chairman, Board Remuneration Committee
21 February 2018
Committee noted the significant work that
has taken place in planning, following the EU
referendum outcome. The Committee also
recognised that Jes Staley has made continued
progress towards ensuring a high performing
culture in line with our Values, and Barclays
has made improvements in some customer
and client metrics such as a reduction in
customer complaints, while noting the need
for further improvement. As announced last
year, the Committee will keep Jes Staley’s 2016
variable remuneration under review pending
the outcome of the investigation relating to
his involvement in a whistleblowing matter.
The Committee will make a final decision on
outcome once that investigation is complete.
Based on Tushar Morzaria’s performance
against the performance measures set at
the beginning of the year, the Committee
approved a 2017 bonus of £747,000 (50.5% of
maximum) of which 46.5% will be deferred in
shares for a period of up to seven years. The
Committee in particular noted that Tushar
Morzaria had been instrumental in the
execution of the strategy including the sell
down of BAGL, the closure of Non-Core, the
setting up of the ring-fenced bank in the UK
and in Barclays achieving its end state range
capital position. Tushar Morzaria has also
demonstrated effective management of key
external stakeholders.
The Committee decided to make an award
under the 2018–2020 Long Term Incentive
Plan (LTIP) cycle to Jes Staley and Tushar
Morzaria (based on their performance in
2017) with a face value at grant of 120%
of their respective Total fixed pay at
31 December 2017. The Committee reviewed
the performance measures of the LTIP to
ensure they are appropriate, given our growth
strategy and align the interests of executive
Directors and shareholders. Return on tangible
equity (RoTE) and cost: income ratio have
been retained as the key financial metrics,
with the weighting on RoTE increased to 50%
to emphasise the focus on improving returns
across the Group. The calibrations have also
been established to maintain direct alignment
with the Group’s financial targets. The
weighting on the cost: income ratio remains
unchanged at 20%. CET1 ratio remains a
key financial metric, but given the end state
target range of c.13% has been achieved, the
Committee concluded that this would now be
more appropriate as an underpin measure on
RoTE instead of a standalone measure.
In line with the Directors’ remuneration policy
(DRP) approved at the 2017 AGM, both
executive Directors’ Fixed Pay will be
unchanged for 2018 at £2,350,000 for Jes
Staley and £1,650,000 for Tushar Morzaria.
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Governance: Remuneration report
At a glance – performance and pay for 2017
Group performance and pay
Key strategic highlights
■■ Non-Core closed early
■■ Completion of BAGL sell down
■■ Launch of the Group Service Company
■■ Preparatory work to establish UK ring-
fenced entity
Pay outcomes
■■ Group incentive pool has reduced by 57%
since 2010
■■ Group compensation to net income ratio
reduced to 38.0% from 39.0%
£3,541m
Profit before tax
up 10%
5.6%
Group RoTE ex. litigation
and conduct and other
material items*
73%
Cost: income ratio
favourable 3%
£7,123m
Total compensation costs
down 4%
£1,506m
Group incentive pool
down 2%
* Material items consist of charges for PPI, losses relating to the sell down of BAGL and a one-off net charge due to the remeasurement of US deferred tax assets.
Executive Directors: Performance outcomes
Annual bonus
2015–2017 Long Term Incentive Plan
(a) Jes Staley
(b) Tushar Morzaria
(Tushar Morzaria only)
£1,065k
48.5% of maximum
£747k
50.5% of maximum
£882k*
52.7% of maximum
Performance measures (% weightings)
0%
50%
100%
Performance measures (% weightings)
0%
50%
100%
* By reference to Q4 2017 average share price.
Financial (60%)
Profit before tax excl. material items (22.5%)
CET1 ratio (22.5%)
Financial (60%)
Net Generated Equity (30%)
Core (RoRWA) excl. own credit (20%)
Cost: income ratio excl. material items (15%)
Non-Core drag on RoE excl. material items (10%)
Strategic/Non-financial (20%)
Loan loss rate (10%)
Personal objectives (20%)
Jes Staley
Tushar Morzaria
Balanced Scorecard (30%)
Executive Directors: Remuneration outcomes
Jes Staley*
Tushar Morzaria
2016
2017
Max
£4.23m
£3.87m
2016
2017
£8.30m
Max
£3.66m
£3.49m
£5.59m
Fixed pay
Pension and benefits
Annual bonus
LTIP
Fixed pay
Pension and benefits
Annual bonus
LTIP
* Jes Staley was not a participant in the 2014-2016 and 2015-2017 LTIP cycles; the LTIP figures for 2016 and 2017 are therefore zero for him.
Executive Directors: Share ownership
Shareholding requirement policy:
■■ minimum of 200% of Total fixed pay* (i.e. Fixed Pay plus Pension)
within five years from date of appointment
■■ shareholding requirement for two years post termination of 100%
of Total Fixed Pay (or pro-rata thereof ) introduced from 2017.
Jes Staley
Date of appointment: 1 December 2015
£5,492k
£9,132k
Tushar Morzaria
Date of appointment: 15 October 2013
* Equivalent to 457% of Salary for Jes Staley under the previous DRP.
Requirement
Actual
£3,700k
£4,354k
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26
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2017 Group incentives
This section provides details of how the 2017 total incentive award decisions were made.
2017 pay and performance headlines
The key performance considerations which the Committee took into account in making its remuneration decisions for 2017 are highlighted below:
■■ Significant strategic progress was made in 2017 with restructuring completed including:
– the closure of Non-Core
– completion of BAGL sell down
– launch of the Group Service Company
– preparatory work to establish the UK ring-fenced entity
■■ Group profit before tax was up 10% at £3,541m (2016: £3,230m). Group profit before tax excluding material items was up 16% at £4,242m
(2016: £3,649m*)
■■ Group RoTE was negative 3.6% (2016: positive 3.6%). Excluding litigation and conduct and other material items, Group RoTE was 5.6%
■■ Group CET1 ratio was up to13.3% (2016: 12.4%).
The pay outcomes and decisions can be summarised as follows:
■■ total compensation costs decreased 4% to £7,123m (2016: £7,445m)
■■ the Group incentive pool was down 2% at £1,506m (2016: £1,533m)
■■ Group compensation to net income ratio was 38.0% (2016: 39.0%)
■■ Corporate and Investment Bank (CIB) front-office incentive awards were also slightly down at £864m (2016: £875m). CIB front-office
compensation to net income ratio was 26.1% (2016: 26.7%)
■■ robust differentiation based on business and individual performance.
* Material items in 2016 included provisions for UK customer redress (£1bn), gain on disposal of Barclays’ share of Visa Europe Limited £615m and own credit (£35m).
2017 incentive award decisions
The Committee’s 2017 incentives decisions took full consideration of financial and non-financial performance and also the material repositioning
of incentives undertaken since 2010. Since 2010, the Group incentive pool has declined steadily, from £3,484m in 2010 to £1,506m in 2017 – a
decrease of 57% over seven years.
£3,484m
(57%) Group
£2,578m
£2,378m
£2,168m
£1,860m
£1,544m
£1,533m
£1,506m
2010
2011
2012
2013
2014a
2015b
2016
2017
Total incentive awards granted – current year
Incentive awards granted
Incentive pool
Commissions and other incentives
Total incentive awards granted
Reconciliation of incentive awards granted to income statement charge:
Less: deferred bonuses granted but not charged in current year
Add: current year charges for deferred bonuses from previous years
Othera
Income statement charge for performance costs
Total compensation costs
Proportion of incentive pool that is deferred
Notes
a Part of the reduction in incentive pools in 2014 was
due to the introduction of Role Based Pay (RBP).
b The 2015 Group incentive pool has been restated from
£1,669m to reflect the treatment of BAGL
as a discontinued operation. The 2010 – 2014 Group
incentive pools have not been restated.
Barclays Group
Year ended
31.12.17
£m
Year ended
31.12.16
£m
% change
1,432
74
1,506
(302)
457
29
1,690
7,123
31%
1,459
74
1,533
(300)
690
(26)
1,897
7,445
30%
2
–
2
(1)
34
11
4
Note
a Difference between incentive awards granted and income statement charge for commissions and other incentives.
96 Barclays PLC Annual Report 2017
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Governance: Remuneration report Governance: Remuneration report
Remuneration policy for all employees
This section sets out Barclays’ remuneration policy for all employees, explaining the philosophy underlying the structure of remuneration
packages, and how this links remuneration to the achievement of sustained high performance and long-term value creation.
Remuneration philosophy
In October 2015, the Committee formally adopted a revised, simplified remuneration philosophy which articulates Barclays’ overarching
remuneration approach and is set out below.
Barclays’ remuneration philosophy
Attract and retain talent needed to deliver Barclays’ strategy
Align pay with investor interests
Reward sustainable performance
Support Barclays’ Values and culture
Align with risk appetite, risk exposure and conduct expectations
Be clear, transparent and as simple as possible
Long-term success depends on the talent of our employees. This
means attracting and retaining an appropriate range of talent to
deliver against our strategy, and paying the right amount for that
talent
Ensure employees’ interests are aligned with those of investors (equity
and debt holders), both in structure and the appropriate balance of
returns
Sustainable performance means making a positive contribution to
stakeholders, in both the short and longer term, playing a valuable
role in society
Results must be achieved in a manner consistent with our Values. Our
Values and culture should drive the way that business is conducted
Designed to reward employees for achieving results in line with the
Bank’s risk appetite and conduct expectations
All employees and stakeholders should understand how we reward
our employees. Remuneration structures should be as simple as
possible so that everyone can understand how they work and the
behaviours they reward
Performance and remuneration
Barclays’ remuneration philosophy links remuneration to achieving sustained high performance and creating long-term value. Our remuneration
philosophy applies to all employees globally across Barclays and aims to reinforce our belief that effective performance management is critical to
enabling the delivery of our business strategy in line with our Values. Employees who adhere to the Barclays’ Values and contribute to Barclays’
success are rewarded accordingly.
This is achieved by basing performance assessment on clear standards of delivery and behaviour, and starts with employees aligning their
objectives (‘what’ they will deliver) to business and team goals in order to support the delivery of the business strategy and good client/customer
outcomes. Behavioural expectations (‘how’ people will achieve their objectives) are set in the context of our Values.
Performance is assessed against both financial and non-financial criteria. Other factors are also taken into consideration within the overall
performance assessment, including core job responsibilities, behaviours towards risk and control, colleague and stakeholder feedback as well as
input from the Risk and Compliance functions, where appropriate.
Through our approach to performance, the equal importance of both ‘what’ an individual has delivered as well as ‘how’ the individual has
achieved this is emphasised, encouraging balanced consideration of each dimension. Both of these elements are assessed and rated
independently of each other. There is no requirement to have an overall rating which allows for more robust and reflective conversations between
managers and team members on the individual components of performance.
A key part of the performance philosophy promotes ongoing quality dialogue throughout the year. This helps manage performance messages
effectively and allows for more timely recognition as well as appropriate coaching, feedback and support where needed.
By linking individual performance assessment to Barclays’ strategy and our Values and, in turn, to remuneration decisions, a clear alignment
between what we are striving to achieve, how we go about this, and ultimately, how we recognise this in individual financial terms is achieved.
Risk, conduct and remuneration
Another key feature of our remuneration philosophy is the alignment of remuneration with our risk appetite and with the conduct expectations
of Barclays, our regulators and stakeholders. The Committee takes risk and conduct events very seriously and ensures that there are appropriate
adjustments to individual remuneration and, where necessary, the incentive pool.
The Remuneration Review Panel, which reports to the Committee, supports the Committee in this process. The Panel is chaired by the Chief Risk
Officer and includes senior representatives from the key control functions of Risk, Compliance, Internal Audit, Legal and HR as well as the CEOs of
Barclays UK and Barclays International. It sets the policy and processes for assessing compensation adjustments for risk and conduct events.
We have robust processes for considering risk and conduct as part of individual performance management processes with outcomes reflected in
individual remuneration decisions. Line managers have primary accountability for ensuring that risk and conduct issues are considered when
assessing performance and making remuneration decisions. In addition, there is a secondary review by the control functions for individuals
involved in significant failures of risk management, conduct issues, regulatory actions or other major incidents which impact either the Group or
business to ensure these issues are also considered. When considering individual responsibility, a variety of factors are taken into account such as
whether an individual was directly responsible or whether the individual, by virtue of seniority, could be deemed indirectly responsible, including
staff who drive the Group’s culture and set its strategy.
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Actions which may be taken where risk management and conduct falls below required standards include:
Adjustment
Current year annual bonuses are adjusted downwards where individuals are found to be responsible (either directly or indirectly)
in a risk or misconduct event.
Malus
Clawback
Deferred unvested bonuses from prior years are subject to malus provisions which enable the Committee to reduce the vesting
level of deferred bonuses (including to nil) at its discretion. Events which may lead the Committee to do this include, but are not
limited to, employee misconduct or a material failure of risk management.
Clawback applies to any variable remuneration awarded to a Material Risk Taker (MRT) on or after 1 January 2015 in respect of
years for which they are a MRT. Barclays may apply clawback if, at any time during the seven-year period from the date on which
variable remuneration is awarded to a MRT: (i) there is reasonable evidence of employee misbehaviour or material error, and/or
(ii) the firm or the business unit suffers a material failure of risk management, taking account of the individual’s proximity to and
responsibility for that incident.
Clawback may be extended to 10 years for PRA Senior Managers where there are outstanding internal or regulatory
investigations at the end of the seven-year clawback period.
In addition to reductions to individuals’ bonuses, the Committee considers and makes collective adjustments to the incentive pool for specific risk
and conduct events. For 2017, the impact of these collective adjustments, resulting from both the direct financial impact on performance and the
additional adjustments applied by the Committee, is a reduction of c.£180m.
We have also adjusted the incentive pool to take account of an assessment of a wide range of future risks including conduct, non-financial factors
that can support the delivery of a strong risk management, control and conduct culture and other factors including reputation, impact on
customers, markets and other stakeholders. The Committee was supported in its consideration of this adjustment by the Board Risk Committee
and the Board Reputation Committee.
Fair pay agenda
Barclays continues to look holistically at different aspects of how we pay our people, to ensure that we deliver fair and effective pay for
performance, with pay decisions that are aligned with Barclays’ Values.
This can be described as our fair pay agenda, which incorporates a number of themes currently highlighted by the Government and the media,
although in practice our approaches to many of these aspects have evolved over many years.
Our main areas of focus are:
■■ Fair pay for the lowest paid
– Ensuring our people receive a fair day’s pay for a fair day’s work.
– Barclays has been committed to paying the Living Wage since 2004, with all UK permanent employees and those UK employees of third party
contractors who provide services to us at our sites being paid at least the current National or London Living Wage. This is a commitment we
have also extended to all our UK employed apprentices. By March 2018, the entry level pay for permanent, non-apprentice employees, will
already be above the Living Wage target level set for 2020 by the Government, two years early. Similarly, Barclays will meet the 2020 target
Living Wage level for its apprentice population by 2019.
– Our current pay deal with Unite (2017–2019) commits to a 7.5% agreed salary increase budget for the Unite recognised population. As part of
the pay deal, our commitment to track the Living Wage and continue to progress junior pay will provide a 10% increase across the three years
for the most junior employees.
■■ Ensuring every individual has the opportunity to progress through the organisation and earn more
– Supporting initiatives to eliminate any ‘glass ceiling’ and ensure equal opportunities for progression for every individual.
– We are an equal opportunities employer and have a number of initiatives in place to support diversity in our workplace e.g. increasing female
representation at all levels across Barclays remains a core focus of our talent management and leadership succession processes.
– Barclays has published its UK Gender Pay Gap for the first time this year (pages 90 to 92), as well as continuing to report the proportion of
women at our more senior corporate grades.
■■ Equal pay
– Barclays fully supports equal pay legislation (in place in the UK since 1970).
– Barclays is committed to ensuring all employees are fairly paid for the work they do, and that men and women receive equal pay for the same
or similar roles. We are explicit with those who make pay decisions that those pay decisions must not, directly or indirectly, take into account
an individual’s gender, age, ethnicity, religion, sexual orientation, marital status, pregnancy, maternity, shared parental, paternity or parental
leave, veteran status or disability.
– To ensure our pay decisions are fair, and reflect our legal obligations, Barclays has a number of policies and processes in place to ensure that
line management decisions that are made at the beginning on hiring and throughout the employment cycle are free from unlawful bias. This
includes ensuring that our internal policies and processes are neutral in their application and free from any conscious or unconscious bias. We
also share key data annually with Unite concerning their recognised population on pay distribution.
■■ Ensuring employees, like any other stakeholders, are appropriately represented in remuneration decision-making
– Employee views are represented by senior management to the Committee. We continue to review potential approaches to build on this.
– Employees are represented by their management through our internal remuneration decision-making processes. We are also proud of our
long-standing relationship with Unite, through which we engage positively on remuneration.
98 Barclays PLC Annual Report 2017
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Governance: Remuneration report ■■ Ensuring executive pay and employee pay are linked to business performance
– The view that executive and employee remuneration should both be linked to the performance of the Company is one shared by the
Committee.
– Pay approaches for our executive Directors are demonstrably aligned to business performance through financial, non-financial performance
and risk based performance measures, as described in the DRP.
– Similar performance considerations are made by the Committee when determining the appropriate level of incentive funding for all of our people.
Remuneration structure
The remuneration structure for employees is closely aligned with that for executive Directors, set out in detail in the DRP which can be found on
pages 108 to 120 of the 2016 Annual Report. The primary exception being that the executive Directors participate in the Barclays’ LTIP and receive
part of their Fixed Pay in Barclays PLC shares.
Employees receive salary, pension and other benefits and are eligible to be considered for an annual bonus. Employees in some customer-facing
businesses participate in formulaic incentive plans, including plans which have good customer outcomes as the primary performance measure.
The plans also recognise how results have been achieved in line with Barclays’ Values. Some senior employees also receive Role Based Pay (RBP).
Remuneration of MRTs is subject to the 2:1 maximum ratio of variable to fixed remuneration. A total of 1,641 (2016: 1,561) individuals were MRTs
in 2017. Capital requirements regulation (CRR) quantitative disclosures on MRTs are set out on pages 189 to 191 of Barclays PLC 2017 Pillar 3
Report.
The remuneration of employees engaged in control functions is determined independently from the business they support and within the
parameters of the incentive pool allocated to them by the Committee. Remuneration for control function employees is less weighted towards
variable remuneration as compared to front-office employees and variable remuneration is typically limited to one times fixed remuneration. This
leads to less volatility in overall control function remuneration as compared to front-office outcomes.
Fixed remuneration
Salary
Salaries reflect individuals’ skills and experience and are reviewed annually in the context of annual performance assessment.
They are increased where justified by role change, increased responsibility or a change in the appropriate market rate. Salaries
may also be increased in line with local statutory requirements and in line with union and works council commitments.
Role Based Pay
(RBP)
A small number of senior employees receive a class of fixed pay called RBP to recognise the seniority, breadth and depth of their
role.
Pension and
benefits
The provision of a competitive package of benefits is important to attracting and retaining the talented staff needed to deliver
Barclays’ strategy. Employees have access to a range of country-specific company-funded benefits, including pension schemes,
healthcare, life assurance and Barclays’ share plans as well as other voluntary employee funded benefits. The cost of providing
these benefits is defined and controlled.
Variable remuneration
Annual bonus Annual bonuses incentivise and reward the achievement of Group, business and individual objectives, and reward employees for
demonstrating individual behaviours in line with Barclays’ Values.
The ability to recognise performance through variable remuneration enables the Group to control its cost base flexibly and to
react to events and market circumstances. Bonuses remain a key feature of remuneration practice in the highly competitive and
mobile market for talent in the financial services sector. The Committee is careful to control the proportion of variable to fixed
remuneration paid to individuals and also to ensure an appropriate amount is deferred to future years.
The typical deferral structures are:
For MRTs:
Incentive award
< £500,000
£500,000 to £1,000,000
≥ £1,000,000
Amount deferred
40% of total award
60% of total award
60% up to £1,000,000
100% above £1,000,000
Incentive award
Up to £65,000
> £65,000
For non-MRTs:
Amount deferred
0%
Graduated level of deferral
Deferred bonuses are generally delivered in equal portions as deferred cash and deferred shares subject to the rules of the
deferred cash and share plans (as amended from time to time) and continued service. Deferred bonuses are subject to either a
3, 5 or 7 year deferral period in line with regulatory requirements.
Where dividend equivalents cannot be delivered on deferred bonus shares, the number of deferred bonus shares awarded will be
calculated using a share price discounted to reflect the absence of dividend equivalents during the vesting period.
Share plans
Alignment of senior employees with shareholders is achieved through deferral of incentive pay. We also encourage wider
employee shareholding through the all-employee share plans. 86% of the global employee population is eligible to participate
(up from 82% in 2016).
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Directors’ remuneration policy
This section sets out a summary of the Barclays’ forward-looking DRP and is provided for information only. The DRP was approved at the 2017
AGM held on 10 May 2017 and applies for three years from that date. The full DRP can be found on pages 108 to 120 of the 2016 Annual
Report or at home.barclays/annualreport
Remuneration policy summary – executive Directors
Element and purpose
Operation
Fixed Pay
To reward skills and experience
appropriate for the breadth and
depth of the role and to provide
the basis for a competitive
remuneration package
Pension
To enable executive Directors
to build long-term retirement
savings
Benefits
To provide a competitive and
cost effective benefits package
appropriate to the role and
location
Annual bonus
To reward delivery of short-
term financial targets set each
year, the individual
performance of the executive
Directors in achieving those
targets, and their contribution
to delivering Barclays’ strategic
objectives
Delivery in part in shares with
a holding period increases
alignment with shareholders.
Deferred bonuses encourage
longer term focus and
retention
Implementation in 2018
No change from 2017.
■■ Jes Staley: £2,350,000
■■ Tushar Morzaria: £1,650,000
These amounts are fixed and will
not change during the policy
period for these individuals.
No change from 2017.
■■ Jes Staley: £396,000
■■ Tushar Morzaria: £200,000
These amounts are fixed and will
not change during the policy
period for these individuals.
No change from 2017.
Fixed Pay is determined with reference to market practice and historical
market data (on which the Committee receives independent advice),
and reflects the individual’s experience and role.
Total compensation is benchmarked against comparable roles in banks.
50% of Fixed Pay is delivered in cash (paid monthly), and 50% is
delivered in shares. The shares are delivered quarterly and are subject to
a holding period with restrictions lifting over five years (20% each year).
As the executive Directors beneficially own the shares, they will be
entitled to any dividends paid on those shares.
There are no performance measures.
Malus and clawback provisions do not apply to Fixed Pay.
Executive Directors receive an annual cash allowance in lieu of
participation in a pension arrangement.
Executive Directors’ benefits provision includes, but is not restricted to,
private medical cover, annual health check, life and ill health income
protection, car cash allowance, and use of a Company vehicle and
driver when required for business purposes.
In addition to the above, if an executive Director were to relocate,
additional support would be provided for a defined and limited period
of time in line with Barclays’ general employee mobility policy. Barclays
will pay the tax on relocation costs but will not tax equalise and will also
not pay tax on any other employment income.
The maximum annual bonus opportunity is 80% of Total fixed pay. For
these purposes Total fixed pay is Fixed Pay plus Pension.
Details of performance measures
are set out on page 109.
Shares issued are subject to a
holding period of one year after
vesting.
As dividend equivalents are not
permissible under regulations, the
number of shares to be awarded
will be calculated using a share
price discounted to reflect the
absence of dividend equivalents
during the vesting period.
The performance measures include financial and non-financial
measures which also include risk related measures and personal
objectives. Financial measures will be at least 60% of the bonus
opportunity. The Committee has discretion to vary the measures and
their respective weighting within each category.
Annual bonuses are delivered as a combination of cash and shares, a
proportion of which may be deferred and/or subject to a holding period.
Deferral proportions and vesting profiles will be structured so that, in
combination with any LTIP award, the proportion of variable pay that is
deferred is no less than that required by regulations.
Dividend equivalents are payable on vested deferred bonus shares. If
dividend equivalents are not permissible under regulations, the number
of shares to be awarded will be determined using a share price
discounted by reference to the expected dividend yield.
A notional discount may be applied to deferred bonuses for the
purposes of calculating the 2:1 cap to the extent permitted by
regulations.
Awards are subject to malus during the vesting period and clawback for
a period of seven years (10 years in specific circumstances) from the
date of award.
100 Barclays PLC Annual Report 2017
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Governance: Remuneration report
Element and purpose
Operation
Implementation in 2018
Annual bonus
continued
Long Term Incentive Plan
(LTIP) award
To reward execution of
Barclays’ strategy over a
multi-year period
Long-term performance
measurement, deferral and
holding periods encourage a
long-term view and align
executive Directors’ interests
with those of shareholders.
Malus and clawback provisions
discourage excessive risk-
taking and inappropriate
behaviours
Non-deferred cash components of any bonus are paid following the
performance year to which they relate, normally in March. Non-deferred
share bonuses are also awarded normally in March and are subject to a
holding period (after the payment of tax) in line with regulations.
Deferred share bonuses are structured so that no deferred shares vest
faster than permitted by regulations (currently in five equal tranches
with the first vesting on or around the third anniversary of grant and the
last tranche vesting on or around the seventh anniversary of grant). Any
shares that vest are subject to an additional holding period (after
payment of tax) in line with regulations.
The maximum annual LTIP award is 120% of Total fixed pay. For these
purposes Total fixed pay is Fixed Pay plus Pension.
Forward-looking performance measures will be based on financial
performance and other long-term strategic measures. Financial
measures will be at least 70% of the total opportunity. Straight-line
vesting applies between threshold and maximum for the financial
measures with no more than 25% vesting at threshold performance.
LTIP awards are structured so that when combined with the annual
bonus the proportion of variable pay that is deferred is no less than that
required by regulations.
The Committee has discretion to vary the measures year on year and
their respective weighting within each category. The Committee also
has discretion to amend targets, measures and the number of awards in
exceptional circumstances and to reduce the vesting of any award,
including to nil, if it deems that the outcome is not consistent with
performance.
Dividend equivalents are payable on vested deferred shares. If dividend
equivalents are not permissible under the regulations, the number of
shares to be awarded will be determined using a share price discounted
by reference to the expected dividend yield.
A notional discount may be applied to LTIP awards for the purposes of
calculating the 2:1 cap to the extent permitted by regulations.
Awards are subject to malus during the vesting period and clawback for
a period of seven years (10 years in specific circumstances) from the
date of award.
No LTIP award vests before the third anniversary of grant and an award
vests no faster than permitted by regulations (currently in five equal
tranches with the first tranche vesting on or around the third
anniversary of grant and the last tranche vesting on or around the
seventh anniversary of the grant date). Any shares that vest are subject
to an additional holding period (after payment of tax) in line with
regulations.
Details of performance measures
and targets for awards to be made
in 2018 (in respect of 2017) are
set out on page 107.
For awards to be made in respect
of 2018, the measures and targets
will be determined at the end of
2018 for the performance period
commencing on 1 January 2019.
On vesting, the award is subject
to a holding period of one year.
As dividend equivalents are not
permissible under regulations, the
number of shares to be awarded
will be calculated using a share
price discounted to reflect the
absence of dividend equivalents
during the vesting period.
Shareholding requirement
To further enhance the
alignment of shareholders’ and
executive Directors’ interests in
long-term value creation
Executive Directors must build up a shareholding of 200% of Total fixed
pay (i.e. Fixed Pay plus Pension) within five years from the date of
appointment as executive Director.
Executive Directors must also continue to hold a shareholding of 100%
of Total fixed pay (or pro-rata thereof ) for two years post-termination.
No change from 2017.
(Equivalent to 457% of Salary for
the Group Chief Executive under
the previous DRP.)
Executive Directors are also entitled to participate in all employee share plans, for example Barclays Sharesave and Barclays Sharepurchase, on the
same basis as all other employees.
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Remuneration policy summary – non-executive Directors
Element and purpose
Operation
Fees
Reflect individual
responsibilities and
membership of Board
Committees and are set to
attract non-executive Directors
who have relevant skills and
experience to oversee the
implementation of our strategy
Fees are set at a level which
reflects the role, responsibilities
and time commitment which
are expected from the
Chairman, Deputy Chairman
and non-executive Directors
Benefits
Expenses
The Chairman and Deputy Chairman are paid an all-inclusive fee for all
Board responsibilities. The Chairman has a minimum time commitment
equivalent to at least 80% of a full-time role. The other non-executive
Directors receive a basic Board fee, with additional fees payable where
individuals serve as a member or Chairman of a Committee of the Board.
Fees are reviewed each year by the Board as a whole. Other than in
exceptional circumstances, fees will not increase by more than 20%
above the current fee levels during this policy period (basic fees last
increased in 2011).
£30,000 (Chairman: £100,000) after tax and national insurance
contributions per annum of each non-executive Director’s basic fee
is used to purchase Barclays’ shares which are retained on the non-
executive Director’s behalf until they retire from the Board.
Some non-executive Directors may also receive fees as directors of
subsidiary companies of Barclays PLC.
The Chairman is provided with private medical cover subject to the
terms of the Barclays’ scheme rules from time to time, and is provided
with the use of a Company vehicle and driver when required for business
purposes.
Benefits which are minor in nature and do not exceed a cost of £500
may be provided to non-executive Directors in specific circumstances.
Implementation in 2018
No change from 2017.
No change from 2017.
The Chairman and non-executive Directors are reimbursed for any
reasonable and appropriate expenses incurred for business reasons.
Any tax that arises on these reimbursed expenses is paid by Barclays.
No change from 2017.
Service contracts and letters of appointment
All executive Directors have a service contract whereas all non-executive Directors have a letter of appointment. Copies of the service contracts
and letters of appointment are available for inspection at the Company’s registered office. The dates of the current Directors’ service contracts and
letters of appointment are shown in the table below.
Chairman
John McFarlane
Executive Directors
Jes Staley
Tushar Morzaria
Non-executive Directors
Mike Ashley
Tim Breedon
Sir Ian Cheshire
Mary Francis
Crawford Gillies
Sir Gerry Grimstone
Reuben Jeffery III
Matthew Lester
Dambisa Moyo
Diane Schueneman
Mike Turner
Effective date
1 January 2015 (non-executive Director), 24 April 2015 (Chairman)
1 December 2015
15 October 2013
18 September 2013
1 November 2012
3 April 2017
1 October 2016
1 May 2014
1 January 2016
16 July 2009
1 September 2017
1 May 2010
25 June 2015
1 January 2018
102 Barclays PLC Annual Report 2017
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Governance: Remuneration report Governance: Remuneration report
Annual report on Directors’ remuneration
This section explains how our Directors’ remuneration policy was implemented during 2017.
Executive Directors
Executive Directors: Single total figure for 2017 remuneration (audited)
The following table shows a single total figure for 2017 remuneration in respect of qualifying service for each executive Director together with
comparative figures for 2016.
Jes Staleyb
Tushar Morzariac
Fixed Paya
£000
Taxable benefits
£000
Annual bonus
£000
LTIP
£000
Pension
£000
Total
£000
2017
2,350
1,614
2016
2,350
1,550
2017
62
44
2016
169
44
2017
1,065
747
2016
1,318
854
2017
–
882
2016
–
1,008
2017
396
200
2016
396
200
2017
3,873
3,487
2016
4,233
3,656
Notes
a The 2016 figures for Fixed Pay relate to Salary and RBP.
b Jes Staley’s 2016 benefits figure includes relocation expenses.
c Tushar Morzaria’s Fixed Pay increased to £1,650,000 with effect from 10 May 2017.
Additional information in respect of each element of pay for the executive Directors (audited)
Fixed Pay
Fixed Pay was introduced for 2017, replacing Salary and RBP, and is delivered 50% in cash and 50% in shares (subject to a five-year holding period
lifting pro-rata).
Taxable benefits
Taxable benefits include private medical cover, life and ill health income protection, tax advice, relocation, car allowance, the use of a Company
vehicle and driver when required for business purposes and other benefits that are considered minor in nature.
Annual bonus
Annual bonuses are typically awarded in Q1 following the financial year to which they relate. The Committee considered the executive Directors’
performance against the financial (60% weighting) and strategic/non-financial (20% weighting) performance measures which had been set to
reflect company priorities for 2017. Performance against their individual personal objectives (20% weighting) was assessed on an individual basis.
2017 annual bonus outcomes
Financial (60% weighting)
The approach taken to assessing financial performance against each of the financial measures was based on a straight-line outcome between
25% for threshold performance and 100% applicable to each measure for achievement of maximum performance.
The formulaic outcome from 2017 performance against the financial measures set at the beginning of the year gave a total of 22.5% out of 60%
being payable attributable to those measures. A summary of the assessment is provided in the following table.
Financial performance measure
Profit before tax (excluding material items)
CET1 ratio
Cost: income ratio (excluding material items)
Total Financial
Weighting
22.5%
22.5%
15.0%
60%
Threshold
25%
£5.10bn
12.6%
67.0%
Maximum
100%
£6.20bn
13.0%
63.0%
2017
Actual
£4.24bn
13.3%
70.0%
2017
Outcome
0%
22.5%
0%
22.5%
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Strategic (20% weighting)
Progress in relation to each of the strategic measures, organised around three main categories, was assessed by the Committee. The Committee
used the following scale in relation to each measure: 0% to 1% firmly below performance expectations, 1.5% to 3% slightly below performance
expectations, 3.5% to 5.5% meeting or slightly exceeding performance expectations, and 6% to 7% clearly above performance expectations.
Based on this approach to assessing performance against 2017 Group Performance Measurement Framework milestones, the Committee agreed
a 13% outcome out of a maximum of 20%. The assessment is provided in the following table.
Customer and Client
2017
Outcome
3.0%
Measure
■■ We have continued to make progress with our customer and client agenda. However,
complaints remain an ongoing area of focus for management and the Board.
■■ Barclays Relationship Net Promoter Score (NPS) ended the year with an improved score of +14
(2016: +10) while Barclaycard UK Relationship NPS remained relatively flat (2017: +9).
Barclaycard International business also continued to perform well on Relationship NPS.
■■ Underlying UK complaint volumes (Barclays UK, excluding PPI) reduced 13% year on year,
however, there has been a small increase in PPI complaints (up 2% year on year) driven largely
by the FCA deadline announcement. Barclays UK complaint volumes, including PPI, were down
7% year on year. Barclays International complaints reduced by 19% year on year. Complaints
reduction remains a priority across the Group, and despite improvements in 2017, Barclays
has more work to do, as can be seen from our position in the H1 2017 FCA complaints tables
in the UK.
■■ The number of customers and clients in the UK using our digital services on a regular basis has
increased to over 10 million customers (2016: nearly 9.5m).
■■ In our home markets of the UK and US, our CIB ranked 6th place by fee share across M&A,
equity and debt capital markets and syndicated loan transactions (2016: 5th); and we were
highly encouraged by the 1st place CIB ranking in the UK (Dealogic).
Colleague
■■ Overall this has been a year of progress on increasing the diversity of our workforce and in
4.5%
building an inclusive and engaged culture.
■■ Employee sustainable engagement improved by 3% year on year to 78%, with the majority
of key survey question results recording improvements and the rest remaining stable.
■■ We remain focused on improving our gender diversity. We have made a 1% improvement in
the percentage of female Managing Directors and Directors to 23% (on a like for like basis
excluding Africa). Recognising the importance of strengthening our talent pipeline, we also
have an ambition for 50% female graduate hires and have ended 2017 at 40%.
■■ External recognition includes: Stonewall recognising Barclays as one of 12 Top Global
Employers; the Human Rights Campaign awarding Barclays 100% on their corporate equality
index; Working Families UK recognising Barclays as one of the top 10 Employers for Working
Families in 2017; and Barclays was acknowledged as a Top 50 Employer through the Social
Mobility Employer Index in 2017.
Citizenship
■■ This has been a very positive year in the Citizenship space, with further progress in many areas.
■■ We helped upskill over 2.1 million people (2016 1.7 million), driven by a range of regional
5.5%
employability partnerships and our flagship LifeSkills programme in the UK.
■■ Barclays delivered £31.7bn in financing for selected social and environmental segments
(2016: £30.5bn).
■■ We helped empower around 205,000 people (2016: 249,000) through initiatives such as:
Barclaycard Initial for those with a limited credit history; our Digital Eagles network, comprised
of specially trained Barclays’ employees working to provide free technology support to
customers and non-customers; and the continued development of learning platforms.
■■ We reduced carbon emissions by 26.1% against the 2015 baseline, making good progress
against our target of 30% reduction by 2018.
■■ We also achieved 89% (2016: 88%) on-time payment by value to our suppliers, ahead of our
target of 85%, and published an updated Statement on Modern Slavery.
13% out of 20%
Further details on the Group Performance Measurement Framework can be found on pages 15 to 22.
104 Barclays PLC Annual Report 2017
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Governance: Remuneration report Individual outcomes including assessment of personal objectives
Performance against each of the executive Directors’ individual personal objectives (20% weighting overall) was assessed by the Committee on an
individual basis.
(i) Jes Staley
A summary of the assessment for Jes Staley against his specific performance measures is provided in the following table.
Performance measure
Financial
Strategic
Personal objectives
Total
Final outcome approved by the Remuneration Committee
See table on page 103
See table on page 104
Judgemental assessment – see below
Weighting
60%
20%
20%
100%
2017
Outcome
22.5%
13.0%
13.0%
48.5%
48.5%
The Committee assessed Jes Staley’s performance against his 2017 personal objectives (as set out on page 126 of the 2016 Annual Report). In
relation to the joint personal objectives, the Committee has taken account of delivery against financial commitments including achieving the end
state target range for the CET1 ratio as well as improvements to our cost: income ratio, while recognising that there is still some way to go in
getting returns where management, the Board and our investors expect them to be. The Committee has also recognised the early closure of
Non-Core and successful reintegration of remaining assets/businesses into Core as well as the achievement of the accounting deconsolidation
and regulatory proportional consolidation of BAGL. It noted that the structural reform programme has been well executed, with the launch of the
Group Service Company achieved. The Committee noted the significant work that has taken place in planning following the EU referendum
outcome. Risk and control have also continued to be managed effectively, with further progress in resolving legacy conduct and litigation matters.
In relation to his individual objectives, the Committee recognises that Jes Staley has made continued progress towards ensuring a high performing
culture in line with our Values, and employee engagement has been strengthened in 2017. Barclays has made improvements in some customer
and client metrics such as a reduction in customer complaints, while noting the need for further improvement. Succession planning for senior
roles has been improved, and continued progress made in improving the percentage of women in senior leadership roles (5th consecutive year
increasing the percentage of female Managing Directors and Directors). Finally, significant improvements have been made to the Group’s control
environment, with a focus on operations and technology infrastructure, particularly through the establishment of the Group Service Company.
While recognising the strong strategic delivery, given some of the remaining challenges, particularly around returns, the Committee judged that
13% of a maximum of 20% attributable to individual objectives was appropriate.
In aggregate, the performance assessment for Jes Staley resulted in an overall formulaic outcome of 48.5% of maximum bonus opportunity being
achieved. The Committee considered the outcome and agreed that a 2017 annual bonus of £1,065,000 (48.5% of maximum) was appropriate, of
which 62.4% is deferred under the Share Value Plan in line with the Group-wide deferral structure.
(ii) Tushar Morzaria
A summary of the assessment for Tushar Morzaria against his specific performance measures is provided in the following table.
Performance measure
Financial
Strategic
Personal objectives
Total
Final outcome approved by the Remuneration Committee
See table on page 103
See table on page 104
Judgemental assessment – see below
Weighting
60%
20%
20%
100%
2017
Outcome
22.5%
13.0%
15.0%
50.5%
50.5%
The Committee assessed Tushar Morzaria’s performance against his 2017 personal objectives (as set out on page 126 of the 2016 Annual Report).
In relation to the joint personal objectives, the Committee recognised Tushar Morzaria’s contribution to the financial outcomes, including
achieving the end state target range for the CET1 ratio as well as improvements to our cost: income ratio. The Committee also recognised that
Tushar Morzaria had been instrumental in the execution of the strategy including the closure of Non-Core, the accounting deconsolidation and
regulatory proportional consolidation of BAGL and the structural reform programme in the UK. He has also made significant contributions to
Barclays’ planning in response to the EU referendum outcome and plays a key leadership role in managing risk and control as well as settling
legacy conduct and litigation issues.
In relation to his individual objectives, the Committee recognises that he is extremely well respected by both internal and external stakeholders
including the Board, regulators, stakeholders, investors and colleagues across the organisation, effectively managing external relationships and the
reputation of the Group. He has also continued to strengthen his team within Finance and has exemplified the Values expected by the Board – he
is tireless in his commitment to the organisation and defines the notion of partnership. Given his strong personal performance during 2017, the
Committee judged that 15% of a maximum 20% attributable to individual objectives was appropriate.
In aggregate, the performance assessment for Tushar Morzaria resulted in an overall formulaic outcome of 50.5% of maximum bonus opportunity
being achieved. The Committee considered the outcome and agreed that a 2017 annual bonus of £747,000 (50.5% of maximum) was appropriate,
of which 46.5% is deferred under the Share Value Plan in line with the Group-wide deferral structure.
In line with the DRP, and due to the regulations prohibiting dividend equivalents being paid on unvested deferred share awards, the number of
shares awarded to each executive Director under the Share Value Plan will be calculated using a share price at the date of award, discounted to
reflect the absence of dividend equivalents during the vesting period. The valuation will be aligned to IFRS 2, with the market expectations of
dividends during the deferral period being assessed by an independent adviser. These shares will vest in five equal tranches from the third to
seventh anniversary (subject to the rules of the Share Value Plan as amended from time to time). All shares (whether deferred or not) are
subject to a further one-year holding period from the point of release. 2017 bonuses are subject to clawback provisions and, additionally,
unvested deferred 2017 bonuses are subject to malus provisions which enable the Committee to reduce the vesting level of deferred bonuses
(including to nil).
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LTIP
The LTIP amount included in Tushar Morzaria’s 2017 single total figure is the value of the amount scheduled to be released in relation to the LTIP
award granted in 2015 in respect of performance period 2015–2017 (by reference to Q4 2017 average share price). As Jes Staley was not a
participant in this cycle, the LTIP figure in the single figure table is zero for him. Release is dependent on, among other things, performance over
the period from 1 January 2015 to 31 December 2017 with straight-line vesting applied between the threshold and maximum points. The
performance achieved against the performance targets is as follows:
Performance measure
Net generated equitya
Weighting
30%
Core return on risk weighted
assets (RoRWA) excluding
own credit
Non-Core drag on return on
equity (RoE) excluding
material items
Loan loss rate
Balanced Scorecard
20%
10%
10%
30%
Average annual Core
RoRWA of 1.81%
Maximum vesting
Net generated equity
of £1,844m
Threshold
7.5% of award vests for
Net generated equity of
£1,363m
5% of award vests for
average annual Core
RoRWA of 1.34%
2.5% of award vests for
Non-Core drag on RoE
of −4.02%
2.5% of award vests for
average annual loan loss
rate of 70bps
Performance against the Balanced Scorecard was
assessed by the Committee to determine the
percentage of the award that may vest between 0%
and 30%. Each of the 5Cs in the Balanced
Scorecard has equal weighting.
Average annual loss rate
of 55bps or below
Non-Core drag on RoE
of −2.97%
Actual
£3,427m
% of award vesting
30.0%
0.68%
0.0%
−3.85%
3.7%
54bps
10.0%
See below
9.0%
Total
52.7%
Note
a Net generated equity is a metric which converts changes in the CET1 ratio into an absolute capital equivalent measure. The measure is expressed as an average over the period.
A summary of the Committee’s assessment against the Balanced Scorecard performance measure over the three year performance period is
provided below.
Weighting
6%
Performance
■■ Barclays UK Relationship NPS ended the year with a score +14, with improvement
Vesting out of maximum
6% for each ‘C’
1%
Category
Customer and
Client
Colleague
6%
Citizenship
6%
also seen in Barclaycard UK Relationship NPS (c.+2). However, performance against
peers remained 4th throughout the period, below our 2018 target of 1st.
■■ Client Franchise Rank remained stable at 5th throughout the period. While this is a
positive result given our shift in strategy to focus more narrowly on geographies
and businesses of strength in the Investment Bank, we are not on track to achieve
the 2018 target of Top 3.
■■ Continued improvement of +1% per year in the female representation across senior
leadership roles (on a like for like basis excluding Africa) to 23% at the end of 2017.
■■ Colleague engagement improved from 74% in 2014 to 75% in 2015 and 2016 and
2%
to 78% in 2017. However, engagement remains significantly below our 2018 targets.
■■ Met or exceeded 10/11 initiatives in 2015 and 6/6 Shared Growth Ambition goals in
4%
2016 and 2017. Of particular note:
– financing to social and environmental segments rising to £31.7bn in 2017
– global carbon emissions decreased 26.1% against the 2015 baseline
– supplier payment on time exceeded target of 85% throughout the period.
Conduct
Company
6%
6%
■■ Conduct reputation, as measured by the YouGov survey, has remained at 5.4 over
0%
the period and below our 2018 target of 6.5.
■■ Significant strengthening in the CET1 ratio over the period, with the CET1 ratio now
2%
within our end-state target range.
■■ However, returns excluding material items (both RoE and RoTE) were below target
through much of the period.
■■ Cost: income ratio improved but still below long term target.
Total
30%
9%
The LTIP award is also subject to a discretionary underpin whereby the Committee must be satisfied with the underlying financial health of the
Group. The Committee was satisfied that this underpin was met, and accordingly determined that the award should be considered for release at
52.7% of the maximum number of shares under the total award. The shares are scheduled to be released in March 2018. After release, the shares
are subject to an additional two year holding period.
Pension
Executive Directors are paid cash in lieu of pension contributions. The cash allowance in 2017 was £396,000 for Jes Staley and £200,000 for
Tushar Morzaria. No other benefits were received by the executive Directors from any Barclays’ pension plans.
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Governance: Remuneration report Executive Directors: other LTIP awards
The Directors’ remuneration reporting regulations require inclusion in the single total figure of only the value of the LTIP awards whose last year of
performance ends in the relevant financial year and whose vesting outcome is known. For 2017, this is the award to Tushar Morzaria under the
2015–2017 LTIP cycle and further details are set out on page 106. This section sets out other LTIP cycles in which the executive Directors
participate, the outcome of which remains dependent on future performance.
LTIP awards to be granted during 2018
The Committee decided to make an award under the 2018–2020 LTIP cycle to Jes Staley and Tushar Morzaria (based on their performance in
2017) with a face value at grant of 120% of their respective Total fixed pay at 31 December 2017.
The 2018–2020 LTIP award will be subject to the following forward-looking performance measures.
Performance measure
Average return on tangible
equity (RoTE) excluding
material items
Weighting
50%
Average cost: income ratio
excluding material items
Risk Scorecard
20%
15%
Strategic/Non-financial
15%
Threshold
10% of award vests for average RoTE of 7.75%
(based on an assumed CET1 ratio of c.13%)
Vesting of this element will depend on CET1 levels during the performance period:
■■ if CET1 goes below the mandatory distribution restrictions (MDR) hurdlea in any year of the
Maximum vesting
Average RoTE of 10.25%
period, no part of the RoTE element will vest
■■ if CET1 goes below the MDR hurdle +150bps but remains above the hurdle during the period,
the Committee will exercise its discretion to determine what portion of the RoTE element
should vest, based on the causes of the CET1 reduction.
Average cost: income ratio of 58%
4% of award vests for average cost: income
ratio of 62.5%
The Risk Scorecard captures a range of risks and is aligned with the annual incentive risk
alignment framework reviewed with the regulators. The current framework measures
performance against three broad categories – Capital and Liquidity, Control Environment and
Conduct – using a combination of quantitative and qualitative metrics. The framework may be
updated from time to time in line with the Group’s risk strategy. Specific targets within each of
the categories are deemed to be commercially sensitive. Retrospective disclosure will be made
in the 2020 Remuneration report, subject to commercial sensitivity no longer remaining.
The evaluation will focus on key performance measures from the Group Performance
Measurement Framework, with a detailed retrospective narrative on progress throughout the
period against each category. Performance against the Strategic/Non-financial measures will be
assessed by the Committee to determine the percentage of the award that may vest between
0% and 15%. The measures are organised around three main categories: Customer and Client,
Colleague and Citizenship. Each of the three main categories has equal weighting. Measures will
likely include, but will not be limited to, the following:
■■ Customer and Client: NPS for consumer businesses, client rankings and market shares for the
CIB, complaints performance and volume of lending provided to customers and clients.
■■ Colleague: Diversity and Inclusion statistics (including women in senior leadership), Employee
sustainable engagement survey scores and conduct and culture measures.
■■ Citizenship: Delivery against our Shared Growth Ambition, Colleague engagement in
Citizenship activities and external benchmarks and surveys.
Note
a The CET1 ratio underpin in 2018 will reference the expected end-state MDR hurdle, currently expected to be 11.4%.
Straight-line vesting applies between the threshold and maximum points in respect of the financial measures.
The award is subject to a discretionary underpin by which the Committee must be satisfied with the underlying financial health of the Group.
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Outstanding LTIP awards
(i) LTIP awards granted during 2016
The performance measures for the awards made under the 2016–2018 LTIP cycle are as follows:
Performance measure
Return on tangible equity
(RoTE) excluding material
items
Weighting
25%
CET1 ratio as at 31 December
2018
Cost: income ratio excluding
material items
Risk Scorecard
25%
20%
15%
Balanced Scorecard
15%
Threshold
6.25% of award vests for average RoTE
of 7.5%
CET1 ratio must remain at or above an acceptable level for any of this element to vest.
The threshold will be reviewed and set annually based on market conditions and regulatory
requirements (11.3% on 31 December 2018)
6.25% of award vests for CET1 ratio of 11.6% CET1 ratio of 12.7%
Maximum vesting
Average RoTE of 10.0%
Average cost: income ratio of 58%
5% of award vests for average cost: income
ratio of 66%
Performance against the Risk Scorecard is assessed by the Committee, with input from the Group
Risk function, Board Risk Committee and Board Reputation Committee as appropriate, to
determine the percentage of the award that may vest between 0% and 15%. Since its
introduction in 2016, the Risk Scorecard has been aligned by the Committee to the annual
incentive risk alignment framework reviewed with the regulators. Following this alignment, the
current framework measures performance against three broad categories – Capital and Liquidity,
Control Environment and Conduct – using a combination of quantitative and qualitative metrics.
Specific targets within each of the categories are deemed to be commercially sensitive.
Retrospective disclosure of performance will be made in the 2018 Remuneration report subject
to commercial sensitivity no longer remaining.
Performance against the Balanced Scorecard is assessed by the Committee to determine the
percentage of the award that may vest between 0% and 15%. Each of the 5Cs in the Balanced
Scorecard has equal weighting. Assessment will be made against progress towards the 2018 targets.
Straight-line vesting applies between the threshold and maximum points in respect of the financial measures.
The award is subject to a discretionary underpin by which the Committee must be satisfied with the underlying financial health of the Group.
(ii) LTIP awards granted during 2017
An award was made to Jes Staley and Tushar Morzaria on 23 June 2017 under the 2017–2019 LTIP cycle at a share price on the date of grant of
£1.9545, in accordance with our DRP. This is the price used to calculate the face value below.
Jes Staley
Tushar Morzaria
The performance measures for the 2017–2019 LTIP awards are as follows:
% of
Total fixed pay
120%
120%
Number
of shares
1,685,955
1,074,443
Face value
at grant
3,295,200
2,100,000
Performance
period
2017–2019
2017–2019
Performance measure
Return on tangible equity
(RoTE) excluding material
items
Weighting
25%
CET1 ratio as at
31 December 2019
Cost: income ratio excluding
material items
Risk Scorecard
25%
20%
15%
Strategic/Non-financial
15%
Maximum vesting
Average RoTE excluding material items of 9.5%
CET1 ratio 200 basis points above the MDR
hurdle
Average cost: income ratio of 58%
Threshold
6.25% of award vests for average RoTE
excluding material items of 7.5%
CET1 ratio must remain at or above an acceptable level for any of this element to vest.
The threshold will be reviewed and set annually based on market conditions and regulatory
requirements (11.3% on 31 December 2018)
6.25% of award vests for CET1 ratio 100 basis
points above the MDR hurdle
5% of award vests for average
cost: income ratio of 63%
The Risk Scorecard captures a range of risks and is aligned with the annual incentive risk alignment
framework reviewed with the regulators. The current framework measures performance against
three broad categories – Capital and Liquidity, Control Environment and Conduct – using a
combination of quantitative and qualitative metrics. The framework may be updated from time
to time in line with the Group’s risk strategy. Specific targets within each of the categories are
deemed to be commercially sensitive. Retrospective disclosure will be made in the 2019
Remuneration report.
The evaluation will focus on key performance measures from the Group Performance
Measurement Framework, with a detailed retrospective narrative on progress throughout the
period against each category. Performance against the Strategic/Non-financial measures will be
assessed by the Committee to determine the percentage of the award that may vest between 0%
and 15%. The measures are organised around three main categories: Customer and Client,
Colleague and Citizenship. Each of the three main categories has equal weighting. Measures will
likely include, but will not be limited to, the following:
■■ Customer and Client: NPS for consumer businesses, Client rankings and market shares for the
Corporate and Investment Bank, complaints performance and volume of lending provided to
customers and clients
■■ Colleague: Diversity and Inclusion statistics (including women in senior leadership), Employee
sustainable engagement survey scores and conduct and culture measures
■■ Citizenship: Delivery against our Shared Growth Ambition, Colleague engagement in Citizenship
activities and external benchmarks and surveys.
108 Barclays PLC Annual Report 2017
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Governance: Remuneration report Straight-line vesting applies between the threshold and maximum points in respect of the financial measures.
The award is subject to a discretionary underpin by which the Committee must be satisfied with the underlying financial health of the Group.
Executive Directors: Statement of implementation of remuneration policy in 2018
The executive Directors’ package for 2018 can be summarised as follows. Further details can be found on pages 100 to 101.
Fixed Pay
Pension
Maximum Bonus
Maximum LTIP
Jes Staley
£2,350,000
£396,000
80% of Total fixed paya
120% of Total fixed paya
Tushar Morzaria
£1,650,000
£200,000
80% of Total fixed paya
120% of Total fixed paya
Comments
No change from 2017.
No change from 2017.
Total variable opportunity unchanged.
Bonus and LTIP combined for regulatory
deferral purposes.
Note
a Total fixed pay is defined as Fixed Pay plus Pension.
2018 Annual bonus performance measures
Performance measures with appropriately stretching targets have been selected to cover a range of financial and non-financial goals that support
the key strategic objectives of the Company. The performance measures and weightings are shown below.
Financial (60% weighting)
■■ Profit before tax excluding material items (40% weighting)
A performance target range
has been set for each financial
measure.
Strategic/Non-financial (20%
weighting)
Personal (20% weighting)
Payout of this element will depend on the CET1 ratio during the performance year:
– if CET1 goes below the expected end-state MDR hurdlea during the year, no part of this element will pay out
– if CET1 goes below the end-state MDR hurdle + 150bps but remains above the hurdle during the period, the
Committee will exercise its discretion to determine what portion of this element should pay out, based on
the causes of the CET1 reduction
■■ Cost: income ratio excluding material items (20% weighting).
The evaluation will focus on key performance measures from the Group Performance Measurement Framework,
with a detailed retrospective narrative on progress during the year against each category. Performance against
the Strategic/Non-financial measures will be assessed by the Committee to determine the percentage of the
award that may vest between 0% and 20%. The measures are organised around three main categories:
Customer and Client, Colleague and Citizenship. Each of the three main categories has equal weighting.
Measures will likely include, but will not be limited to, the following:
■■ Customer and Client: NPS for consumer businesses, Client rankings and market shares for the Corporate and
Investment Bank, complaints performance and volume of lending provided to customers and clients
■■ Colleague: Diversity and Inclusion statistics (including women in senior leadership), Employee sustainable
engagement survey scores and conduct and culture measures
■■ Citizenship: Delivery against our Shared Growth Ambition, Colleague engagement in Citizenship activities and
external benchmarks and surveys.
The executive Directors have the following joint personal objectives for 2018:
■■ deliver on 2018 financial goals such that we remain on track to achieve our returns targets
■■ seek opportunities for further cost savings and optimise the capital allocation within the Group
■■ complete the structural reform programme successfully, ensuring the UK ring-fenced bank is fully operational
■■ finalise the implementation plan for an effective Brexit outcome
■■ continue to drive strategic initiatives to enhance growth in shareholder value in the medium term
■■ manage risk and control effectively and make continued progress in resolving outstanding conduct matters.
In addition, individual personal objectives for 2018 are as follows:
Jes Staley:
■■ continue to strengthen the Bank’s cyber readiness, operational and financial controls
■■ further improve customer and client satisfaction, with a particular focus on reducing the number of overall
complaints
■■ as part of the ongoing succession planning for Group and Business Unit/Functional Executive Committees,
continue the focus on improving the percentage of women in senior leader positions.
Tushar Morzaria:
■■ continue to strengthen team performance (especially following the creation of the Group Service Company),
talent base and employee engagement in Group Finance, Tax and Treasury
■■ demonstrate effective management of external relationships and reputation.
Note
a The end-state MDR hurdle is currently expected to be 11.4%.
Detailed calibration of the Financial targets is commercially sensitive and it is not appropriate to disclose this information externally on a
prospective basis. Disclosure of achievement will be made in the 2018 Annual Report subject to the targets no longer being commercially
sensitive. The Committee may exercise its discretion to amend the formulaic outcome of assessment against the targets. Any exercise of
discretion will be disclosed and explained.
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Illustrative scenarios for executive Directors’ remuneration
The charts below show the potential value of the current executive Directors’ 2018 total remuneration in three scenarios: ‘Minimum’ (i.e. Fixed Pay,
Pension and benefits), ‘Maximum’ (i.e. Fixed Pay, Pension, benefits and the maximum variable pay that may be awarded) and ‘Mid-point’ (i.e. Fixed
Pay, Pension, benefits and 50% of the maximum variable pay that may be awarded). For the purposes of these charts, the value of benefits is based
on an estimated annual value for 2018. The scenarios do not reflect share price movement between award and vesting.
A significant proportion of the potential remuneration of the executive Directors is variable and is therefore performance-related. It is also subject
to deferral, additional holding periods, malus and clawback.
Total remuneration opportunity:
Group Chief Executive (£m)
Minimum
Total 2.81
42%
42%
16%
Mid-point
Total 5.55
21%
21%
8% 20%
30%
Total remuneration opportunity:
Group Finance Director (£m)
Minimum
Total 1.89
44%
44% 12%
Mid-point
Total 3.74
22% 22% 6% 20% 30%
Maximum
Total 8.30
Maximum
Total 5.59
14%
14%
6%
26%
40%
15%
15%
4%
26%
40%
0
1.5
3
4.5
6
7.5
9
0
1.5
3
4.5
6
7.5
9
Fixed cash
Fixed shares
Pension and Benefits
Bonus
LTIP
Fixed cash
Fixed shares
Pension and Benefits
Bonus
LTIP
In the above illustrative scenarios, benefits include regular contractual benefits. Additional ad hoc benefits may arise, for example, overseas
relocation of executive Directors, but will always be provided in line with the DRP.
Performance graph and table
The performance graph below illustrates the performance of Barclays over the financial years from 2009 to 2017 in terms of total shareholder
return compared with that of the companies comprising the FTSE 100 index. The index has been selected because it represents a cross-section of
leading UK companies.
Total shareholder return – rebased to 2008
Barclays PLC
FTSE 100 Index
250
180
127
2009
174
143
2010
140
120
2011
2008
210
183
193
184
182
178
183
154
Year ended 31 December
217
187
243
173
2012
2013
2014
2015
2016
2017
In addition, the table below provides a summary of the total remuneration of the relevant Group Chief Executive over the same period as the above
graph. For the purpose of calculating the value of the remuneration of the Group Chief Executive, data has been collated on a basis consistent with
the ‘single figure’ methodology.
The table also provides pay ratios of the Group Chief Executive’s total remuneration to average remuneration for UK employees and the Group
Executive Committee (Group ExCo) respectively.
Year
Group Chief Executive
Group Chief Executive
single figure of total
remuneration £000s
Annual bonus against
maximum opportunity %
Long-term incentive
vesting against maximum
opportunity %
Ratio of single figure of
total remuneration to:
UK employee median
UK employee mean
Ratio of single figure of
total remuneration to:
Group ExCo median
Group ExCo mean
2009
John
Varley
2010
John
Varley
2011
Bob
Diamond
2012
Bob
Diamonda
Antony
Jenkinsb
2013
Antony
Jenkins
2014
Antony
Jenkins
2015
John
McFarlanec
Antony
Jenkinsb
Jes
Staleyd
2016
Jes
Staley
2017
Jes
Staley
2,050
4,567
11,070e
1,892
529
1,602
5,467f
3,399
305
277
4,233
3,873
0% 100%
80%
0%
0%
0%
57%
48%
N/A
N/A
60% 48.5%
50%
16%
N/Ag
0%
N/Ag
N/Ag
30%
39%
N/Ag
N/Ag
N/Ag
N/Ag
75 x
39 x
165 x
86 x
391 x
204 x
0.5 x
0.3 x
1.0 x
0.5 x
2.4 x
1.3 x
84 x
44 x
1.2 x
0.8 x
54 x
29 x
175 x
94 x
0.4 x
0.4 x
2.2 x
2.0 x
126 x
69 x
1.6 x
1.3 x
137 x
73 x
119 x
65 x
1.1 x
1.1 x
1.0 x
0.7 x
Notes
a Bob Diamond left the Board on 3 July 2012.
b Antony Jenkins became Group Chief Executive on 30 August 2012 and left the Board on 16 July 2015.
c John McFarlane was Executive Chairman from 17 July 2015 to 30 November 2015. His fees, which remained unchanged, have been pro-rated for his time in the position.
He was not eligible to receive a bonus or LTIP.
d Jes Staley became Group Chief Executive on 1 December 2015.
e This figure includes £5,745k tax equalisation as set out in the 2011 Remuneration report. Bob Diamond was tax equalised on tax above the UK rate where that could not be offset
by a double tax treaty.
f Antony Jenkins’ 2014 pay is higher than in earlier years since he declined a bonus in 2012 and 2013 and did not have LTIP vesting in those years.
g Not a participant in a long-term incentive award which vested in the period.
110 Barclays PLC Annual Report 2017
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Governance: Remuneration report As we focus on our fair pay agenda, we are publishing our CEO pay ratios two years in advance of the disclosure becoming a statutory
requirement. The pay ratios compare amounts disclosed in the single total figure table for the Group Chief Executive to (a) the median and mean
annual total compensation of all UK employees, and (b) the median and mean annual total compensation of the Group ExCo. Where there was
more than one Group Chief Executive in a given year (2012 and 2015), the pay ratio references the sum of the Group Chief Executive single total
figures for that year.
It is worth noting that the ratios can be volatile. This is a result of a number of factors, including the tenure of our Group Chief Executives and the
variation in LTIP payouts (in some years, the Group Chief Executive may not be a participant in a vesting LTIP). Our current Group Chief Executive’s
Fixed Pay is fixed for the duration of the current DRP, his 2017 bonus has reduced from 2016 and he has no LTIP vesting this year. This contrasts
with the outcome for more junior populations where average fixed pay and average bonuses have increased between 2016 and 2017.
Percentage change in Group Chief Executive’s remuneration
The table below shows how the percentage change in the Group Chief Executive’s salary, benefits and bonus between 2016 and 2017 compared
with the percentage change in the average of each of those components of pay for UK based employees.
Group Chief Executive
Average based on UK employeesa
Note
a Certain populations were excluded to enable a meaningful like for like comparison.
Fixed Pay
0%
3.3%
Benefits
−63.3%
0.6%
Annual bonus
−19.2%
1.2%
We have chosen UK based employees as the comparator group as it is the most representative for pay structure comparisons.
Relative importance of spend on pay
A year on year comparison of Group compensation costs and distributions to shareholders is shown below.
Group compensation costs (£m)
Dividends to shareholders (£m)
0
2017
2016
2,500
5,000
7,500
0
200
400
600
800
1,000
£7,123
£7,445
2017
2016
£509
£757
Total remuneration of the employees in the Barclays Group
The table below shows the number of employees in the Barclays Group as at 31 December 2016 and 2017 in bands by reference to total
remuneration. Total remuneration comprises salary, RBP, other allowances, bonus and the value at award of LTIP awards.
Total remuneration of the employees in the Barclays Group
Remuneration band
£0 to £25,000
£25,001 to £50,000
£50,001 to £100,000
£100,001 to £250,000
£250,001 to £500,000
£500,001 to £1,000,000
£1,000,001 to £2,000,000
£2,000,001 to £3,000,000
£3,000,001 to £4,000,000
£4,000,001 to £5,000,000
£5,000,001 to £6,000,000
Above £6,000,000
Number of employees
2017
31,406
24,280
17,604
9,818
2,113
811
262
70
21
5
7
4
2016
Constant
currency
33,434
23,081
16,942
9,453
2,183
829
273
65
26
7
9
3
2016
Actual
33,989
22,927
17,063
9,098
2,093
771
264
61
21
7
9
2
Barclays is a global business. Of those employees earning above £1m in total remuneration for 2017 in the table above, 61% are based in the US,
32% in the UK, and 7% in the rest of the world.
The number of employees paid above £1m is down year on year on a constant currency basis (369 in 2017 vs. 383 in 2016).
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Chairman and non-executive Directors
Remuneration for non-executive Directors reflects their responsibilities and time commitment and the level of fees paid to non-executive Directors
of comparable major UK companies.
Chairman and non-executive Directors: Single total figure for 2017 fees (audited)
Chairman
John McFarlane
Non-executive Directors
Mike Ashley
Tim Breedon
Sir Ian Cheshirea
Mary Francisb
Crawford Gillies
Sir Gerry Grimstonec
Reuben Jeffery III
Matthew Lesterd
Dambisa Moyo
Diane de Saint Victore
Diane Schuenemanfg
Steve Thiekefh
Wendy Lucas-Bulli
Frits van Paasschenj
Total
Fees
2017
£000
800
215
225
360
135
195
375
120
45
135
38
308
87
–
–
3,038
2016
£000
800
207
220
–
29
195
250
120
–
135
118
232
221
64
35
2,626
Benefits
2017
£000
2016
£000
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
Total
2017
£000
802
215
225
360
135
195
375
120
45
135
38
308
87
–
–
3,040
2016
£000
801
207
220
–
29
195
250
120
–
135
118
232
221
64
35
2,627
Non-executive Directors are reimbursed expenses that are incurred for business reasons. Any tax that arises on these reimbursed expenses is paid
by Barclays.
The Chairman is provided with private medical cover and the use of a Company vehicle and driver when required for business purposes.
Notes
a Sir Ian Cheshire joined the Board as a non-executive Director and the Barclays UK Board as Chairman with effect from 3 April 2017. The 2017 figure includes fees of £300,000 for
his role on the Barclays UK Board.
b Mary Francis joined the Board as a non-executive Director with effect from 1 October 2016.
c Sir Gerry Grimstone joined the Board as a non-executive Director from 1 January 2016 succeeding Sir Michael Rake as Senior Independent Director and Deputy Chairman. He was
appointed Chairman of the Barclays International Divisional Board on 1 August 2017. His Board Deputy Chairman fees were reduced to £150,000 with effect from this
appointment. The 2017 figure includes fees of £167,000 for his role on the Barclays International Divisional Board.
d Matthew Lester joined the Board as a non-executive Director with effect from 1 September 2017.
e Diane de Saint Victor retired from the Board with effect from 10 May 2017.
f Diane Schueneman and Steve Thieke both served in 2016 on the US Governance Review Board and subsequently the board of the US intermediate holding company on its
formation. The 2016 figures include fees of $138,000 and $150,000 respectively for their roles on the US Governance Review Board and the board of the US intermediate holding
company. In 2016, Steve Thieke also waived fees of $63,000. The 2017 figures include fees of $170,000 and $63,000 respectively for their role on the board of the US intermediate
holding company. In 2017, Steve Thieke also waived fees of $34,000.
g Diane Schuneneman was appointed Chair of the Group Service Company Board on 1 September 2017. The 2017 figure includes fees of £41,000 for her role on the Group Service
Company Board.
h Steve Thieke retired from the Board with effect from 10 May 2017.
i Wendy Lucas-Bull retired from the Board with effect from 1 March 2016. 2016 figures include fees received by Wendy Lucas-Bull for her role as Chairman of BAGL.
j Frits van Paasschen retired from the Board with effect from 28 April 2016.
Chairman and non-executive Directors: Statement of implementation of remuneration policy in 2018
2018 fees, subject to annual review in line with policy, for the Chairman and non-executive Directors are shown below.
Chairmana
Deputy Chairmanb
Board memberc
Additional responsibilities
Senior Independent Director
Chairman of Board Audit or Board Remuneration Committee
Chairman of Board Risk Committee
Chairman of Board Reputation Committee
Membership of Board Audit or Board Remuneration Committee
Membership of Board Reputation or Board Risk Committee
Membership of Board Nominations Committee
1 January 2018
£000
800
250
80
1 January 2017
£000
800
250
80
30
70
70
50
30
25
15
30
70
70
50
30
25
15
Notes
a The Chairman does not receive any other additional responsibility fees in addition to the Chairman fees.
b The Deputy Chairman does not receive any additional fees in respect of being a member or Chairman of Board Committees or for his role as Senior Independent Director. The
current Deputy Chairman’s fees have been reduced to £150,000 with effect from his appointment as Chairman of the Barclays International Divisional Board.
c The basic Board member fee payable to non-executive Directors was last increased in May 2011.
112 Barclays PLC Annual Report 2017
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Governance: Remuneration report Payments to former Directors
Former Group Finance Director: Chris Lucas
In 2017, Chris Lucas continued to be eligible to receive life assurance cover, private medical cover and payments under the Executive Income
Protection Plan (EIPP). Full details of his eligibility under the EIPP were disclosed in the 2013 Directors’ Remuneration report (page 115 of the 2013
Annual Report). Chris Lucas did not receive any other payment or benefit in 2017.
Directors’ shareholdings and share interests
Executive Directors’ shareholdings and share interests (audited)
The chart below shows the value of Barclays’ shares held beneficially by Jes Staley and Tushar Morzaria as at 19 February 2018 that count towards
the shareholding requirement of, as a minimum, Barclays’ shares worth 200% of Total fixed pay (i.e. Fixed Pay plus Pension). The current executive
Directors have five years from their respective date of appointment to meet this requirement. At close of business on 19 February 2018, the market
value of Barclays’ ordinary shares was £2.01.
Jes Staley (£000)
Tushar Morzaria (£000)
Requirement
Actual
£5,492
£9,132
Requirement
Actual
£3,700
£4,354
Interests in Barclays PLC shares (audited)
The table below shows shares owned beneficially by all the Directors and shares over which executive Directors hold awards which are subject to
either deferral terms and/or performance measures. The shares shown below that are subject to performance measures are the maximum
number of shares that may be released.
Executive Directors
Jes Staley
Tushar Morzaria
Chairman
John McFarlane
Non-executive Directors
Mike Ashley
Tim Breedon
Sir Ian Cheshirea
Mary Francis
Crawford Gillies
Sir Gerry Grimstone
Reuben Jeffery III
Matthew Lesterb
Dambisa Moyo
Diane de Saint Victorc
Diane Schueneman
Steve Thieked
Mike Turnere
Unvested
Owned outright
Subject to
performance
measures
Not subject to
performance
measures
Total as at
31 December
2017 (or date
of retirement
from the Board,
if earlier)
Total as at
19 February
2018
4,543,088
2,166,204
1,685,955
3,172,878
398,406
492,782
6,627,449
5,831,864
6,627,449
5,831,864
72,043
73,517
37,124
82,851
14,099
77,796
110,972
211,189
10,000
59,036
42,823
27,255
59,724
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
72,043
72,043
73,517
37,124
82,851
14,099
77,796
110,972
211,189
10,000
59,036
42,823
27,255
59,724
–
73,517
37,124
82,851
14,099
77,796
110,972
211,189
10,000
59,036
–
27,255
–
–
Notes
a Sir Ian Cheshire joined the Board as a non-executive Director with effect from 3 April 2017.
b Matthew Lester joined the Board as a non-executive Director with effect from 1 September 2017.
c Diane de Saint Victor retired from the Board as a non-executive Director with effect from 10 May 2017.
d Steve Thieke retired from the Board as a non-executive Director with effect from 10 May 2017.
e Mike Turner joined the Board as a non-executive Director with effect from 1 January 2018.
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Annual report on Directors’ remuneration
Barclays Board Remuneration Committee
The Board Remuneration Committee is responsible for overseeing Barclays’ remuneration as described in more detail below.
Terms of Reference
The role of the Committee is to:
■■ set the overarching principles and parameters of remuneration policy across the Group
■■ consider and approve the remuneration arrangements of (i) the Chairman, (ii) the executive Directors, (iii) members of the Barclays Group
Executive Committee and any other senior executives specified by the Committee from time to time, and (iv) all other Group employees whose
total annual compensation exceeds an amount determined by the Committee from time to time (currently £2m)
■■ exercise oversight for remuneration issues.
The Committee considers all aspects of the design and operation of remuneration policy to ensure a coherent approach is taken in respect of all
employees. In discharging this responsibility the Committee seeks to ensure that the policy assesses, among other things, the impact of pay
arrangements on culture and all elements of risk management. The Committee also approves incentive pools for all major businesses and
functions, reviews the design and provision of retirement benefits, and considers and approves measures designed to promote the alignment of
the interests of shareholders and employees. The Committee and its members work as necessary with other Board Committees, and is authorised
to select and appoint its own advisers as required.
The Terms of Reference can be found at home.barclays/corporategovernance or from the Company Secretary on request.
Chairman and members
The Chairman and members of the Committee are as follows:
■■ Crawford Gillies, Committee member since 1 May 2014 and Chairman since 24 April 2015
■■ Tim Breedon, Committee member since 1 December 2012
■■ Mary Francis, Committee member since 1 November 2016
■■ Dambisa Moyo, Committee member since 1 September 2015.
All current members are considered independent by the Board.
Remuneration Committee attendance in 2017
Crawford Gillies
Tim Breedon
Mary Francis
Dambisa Moyo
Meetings attended/eligible to attend
7/7
7/7
7/7
7/7
The performance of the Committee is reviewed each year as part of the Board Effectiveness Review. The results of the January 2018 review were
positive and concluded that the Committee is composed of the right level of experience and skills. Full details of the Board Effectiveness Review
can be found on page 78.
Advisers to the Remuneration Committee
Between February 2016 and September 2017, the Board Remuneration Committee did not engage an independent adviser.
PricewaterhouseCoopers (PwC) was appointed as the independent adviser to the Committee in October 2017. Prior to the appointment of KPMG
as auditors on 31 March 2017 (and formally approved at the 2017 AGM in May 2017), PwC was the Group’s external auditor. The Committee is
satisfied that the advice provided by PwC to the Committee is independent and objective. PwC is a signatory to the voluntary UK Code of Conduct
for executive remuneration consultants.
Throughout 2017, Willis Towers Watson continued to provide the Committee with market data on compensation when considering incentive levels
and remuneration packages.
PwC and Willis Towers Watson were paid £78,000 in aggregate (excluding VAT) in fees for their advice to the Committee in 2017 relating to the
executive Directors (either exclusively or along with other employees within the Committee’s Terms of Reference).
In addition to advising the Committee, PwC provided unrelated consulting advice to the Group in respect of corporate taxation, climate-related
financial disclosures, data strategy, technology consulting and internal audit.
In the course of its deliberations, the Committee also considers the views of the Group Chief Executive, the Group Human Resources Director and
the Group Reward and Performance Director. The Group Finance Director and the Chief Risk Officer provide regular updates on Group and
business financial performance and risk profile respectively.
No Barclays’ employee or Director participates in discussions with, or decisions of, the Committee relating to his or her own remuneration. No
other advisers provided services to the Committee in the year.
114 Barclays PLC Annual Report 2017
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Governance: Remuneration report Remuneration Committee activities in 2017
The following provides a summary of the Committee’s activities during 2017 and at the January and February 2018 meetings at which 2017
remuneration decisions were finalised.
Meeting
January 2017
Fixed and variable pay issues
Governance, risk and other mattersa
■■ 2016 incentive funding proposals including risk adjustments
■■ 2016 bonus proposals for senior executives
■■ Barclays deferral approach
February 2017
■■ Approved executive Directors’ and senior executives’ 2017
■■ Approved 2016 Remuneration report
fixed pay
■■ Review of Committee effectiveness
■■ Approved 2017 executive Directors’ annual bonus performance
measures
■■ Group fixed pay budgets for 2017
■■ Approved final 2016 incentive funding including risk
adjustments
■■ Approved proposals for executive Directors’ and senior
executives’ 2016 bonuses and 2017–2019 LTIP awards for
executive Directors
April 2017
May 2017
July 2017
■■ Incentive funding approach
■■ 2017 ex ante risk adjustment methodology
■■ Consideration of whistleblowing event
■■ Non-executive Directors’ fees for
subsidiary boards
■■ Structural reform update
■■ Gender Pay Gap reporting
■■ Annual all employee share plans update
■■ Non-executive Directors’ fees for
subsidiary boards
October 2017
■■ 2017 incentive funding projections including risk adjustments
■■ US benefits arrangements
■■ Annual review of Group Chairman’s remuneration
■■ BAGL – approach for 2017 pay round
December 2017
■■ Initial considerations on executive Directors’ and senior
executives’ 2017 bonuses and 2018 fixed pay and bonus
approach
■■ 2018 LTIP performance measures
■■ 2017 incentive funding proposals including risk adjustments
■■ Approved changes to deferral plans
■■ Review of Committee activity, Terms of
Reference and Control Framework
January 2018
■■ 2017 incentive funding proposals including risk adjustments
■■ Non-executive Directors’ fees for
■■ 2017 bonus proposals for senior executives
subsidiary boards
February 2018
■■ Approved executive Directors’ and senior executives’
■■ Approved 2017 Remuneration report
2018 fixed pay
■■ Review of Committee effectiveness
■■ Approved 2018 executive Directors’ annual bonus performance
measures
■■ Group fixed pay budgets for 2018
■■ Approved final 2017 incentive funding including risk
adjustments
■■ Approved proposals for executive Directors’ and senior
executives’ 2017 bonuses and 2018–2020 LTIP awards for
executive Directors
Note
a The Committee is also provided with updates at each scheduled meeting on: regulatory and stakeholder matters, Finance and Risk, Remuneration Review Panel meetings,
operation of the Committee’s Control Framework on hiring, retention and termination, headcount and employee attrition, and extant LTIP performance.
home.barclays/annualreport
Barclays PLC Annual Report 2017 115
GovernanceRisk reviewFinancial reviewFinancial statementsShareholder informationStrategic report Annual report on Directors’ remuneration
Statement of shareholder voting at Annual General Meeting
The table below shows the voting result in respect of our remuneration arrangements at the AGM held on 10 May 2017:
Advisory vote on the 2016 Remuneration report
Binding vote on the Directors’ remuneration policy
For
% of
votes cast
Number
97.22%
11,879,285,601
97.91%
12,062,616,141
Against
% of
votes cast
Number
2.78%
339,664,546
2.09%
257,416,828
Withheld
Number
152,439,545
51,369,054
At the AGM held on 24 April 2014, shareholders of Barclays PLC voted 96.02% (10,364,453,159 votes) for the resolution in respect of a fixed to
variable remuneration ratio of 1:2 for ‘Remuneration Code Staff ’ (now known as MRTs). On 14 December 2017, the Board of Barclays PLC as
shareholder of Barclays Bank PLC approved the resolution that Barclays Bank PLC and any of its current and future subsidiaries be authorised to
apply a ratio of the fixed to variable components of total remuneration that exceeds 1:1, provided the ratio does not exceed 1:2.
116 Barclays PLC Annual Report 2017
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Governance: Remuneration report Risk review
Contents
The management of risk is a critical underpinning to the execution of Barclays’ strategy.
The material risks and uncertainties the Group faces across its business and portfolios are
key areas of management focus.
Barclays’ risk disclosures are provided in the Annual Report and in the
Barclays PLC Pillar 3 Report 2017.
Risk management
Overview of Barclays’ approach to risk
management. A detailed overview together
with more specific information on policies
that the Group determines to be of particular
significance in the current operating
environment can be found in Barclays PLC
Pillar 3 Report 2017 or at Barclays.com
■■ Enterprise Risk Management Framework (ERMF)
■■ Principal Risks
■■ Risk Appetite for the Principal Risks
■■ Roles and responsibilities in the management of risk
■■ Frameworks, Policies and Standards
■■ Assurance
■■ Effectiveness of risk management arrangements
■■ Learning from our mistakes
■■ Barclays’ Risk Culture
■■ Group-wide risk management tools
■■ Risk management in the setting of strategy
Material existing and emerging risks
Insight into the level of risk across our
business and portfolios, the material existing
and emerging risks and uncertainties we face
and the key areas of management focus.
■■ Material existing and emerging risks to the Group’s future performance
■■ Material existing and emerging risks potentially impacting more than
one Principal Risk
■■ Credit risk
■■ Market risk
■■ Treasury and capital risk
■■ Operational risk
■■ Model risk
■■ Conduct risk
■■ Reputation risk
■■ Legal risk and legal, competition and regulatory matters
Principal Risk management
Barclays’ approach to risk management
for each Principal Risk with focus on
organisation and structure and roles and
responsibilities.
Risk performance
Credit risk: The risk of loss to the firm
from the failure of clients, customers or
counterparties, including sovereigns, to fully
honour their obligations to the firm, including
the whole and timely payment of principal,
interest, collateral and other receivables.
Market risk: The risk of a loss arising from
potential adverse changes in the value of the
firm’s assets and liabilities from fluctuation in
market variables including, but not limited to,
interest rates, foreign exchange, equity prices,
commodity prices, credit spreads, implied
volatilities and asset correlations.
■■ Credit risk management
■■ Management of credit risk mitigation techniques and counterparty credit risk
■■ Market risk management
■■ Management of securitisation exposures
■■ Treasury and capital risk management
■■ Operational risk management
■■ Model risk management
■■ Conduct risk management
■■ Reputation risk management
■■ Legal risk management
■■ Credit risk overview and summary of performance
■■ Analysis of the balance sheet
■■ The Group’s maximum exposure and collateral and other credit
enhancements held
■■ The Group’s approach to management and representation of credit quality
■■ Analysis of the concentration of credit risk
■■ Loans and advances to customers and banks
■■ Analysis of specific portfolios and asset types
■■ Analysis of problem loans
■■ Impairment
■■ Analysis of debt securities
■■ Analysis of derivatives
■■ Market risk overview and summary of performance
■■ Balance sheet view of trading and banking books
■■ Traded market risk review
■■ Review of regulatory measures
Annual
Report
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119
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134
135
136
137
139
139
139
142
144
147
148
151
156
157
157
160
161
162
163
Pillar 3
Report
122
122
122
122
125
125
125
125
125
126
128
n/a
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129
146
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158
162
170
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93
94
95
96
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Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Contents
Risk performance continued
Treasury and capital risk – Liquidity:
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.
Treasury and capital risk – Capital: The risk
that the firm has an insufficient level or
composition of capital to support its normal
business activities and to meet its regulatory
capital requirements under normal operating
environments or stressed conditions (both
actual and as defined for internal planning or
regulatory testing purposes). This includes the
risk from the firm’s pension plans.
Treasury and capital risk – Interest rate risk
in the banking book: The risk that the firm
is exposed to capital or income volatility
because of a mismatch between the interest
rate exposures of its (non-traded) assets and
liabilities.
Operational risk: The risk of loss to the firm
from inadequate or failed processes or
systems, human factors or due to external
events (for example, fraud) where the root
cause is not due to credit or market risks.
Model risk: The risk of the potential adverse
consequences from financial assessments or
decisions based on incorrect or misused
model outputs and reports.
Conduct risk: The risk of detriment to
customers, clients, market integrity,
competition or Barclays from the
inappropriate supply of financial services,
including instances of wilful or negligent
misconduct.
Reputation risk: The risk that an action,
transaction, investment or event will reduce
trust in the firm’s integrity and competence
by clients, counterparties, investors,
regulators, employees or the public.
Legal risk: The risk of loss or imposition of
penalties, damages or fines from the failure
of the firm to meet its legal obligations
including regulatory or contractual
requirements.
■■ Liquidity risk overview and summary of performance
■■ Liquidity risk stress testing
■■ Liquidity pool
■■ Funding structure and funding relationships
■■ Encumbrance
■■ Credit ratings
■■ Contractual maturity of financial assets and liabilities
■■ Capital risk overview and summary of performance
■■ Regulatory minimum capital and leverage requirements
■■ Capital resources
■■ Risk weighted assets
■■ Leverage ratios and exposures
■■ Foreign exchange risk
■■ Pension risk review
■■ Minimum requirement for own funds and eligible liabilities
■■ Interest rate risk in the banking book overview and summary
of performance
■■ Net interest income sensitivity
■■ Economic capital by business unit
■■ Analysis of equity sensitivity
■■ Volatility of the available for sale portfolio in the liquidity pool
■■ Operational risk overview and summary of performance
■■ Operational risk profile
Annual
Report
166
166
168
169
171
174
175
179
180
181
183
184
185
186
187
188
189
189
190
190
191
192
Pillar 3
Report
n/a
n/a
n/a
n/a
188
n/a
n/a
n/a
8
19
26
31
113
114
34
112
115
116
116
117
118
120
■■ Model risk overview and summary of performance
193
n/a
■■ Conduct risk overview and summary of performance
194
n/a
■■ Reputation risk overview and summary of performance
195
n/a
■■ Legal risk overview and summary of performance
196
n/a
Supervision and regulation
The Group’s operations, including its
overseas branches, subsidiaries and
associates, are subject to a significant
body of rules and regulations.
■■ Supervision of the Group
■■ Global regulatory developments
■■ Financial regulatory framework
■■ Structural reform
Pillar 3 Report
Contains extensive information on risk as well
as capital management.
Risk and capital position review: Provides a
detailed breakdown of Barclays’ regulatory
capital adequacy and how this relates to
Barclays’ risk management.
■■ Summary of risk profile
■■ Notes on basis of preparation
■■ Scope of application of Basel rules
■■ Group capital resources, requirements, leverage and liquidity
■■ Analysis of credit risk
■■ Analysis of counterparty credit risk
■■ Analysis of market risk
■■ Analysis of securitisation exposures
■■ Analysis of treasury and capital risk
■■ Analysis of operational risk
197
198
199
204
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3
5
6
17
36
78
93
99
112
118
118 Barclays PLC Annual Report 2017
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Risk review Risk review
Risk management
Barclays’ risk management strategy
Introduction
Barclays engages in activities which entail risk
taking, every day, throughout its business.
This section introduces these risks, and
outlines key governance arrangements for
managing them. These include roles and
responsibilities, frameworks, policies and
standards, assurance and lessons learned
processes. The Group’s approach to fostering
a strong Risk Culture is also described.
Enterprise Risk Management
Framework (ERMF)
The ERMF sets the strategic direction for risk
management by defining standards, objectives
and responsibilities for all areas of Barclays.
It supports the Chief Executive Officer (CEO)
and Group Chief Risk Officer (CRO) in
embedding effective risk management
and a strong Risk Culture.
The ERMF sets out:
■■ Principal Risks faced by the Group
■■ Risk Appetite requirements
■■ Roles and responsibilities for risk
management
■■ Risk Committee structure.
Principal Risks
The ERMF identifies eight Principal Risks
(see table below) and sets out associated
responsibilities and risk management
standards.
Risk Appetite for the
Principal Risks
Risk Appetite is defined as the level of risk
which the Group is prepared to accept in the
conduct of its activities. The Risk Appetite of
the Group specifies the level of risk we are
willing to take and why, to enable specific risk
taking activities.
Risk Appetite is approved and disseminated
across legal entities and businesses, including
by use of Mandate and Scale limits to enable
and control specific activities that have
material concentration risk implications
for the Group.
Roles and responsibilities in
the management of risk
The Three Lines of Defence
All colleagues are responsible for
understanding and managing risks within
the context of their individual roles and
responsibilities, as set out in the ‘Three Lines
of Defence’.
First Line of Defence
The First Line comprises all employees
engaged in the revenue generating and client
facing areas of the Group and all associated
support functions, including Finance,
Treasury, Human Resources and the Chief
Operating Officer (COO) function. Employees
in the First Line are responsible for:
■■ identifying all the risks and developing
appropriate policies, standards and controls
to govern their activities
Financial Principal Risks
Non-Financial Principal Risks
Operational risk: The risk of loss to the firm
from inadequate or failed processes or systems,
human factors or due to external events
(for example, fraud) where the root cause is
not due to credit or market risks.
Model risk: The risk of the potential adverse
consequences from financial assessments or
decisions based on incorrect or misused model
outputs and reports.
Conduct risk: The risk of detriment to customers,
clients, market integrity, competition or Barclays from
the inappropriate supply of financial services,
including instances of wilful or negligent misconduct.
Reputation risk: The risk that an action, transaction,
investment or event will reduce trust in the firm’s
integrity and competence by clients, counterparties,
investors, regulators, employees or the public.
Legal risk: The risk of loss or imposition of
penalties, damages or fines from the failure of
the firm to meet its legal obligations including
regulatory or contractual requirements.
Credit risk: The risk of loss to the firm from the
failure of clients, customers or counterparties,
including sovereigns, to fully honour their
obligations to the firm, including the whole and
timely payment of principal, interest, collateral
and other receivables.
Market risk: The risk of loss arising from potential
adverse changes in the value of the firm’s assets
and liabilities from fluctuation in market variables
including, but not limited to, interest rates, foreign
exchange, equity prices, commodity prices, credit
spreads, implied volatilities and asset correlations.
Treasury and capital risk:
■ Liquidity risk: The risk that the firm is unable
to meet its contractual or contingent obligations
or that it does not have the appropriate amount,
tenor and composition of funding and liquidity
to support its assets.
■ Capital risk: The risk that the firm has an
insufficient level or composition of capital to
support its normal business activities and to meet
its regulatory capital requirements under normal
operating environments or stressed conditions
(both actual and as defined for internal planning
or regulatory testing purposes). This includes the
risk from the firm’s pension plans.
■ Interest rate risk in the banking book: The risk
that the firm is exposed to capital or income
volatility because of a mismatch between the
interest rate exposures of its (non-traded) assets
and liabilities.
■■ operating within any and all limits which
the Risk and Compliance functions establish
in connection with the Risk Appetite of
the Group
■■ escalating risk events to senior managers
in Risk and Compliance.
Second Line of Defence
Employees of Risk and Compliance comprise
the Second Line of Defence. The role of the
Second Line is to establish the limits, rules and
constraints under which First Line activities
shall be performed, consistent with the Risk
appetite of the Group, and to monitor the
performance of the First Line against these
limits and constraints.
Third Line of Defence
Employees of Internal Audit comprise
the Third Line of Defence. They provide
independent assurance to the Board and
Executive Management over the effectiveness
of governance, risk management and control
over current, systemic and evolving risks.
The Legal 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.
Risk Committees
Business Risk Committees consider risk
matters relevant to their business, and
escalate as required to the Group Risk
Committee (GRC), whose Chairman, in turn,
escalates to Board Committees and the Board.
There are three Board-level forums which
oversee the application of the ERMF and
review and monitor risk across the Group.
These are: the Board Risk Committee, the
Board Audit Committee, and the Board
Reputation Committee. Additionally, the Board
Remuneration Committee oversees pay
practices focusing on aligning pay to
sustainable performance. Finally, the main
Board of Barclays receives regular information
on the risk profile of the Group, and has
ultimate responsibility for risk appetite and
capital plans.
The Chairman of each Committee prepares
a statement each year on the Committee’s
activities, which are included in this report on
pages 45 to 79.
The Board
One of the Board’s (Board of Directors of
Barclays Bank PLC) responsibilities is the
approval of Risk Appetite (see page 126 of the
Barclays PLC Pillar 3 Report 2017). The Group
CRO regularly presents a report to the Board
summarising developments in the risk
environment and performance trends in the
key portfolios. The Board is also responsible
for the ERMF.
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Barclays PLC Annual Report 2017 119
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Risk management
Barclays’ risk management strategy
Board Committees
Board
Board Risk
Committee
Board Audit
Committee
Board Reputation
Committee
Board Remuneration
Committee
Management Level
Committees/Forums
Group ExCo
Group Risk Committee
Remuneration
Review Panel
Business Level
Committees/Forums
Business Risk Committees
The Board Risk Committee (BRC)
The BRC monitors the Group’s risk profile
against the agreed financial appetite. Where
actual performance differs from expectations,
the actions taken by management are
reviewed to verify that the BRC is comfortable
with them. After each meeting, the Chairman
of the BRC prepares a report for the next
meeting of the Board. All members are
independent non-executive Directors. The
Group Finance Director (GFD) and the
Group CRO attend each meeting as a
matter of course.
The BRC also considers the Group’s Risk
Appetite statement for operational risk and
evaluates the Group’s operational risk profile
and operational risk monitoring.
The BRC receives regular and comprehensive
reports on risk methodologies, the
effectiveness of the risk management
framework, and the Group’s risk profile,
including the key issues affecting each
business portfolio and forward risk trends.
The Committee also commissions in-depth
analyses of significant risk topics, which are
presented by the Group CRO or senior risk
managers in the businesses.
The Board Audit Committee (BAC)
The BAC receives regular reports on the
effectiveness of internal control systems,
quarterly reports on material control issues
of significance, and quarterly papers on
accounting judgements (including
impairment). It also receives a half-yearly
review of the adequacy of impairment
allowances, which it reviews relative to the
risk inherent in the portfolios, the business
environment, the Group’s policies and
methodologies. The Chairman of the BAC
also sits on the BRC.
The Board Reputation Committee (RepCo)
The RepCo reviews management’s
recommendations on conduct and reputation
risk and the effectiveness of the processes by
which the Group identifies and manages these
risks. It also reviews and monitors the
effectiveness of Barclays’ citizenship strategy,
including the management of Barclays’
economic, social and environmental
contribution.
The Board Remuneration Committee
(RemCo)
The RemCo receives a detailed report on risk
management performance and risk profile,
and proposals on ex-ante and ex-post risk
adjustments to variable remuneration. These
inputs are considered in the setting of
performance incentives.
Induction programmes support new
colleagues in understanding how risk
management culture and practices support
how the Group does business and the link to
Barclays’ values. The Leadership Curriculum
covers the building, sustaining and supporting
of a trustworthy organisation and is offered to
colleagues globally.
Other Risk Culture drivers
In addition to values and conduct, we consider
the following determinants of Risk Culture:
■■ Management and governance: This means
a consistent tone from the top and clear
responsibilities to enable identification and
challenge.
■■ Motivation and incentives: The right
behaviours are rewarded and modelled.
■■ Competence and effectiveness: This
means that colleagues are enabled to
identify, coordinate, escalate and address
risk and control matters.
■■ Integrity: Colleagues are willing to meet
their risk management responsibilities;
colleagues escalate issues on a timely basis.
Summaries of the relevant skills, experience
and background of the Directors of the Board
are presented in the Board of Directors section
on pages 47 to 48. The terms of reference and
additional details on membership and
activities for each of the principal Board
Committees are available from the Corporate
Governance section of Barclays’ website at:
home.barclays/about-barclays/barclays-
corporate-governance.html
Barclays’ Risk Culture
Risk Culture can be defined as ‘norms,
attitudes and behaviours related to risk
awareness, risk taking and risk management’.
At Barclays this is reflected in how we identify,
escalate and manage risk matters.
Our Code of Conduct – the Barclays Way
Globally, all colleagues must attest to the
‘Barclays Way’, our Code of Conduct, and all
frameworks, policies and standards applicable
to their roles. The 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 all aspects of colleagues’ working
relationships, specifically (but not exclusively)
with other Barclays employees, customers and
clients, governments and regulators, business
partners, suppliers, competitors and the
broader community.
Embedding of a values-based, conduct
culture
The Group Executive Committee reconfirmed
Conduct, Culture and Values as one of its
execution priorities for 2017 with the aim of
embedding the cultural measurement tool
developed in 2016. The effectiveness of the
Risk and Control environment, for which all
colleagues are responsible, depends on the
continued embedment of strong values.
Please see the Board Reputation Committee
report on pages 69 to 74 for further details.
120 Barclays PLC Annual Report 2017
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Risk review Risk review
Material existing and emerging risks
Material existing and emerging
risks to the Group’s future
performance
Material risks are those to which senior
management pay particular attention and
which could cause the delivery of the Group’s
strategy, results of operations, financial
condition and/or prospects to differ materially
from current expectations.
Emerging risks are those that have largely
unknown components, the impact of which
could crystallise over a longer time horizon.
These could currently be considered immaterial
but over time may individually or cumulatively
affect the Group’s strategy and cause the same
outcomes as detailed above regarding material
risks. In addition, certain factors beyond the
Group’s control, including escalation of
terrorism or global conflicts, natural disasters
and similar calamities, although not detailed
below, could have a similar impact on
the Group.
The risks described below are material risks that
senior management has identified with respect
to the Group, which is defined as Barclays PLC
and its consolidated subsidiaries (including the
Barclays Bank PLC Group). In connection with
the planned implementation in the first half of
2018 of ring-fencing certain of the Group’s UK
businesses, Barclays Bank PLC will transfer what
are materially the assets and business of the
Barclays UK division to another subsidiary
of the Group, Barclays Bank UK PLC. Senior
management expects that upon this transfer,
the material risks with respect to the Barclays
Bank PLC Group will be the same in all material
respects as those risks with respect to the
Group. For more information on certain risks
senior management has identified with respect
to the Barclays Bank PLC Group, see v) Certain
potential consequences of ring-fencing to
Barclays Bank PLC.
Material existing and emerging
risks potentially impacting more
than one Principal Risk
i) Business conditions, general economy and
geopolitical issues
The Group offers a broad range of services,
including to retail, institutional and government
customers, in a large number of countries.
The breadth of these operations means that
deterioration in the economic environment, or
an increase in political instability in countries
where the Group is active, or in any systemically
important economy, could adversely affect the
Group’s operating performance, financial
condition and prospects.
Although economic activity continued to
strengthen globally in 2017 a change in global
economic conditions and the reversal of the
improving trend may result in lower client
activity of the Group and/or an increase of the
Group’s default rates, delinquencies, write-offs,
and impairment charges, which in turn could
adversely affect the Group’s performance
and prospects.
In several countries, reversals of capital inflows,
as well as fiscal austerity, have already caused
deterioration in political stability. This could be
exacerbated by a renewed rise in asset price
volatility or sustained pressure on government
finances. In addition, geopolitical tensions in
some areas of the world, such as the Korean
Peninsula, the Middle East and Eastern Europe,
are already acute and at risk of further
deterioration, thus potentially increasing market
uncertainties and adverse global economic and
market conditions.
In the US, there is uncertainty around the policy
platform of the administration which took office
in 2017. There is the possibility of significant
changes in policy in sectors including trade,
healthcare and commodities which may have
an impact on associated Barclays portfolios. A
significant proportion of the Group’s portfolio
is located in the US, including a major credit
card portfolio and a range of corporate and
investment banking exposures. Stress in the
US economy, weakening GDP, an unexpected
rise in unemployment and/or an increase in
interest rates could lead to increased levels
of impairment.
Most major central banks have indicated that
they expect prevailing loose monetary policies
to tighten. Should ‘normalisation’ paths diverge
substantially, flows of capital between countries
could alter significantly, placing segments with
sizeable foreign currency liabilities, in particular
emerging markets, under pressure. In addition,
possible divergence of monetary policies
between major advanced economies risks
triggering further financial market volatility
(see also ii) Interest rate rises adversely
impacting credit conditions, below).
In the UK, the vote in favour of leaving the
EU (see iii) Process of UK withdrawal from
the European Union, below) has given rise
to political uncertainty with attendant
consequences for investment and market
confidence. The initial impact was a
depreciation of Sterling resulting in higher costs
for companies exposed to imports and a more
favourable environment for exporters. Rising
domestic costs resulting from higher import
prices may impact household incomes and the
affordability of consumer loans and mortgages.
In turn, this may affect businesses dependent
on consumers for revenue. There has also been
a reduction in activity in both commercial and
residential real estate markets which has the
potential to impact value of real estate assets
and adversely affect mortgage assets.
Sentiment towards emerging markets as a
whole continues to be driven in large part by
developments in China, where there is some
concern around the ability of authorities to
manage growth while transitioning from
manufacturing towards services. Although the
Chinese government’s efforts to stably increase
the weight of domestic demand have had some
success, the pace of credit growth remains a
concern, given the high level of leverage and
despite regulatory action. A stronger than
expected slowdown could result if authorities
fail to appropriately manage the end of the
investment and credit-led boom.
Deterioration in emerging markets could affect
the Group if it results in higher impairment
charges for the Group via sovereign or
counterparty defaults.
More broadly, a deterioration of conditions in
the key markets where the Group operates
could affect performance in a number of ways
including, for example: (i) deteriorating business,
consumer or investor confidence leading to
reduced levels of client activity, including
demand for borrowing from creditworthy
customers, or indirectly, a material adverse
impact on GDP growth in significant markets
and therefore on Group performance; (ii) higher
levels of default rates and impairment; (iii) mark
to market losses in trading portfolios resulting
from changes in factors such as credit ratings,
share prices and solvency of counterparties; (iv)
reduced ability to obtain capital from other
financial institutions for the Group operations;
and (v) lower levels of fixed asset investment
and productivity growth overall.
ii) Interest rate rises adversely impacting
credit conditions
To the extent that central banks increase
interest rates particularly in the Group’s main
markets, in the UK and the US, there could be
an impact on consumer debt affordability and
corporate profitability.
While interest rate rises could positively impact
the Group’s profitability, as retail and corporate
business income may increase due to margin
de-compression, future interest rate increases,
if larger or more frequent than expectations,
could cause stress in the loan portfolio and
underwriting activity of the Group. Higher
credit losses driving an increased impairment
allowance would most notably impact
retail unsecured portfolios and wholesale
non-investment grade lending.
Interest rates rising faster than expected could
also have an adverse impact on the value of
high quality liquid assets which are part of the
Group Treasury function’s investment activity
that could consequently create more volatility
through the Group’s available for sale reserves
than expected.
iii) Process of UK withdrawal from the
European Union
The uncertainty and increased market volatility
following the UK’s decision to leave the EU in
2019 is likely to continue until the exact nature
of the future trading relationship with the EU
becomes clear. The potential risks associated
with an exit from the EU include:
■■ Increased market risk with the impact on the
value of trading book positions, mainly in
Barclays International, expected to be driven
predominantly by currency and interest rate
volatility.
■■ Potential for credit spread widening for UK
institutions which could lead to reduced
investor appetite for Barclays’ debt securities,
which could negatively impact the cost of
and/or access to funding. Potential for
continued market and interest rate volatility
could affect the interest rate risk underlying,
and potentially affect the value of the assets
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in the banking book, as well as securities held
by Barclays for liquidity purposes.
The implementation of these changes involves
a number of risks which include:
■■ Changes in the long-term outlook for UK
interest rates which may adversely affect IAS
19 pension liabilities and the market value of
equity investments funding those liabilities.
■■ Increased risk of a UK recession with lower
growth, higher unemployment and falling
UK house prices. This would likely negatively
impact a number of Barclays’ portfolios,
particularly in Barclays UK, notably: higher
Loan to Value mortgages, UK unsecured
lending including credit cards and
Commercial Real Estate exposures.
■■ Changes to current EU ‘Passporting’ rights
which will likely require adjustments to the
current model for the Group’s cross-border
banking operation which could increase
operational complexity and/or costs.
■■ The ability to attract, or prevent the departure
of, qualified and skilled employees may be
impacted by the UK’s future approach to the
EU freedom of movement and immigration
from the EU countries and this may impact
Barclays’ access to the EU talent pool.
■■ The legal framework within which Barclays
operates could change and become more
uncertain as the UK takes steps to replace or
repeal certain laws currently in force, which
are based on EU legislation and regulation
(including EU regulation of the banking
sector). Certainty of existing contracts,
enforceability of legal obligations and
uncertainty around the outcome of disputes
may be affected until the impacts of the loss
of the current jurisdictional arrangements
between UK and EU courts and the universal
enforceability of judgements across the EU
(including the status of existing EU case law)
are fully known.
iv) Regulatory change agenda and impact on
business model
The 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 and consume
significant levels of business resources.
Furthermore, a more intensive regulatory
approach and enhanced requirements together
with the uncertainty (particularly in light of the
UK’s decision to withdraw from the EU) and
potential lack of international regulatory
co-ordination as enhanced supervisory
standards are developed and implemented may
adversely affect the Group’s business, capital
and risk management strategies and/or may
result in the Group deciding to modify its legal
entity structure, capital and funding structures
and business mix, or to exit certain business
activities altogether or not to expand in areas
despite otherwise attractive potential.
The most significant of the regulatory reforms
affecting the Group in 2018 is the creation of
the ring-fenced bank under the Bank’s
structural reform programme (for more on
structural reform, see Supervision and
Regulation on page 204).
■■ The Group is restructuring its intra-group
and external capital, funding and liquidity
arrangements to meet regulatory
requirements and support business needs.
The changes will impact the sources of
funding available to the different entities
including their respective ability to access the
capital markets. These changes may affect
funding costs.
■■ The changes to the Group structure may
negatively impact the assessment made by
credit rating agencies and creditors over time.
The risk profile and key risk drivers of the
ring-fenced bank and the non ring-fenced
bank will be specific to the activities and risk
profile of each entity. As a result, different
Group entities such as Barclays Bank PLC may
also be assessed differently in future which
could result in differences in credit ratings.
Changes to the credit assessment at the
Group or individual entity level, including the
potential for ratings downgrades and ratings
differences across entities, could impact
access and cost of certain sources of funding.
■■ Implementation of ring-fencing introduces
a number of execution risks. Technology
change could result in outages or operational
errors. Legal challenge to the ring-fence
transfer scheme may delay the transfer of
assets and liabilities to the ring-fenced bank.
Delayed delivery could increase reputational
risk or result in regulatory non-compliance.
■■ There is a risk that Barclays does not meet
regulatory requirements across the new
structure. Failure to meet these requirements
may have an adverse impact on the Group’s
profitability, operating flexibility, flexibility of
deployment of capital and funding, return on
equity, ability to pay dividends, credit ratings,
and/or financial condition.
In addition to structural reform there are
several other significant pieces of legislation/
areas of focus which will require significant
management attention, cost and resource:
■■ Changes in prudential requirements,
including the proposals for amendment of
the CRD IV and the BRRD (as part of the
EU’s risk reduction measures package) may
impact minimum requirements for own funds
and eligible liabilities (MREL) (including
requirements for internal MREL), leverage,
liquidity or funding requirements, applicable
buffers and/or add-ons to such minimum
requirements and risk weighted assets
calculation methodologies all as may be set
by international, EU or national authorities
from time to time. Such or similar changes
to prudential requirements or additional
supervisory and prudential expectations,
either individually or in aggregate, may result
in, among other things, a need for further
management actions to meet the changed
requirements, such as: increasing capital,
MREL or liquidity resources, reducing
leverage and risk weighted assets; restricting
distributions on capital instruments;
modifying the terms of outstanding capital
instruments; modifying legal entity structure
(including with regard to issuance and
deployment of capital, MREL and funding for
the Group); changing the Group’s business
mix or exiting other businesses; and/or
undertaking other actions to strengthen the
Group’s position. (See Treasury and capital
risk on pages 164 to 190 and Supervision and
regulation on pages 197 to 204 for more
information).
■■ The derivatives market has been the subject
of particular focus for regulators in recent
years across the G20 countries and beyond,
with regulations introduced which require the
reporting and clearing of standardised over
the counter (OTC) derivatives and the
mandatory margining of non-cleared OTC
derivatives. Reforms in this area are ongoing
with further requirements expected to be
implemented in the course of 2018. More
broadly, the recast Markets in Financial
Instruments Directive in Europe (MiFID II),
which came into force in January 2018, has
fundamentally changed the European
regulatory framework, and entails significant
operational changes for market participants
in a wide range of financial instruments as
well as changes in market structures and
practices. In addition, the EU Benchmarks
Regulation which also came into force in
January 2018 regulates the administration
and use of benchmarks in the EU.
Compliance with this evolving regulatory
framework entails significant costs for market
participants and is having a significant impact
on certain markets in which the Group,
notably Barclays International, operates.
Other regulations applicable to swap dealers,
including those promulgated by the US
Commodity Futures Trading Commission,
have imposed significant costs on the
Group’s derivatives business. These and any
future requirements, including the US SEC’s
regulations relating to security-based swaps
and the possibility of overlapping and/or
contradictory requirements imposed on
derivative transactions by regulators in
different jurisdictions, are expected to
continue to impact such business.
■■ The Group and certain of its members are
subject to supervisory stress testing exercises
in a number of jurisdictions. These exercises
currently include the programmes of the
BoE, the EBA, the FDIC and the FRB. These
exercises are designed to assess the resilience
of banks to adverse economic or financial
developments and enforce robust, forward-
looking capital and liquidity management
processes that account for the risks
associated with their business profile.
Assessment by regulators is on both a
quantitative and qualitative basis, the latter
focusing on the Group’s or certain of its
members’ business model, data provision,
stress testing capability and internal
management processes and controls. The
stress testing requirements to which the
Group and its members are subject are
becoming increasingly stringent. Failure to
meet requirements of regulatory stress tests,
or the failure by regulators to approve the
stress test results and capital plans of the
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Risk review Group, could result in the Group being
required to enhance its capital position, limit
capital distributions or position additional
capital in specific subsidiaries. For more
information on stress testing, please see
Supervision and regulation on page 200.
■■ The introduction and implementation of
both 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
(together ‘Open Banking’) from January 2018
is anticipated to transform the traditional UK
banking model and conventional relationship
between a customer and their bank. It will do
this by providing customers with the ability to
share their transactional data with authorised
third party service providers either for
aggregation or payment services. It is
anticipated that these aggregation or
payment services will be offered by third
parties to Barclays’ customers. Members of
the Barclays Group will be able to offer these
same services to customers of other banks.
A failure to comply with Open Banking
requirements could expose Barclays to
regulatory sanction, potential financial
loss and reputational detriment. While Open
Banking will affect the Group as a whole, the
impact is likely to be particularly relevant for
Barclays UK.
v) Certain potential consequences of
ring-fencing to Barclays Bank PLC
In connection with the planned implementation
in the first half of 2018 of ring-fencing certain of
the Group’s UK businesses, Barclays Bank PLC
will transfer what are materially the assets and
business of the Barclays UK division to another
subsidiary of the Group, Barclays Bank UK PLC.
Senior management expects that upon this
transfer, the material risks with respect to the
Barclays Bank PLC Group will be the same in all
material respects as those risks with respect to
the Group. However, senior management has
identified certain potential differences in risks
with respect to the Barclays Bank PLC Group as
compared to risks to the Group.
The transfer of the assets and liabilities of the
Barclays UK division from Barclays Bank PLC
will mean that the Barclays Bank PLC Group
will be less diversified than the Group as a
whole. Barclays Bank PLC will not be the parent
of Barclays Bank UK PLC and thus will not have
recourse to the assets of Barclays Bank UK PLC.
Relative to the Group, the Barclays Bank PLC
Group will be, among other things:
■■ more focused on businesses outside the UK,
particularly in the US, and thus more exposed
to the US economy and more affected by
movements in the US Dollar (and other
non-Sterling currencies) relative to Sterling,
with a relatively larger portion of its business
exposed to US regulation
■■ more focused on wholesale businesses, such
as corporate and investment banking and
capital markets, which expose Barclays Bank
PLC Group to a broader range of market
conditions and to counterparty and
operational risks and thus the financial
performance of Barclays Bank PLC may be
subject to greater fluctuations relative to that
of the Group as a whole or that of the
ring-fenced bank
■■ more dependent on wholesale funding
sources, as the UK retail deposit base will be
transferred to the ring-fenced bank. The UK
retail mortgage assets will also be transferred
to the ring-fenced bank, which reduces
Barclays Bank PLC’s access to funding
sources reliant on residential mortgage
collateral. The Barclays Bank PLC Group may
therefore experience more difficult financing
conditions and/or higher costs of funding
including in situations of stress. As a result of
the implementation of ring-fencing, different
Group entities, such as Barclays Bank PLC,
may be assessed differently by credit rating
agencies, which may result in different, and
possibly more negative, assessments of
Barclays Bank PLC’s credit and thus in lower
credit ratings than the credit ratings of the
Group, which in turn could adversely affect
the sources and costs of funding for Barclays
Bank PLC
■■ potentially subject to different regulatory
obligations, including different liquidity
requirements and capital buffers.
As a result of any or all of the foregoing,
implementation of ring-fencing may adversely
affect the market value and/or liquidity of
securities issued by Barclays Bank PLC.
Material existing and emerging
risks impacting individual
Principal Risks
i) Credit risk
a) Impairment
The introduction of the impairment
requirements of IFRS 9 Financial Instruments,
implemented on 1 January 2018, results in
higher impairment loss allowances that are
recognised earlier, on a more forward looking
basis and on a broader scope of financial
instruments than is the case under IAS 39 and,
as a result, will have a material impact on the
Group’s financial condition. Measurement
involves increased complex judgement and
impairment charges will tend to be more
volatile. Unsecured products with longer
expected lives, such as revolving credit cards,
are the most impacted. The capital treatment
on the increased reserves has the potential to
adversely impact regulatory capital ratios. In
addition, the move from incurred to expected
credit losses has the potential to impact
the Group’s performance under stressed
economic conditions or regulatory stress tests.
For more information please refer to Note 1 on
pages 241 to 246.
b) Specific sectors
The Group is subject to risks arising from
changes in credit quality and recovery rate of
loans and advances due from borrowers and
counterparties in a specific portfolio. Any
deterioration in credit quality could lead to
lower recoverability and higher impairment
in a specific sector. The following are areas of
uncertainties to the Group’s portfolio which
could have a material impact on performance.
■■ UK real estate market. With UK property
representing a significant portion of the
overall UK Corporate and Retail credit
exposure, the Group is at risk from a fall in
property prices in both the residential and
commercial sectors in the UK.
Strong house price growth in London and
the south-east of the UK, fuelled by foreign
investment, strong buy-to-let (BTL) demand
and subdued housing supply, has resulted
in affordability metrics becoming stretched.
Average house prices as at the end of 2017
were more than 5.6 times average earnings.
■■ Large single name losses. The Group 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 Group’s results due to,
for example, increased credit losses and
higher impairment charges.
■■ Leverage finance underwriting. The Group
takes on sub-investment grade underwriting
exposure, including single name risk,
particularly in the US and Europe. The
Group is exposed to credit events and
market volatility during the underwriting
period. Any adverse events during this period
may potentially result in loss for the Group,
mainly through Barclays International, or
an increased capital requirement should
there be a need to hold the exposure for
an extended period.
ii) Market risk
Market volatility
Elevated market volatility, which can be
triggered and/or aggravated by disappointment
in economic data, divergent monetary policies,
political uncertainty or conflicts, would likely
entail a significant deflation of assets which in
turn may put under strain counterparties and
have knock-on effects on the bank.
In addition, the 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
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.
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iii) Treasury and capital risk
The Group may not be able to achieve its
business plans due to, among other things:
a) being unable to maintain appropriate capital
ratios; b) being unable to meet its obligations
as they fall due; c) rating agency downgrades;
d) adverse changes in foreign exchange rates
on capital ratios; e) adverse movements in the
pension fund; f) non-traded market risk/
interest rate risk in the banking book.
a) Inability to maintain prudential ratios
and other regulatory requirements
Inability to maintain appropriate prudential
ratios could lead to: an inability to support
business activity; a failure to meet regulatory
capital requirements including any additional
capital add-ons or the requirements set for
regulatory stress tests; increased cost of
funding due to deterioration in investor appetite
or credit ratings; restrictions on distributions
including the ability to meet dividend targets;
and/or the need to take additional measures
to strengthen the Group’s capital or leverage
position.
b) Inability to manage liquidity and funding
risk effectively
Inability to manage liquidity and funding risk
effectively may result in the Group either not
having sufficient financial resources to meet
its payment obligations as they fall due or,
although solvent, only being able to meet these
obligations at excessive cost. This could cause
the Group to fail to meet regulatory liquidity
standards, be unable to support day-to-day
banking activities (including meeting deposit
withdrawals or funding new loans) or no longer
be a going concern.
The stability of the Group’s current funding
profile, in particular that part which is based
on accounts and savings deposits payable on
demand or at short notice, could be affected by
the Group failing to preserve the current level of
customer and investor confidence. The Group
also regularly accesses the capital markets
to provide long-term funding to support its
operations. Several factors, including adverse
macroeconomic conditions, adverse outcomes
in legal, regulatory or conduct matters and loss
of confidence by investors, counterparties
and/or customers in the Group, can affect
the ability of the Group to access the capital
markets and/or the cost and other terms
upon which the Group is able to obtain
market funding.
c) Credit rating changes and the impact on
funding costs
Any potential or actual credit rating agency
downgrades could significantly increase the
Group’s borrowing costs, credit spreads and
materially adversely affect the Group’s interest
margins and liquidity position which may, as
a result, significantly diverge from current
expectations. Such adverse changes would
also have a negative impact on the Group’s
overall performance.
d) Adverse changes in FX rates impacting
capital ratios
The 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 Group’s regulatory capital ratios are
sensitive to foreign currency movements, and
any failure to appropriately manage the Group’s
balance sheet to take account of foreign
currency movements could result in an adverse
impact on regulatory capital and leverage ratios.
e) Adverse movements in the pension fund
Adverse movements in pension assets and
liabilities for defined benefit pension schemes
could result in a pension deficit which,
depending on the specific circumstance,
may require the Group to make substantial
additional contributions to its pension plans.
The liabilities discount rate is a key driver and,
in accordance with International Financial
Reporting Standards (IAS 19), is derived from
the yields of high quality corporate bonds
(deemed to be those with AA ratings) and
consequently includes exposure to both
UK sovereign gilt yields and corporate
credit spreads.
Therefore, the valuation of the Group’s defined
benefits schemes would be adversely affected
by a prolonged fall in the discount rate due
to a persistent low rate and/or credit spread
environment. Inflation is another significant risk
driver to the pension fund, as the liabilities are
adversely impacted by an increase in long-term
inflation expectations.
f) Non-traded market risk/interest rate risk
in the banking book
A liquidity buffer investment return shortfall
could increase the Bank’s cost of funds and
impact the capital ratios. The Bank’s structural
hedge programmes for interest rate risk in
the banking book rely heavily on behavioural
assumptions, as a result, the success of the
hedging strategy is not guaranteed. A potential
mismatch in the balance or duration of the
hedge assumptions could lead to earnings
deterioration.
iv) Operational risk
a) Cyber threat
The frequency of cyber attacks continues to
grow on an annual basis and is a global threat
which is inherent across all industries, including
the financial sector. As the financial sector
remains a primary target for cyber criminals,
2017 saw a number of highly publicised attacks
involving ransomware, theft of intellectual
property, customer data and service
unavailability across a wide range of
organisations.
The cyber threat increases the inherent risk to
the availability of the Group’s services and to the
Group’s data (whether it is held by the Group
or in its supply chain), to the integrity of
financial transactions of the Group, its clients,
counterparties and customers. Failure to
adequately manage this threat and to
continually evolve enterprise security and
provide an active cyber security response
capability could result in increased fraud losses,
inability to perform critical economic functions,
customer detriment, potential regulatory
censure and penalty, legal liability, reduction
in shareholder value and reputational damage.
b) Service resilience
Loss of, or disruption to, the Group’s business
processing, whether arising through impacts
on technology systems, real estate services,
personnel availability or the support of major
suppliers, represents a material inherent risk
theme for the Group.
Building resilience into business processes
and into the services of technology, real estate
and suppliers on which those processes depend
can reduce disruption to the Group’s business
activities or avoid it altogether. Failure to do so
may result in significant customer detriment,
cost to reimburse losses incurred by our
customers, potential regulatory censure or
penalty, and reputational damage.
c) Outsourcing
The Group depends on suppliers for the
provision of many of its services and the
development of future technology driven
product propositions, though the Group
continues to be accountable for risk arising
from the actions of such suppliers. Failure to
monitor and control the Group’s suppliers
could potentially lead to client information, or
critical infrastructures and services, not being
adequately protected or available when
required.
The dependency on suppliers and
sub-contracting of outsourced services
introduces concentration risk where the failure
of specific suppliers could have an impact on
our ability to continue to provide services that
are material to the Group, especially for those
individual businesses within the Group to which
many services are provided centrally by the
newly established Group Service Company.
Failure to adequately manage outsourcing risk
through control environments which remain
robust to ever changing threats and challenges
could result in increased losses, inability to
perform critical economic functions, customer
detriment, potential regulatory censure and
penalty, legal liability and reputational damage.
d) Operational precision and payments
The risk of material errors in operational
processes, including payments, are exacerbated
during the present period of significant levels of
structural and regulatory change, the evolving
technology landscape, and a transition to digital
channel capabilities.
Material operational or payment errors could
disadvantage the Group’s customers, clients or
counterparties and could result in regulatory
censure and penalties, legal liability, reputational
damage and financial loss by the bank.
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Risk review e) New and emergent technology
Technological advancements present
opportunities to develop new and innovative
ways of doing business across the Group, with
new solutions being developed both in-house
and in association with third party companies.
Introducing new forms of technology has the
potential to increase inherent risk.
Failure to closely monitor risk exposure could
lead to customer detriment, loss of business,
regulatory censure, missed business
opportunity and reputational damage.
f) Fraud
Fraud is a constantly evolving risk to the Group.
This is exacerbated during periods of significant
change, including the digitisation of products,
which carry higher levels of inherent risk. As the
Group continues to invest in new and upgraded
fraud systems, criminals continually adapt
and become ever more sophisticated in their
approach. Risks from social engineering and
attempts to trick customers into authorising
payments also continue to grow and increasing
regulatory focus is placing more responsibility
on the industry to protect consumers.
In addition, internal fraud arising from areas
such as failure of the Group’s trading controls
could result in high profile material losses
together with regulatory censure/penalties and
significant reputational damage.
g) Ability to hire and retain appropriately
qualified employees
The Group has resource requirements to
support existing revenue streams, moves into
new business models and to deliver complex
multi-year regulatory commitments and
mandatory change. These commitments
require diversified and specialist skilled
colleagues and Barclays’ ability to attract,
develop and retain such 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. External regulation
such as the introduction of the Individual
Accountability Regime and the required deferral
and clawback provisions of our compensation
arrangements may make Barclays a less
attractive proposition relative to both our
international competitors and other industries.
Similarly, the impact of exit of the UK from the
EU, in March 2019 (see Process of UK
withdrawal from the European Union on pages
121 and 122), could potentially have a more
immediate impact on our ability to hire and
retain key employees.
Failure to attract or prevent the departure of
appropriately qualified and skilled employees
who are dedicated to overseeing and managing
current and future regulatory standards and
expectations, or who have the necessary
diversified skills required to deliver the Group
strategy, could negatively impact our financial
performance, control environment and level
of employee engagement. Additionally, this
may result in disruption to service which
could in turn lead to disenfranchising certain
customer groups, customer detriment
and reputational damage.
h) Tax risk
The 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 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 Group. The Tax Cuts and Jobs Act has
introduced substantial changes to the US tax
system, including the introduction of a new
tax, the Base Erosion Anti-Abuse Tax. These
changes have increased the Group’s tax
compliance obligations and require a number
of system and process changes which introduce
additional operational risk. In addition,
increasing customer tax reporting requirements
around the world and the digitisation of the
administration of tax has potential to increase
the Group’s tax compliance burden further.
i) Critical accounting estimates and
judgements
The preparation of financial statements in
accordance with IFRS requires the use of
estimates. It also requires management to
exercise judgement in applying relevant
accounting policies. The key areas involving a
higher degree of judgement or complexity, or
areas where assumptions are significant to the
consolidated and individual financial statements
include credit impairment charges for amortised
cost assets, taxes, fair value of financial
instruments, pensions and post-retirement
benefits, and provisions including conduct and
legal, competition and regulatory matters.
There is a risk that if the judgement exercised,
or the estimates or assumptions used,
subsequently turn out to be incorrect, this could
result in significant loss to the Group, beyond
what was anticipated or provided for.
The further development of standards and
interpretations under IFRS could also
significantly impact the financial results,
condition and prospects of the Group.
j) Data management and information
protection
The Group holds and processes large volumes
of data, including personally identifiable
information, intellectual property, and financial
data. Failure to accurately collect and maintain
this data, protect it from breaches of
confidentiality and interference with its
availability exposes the Bank to the risk of loss
or unavailability of data (including customer
data covered under vi), c) Data protection and
privacy, below), data integrity issues and could
result in regulatory censure, legal liability and
reputational damage.
v) Model risk
Enhanced model risk management
requirements
Barclays 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/reward evaluation, managing client assets,
and meeting reporting requirements.
Models are, by their nature, imperfect and
incomplete representations of reality because
they rely on assumptions and inputs, and so
they may be subject to errors affecting the
accuracy of their outputs. For instance, the
quality of the data used in models across
Barclays has a material impact on the
accuracy and completeness of our risk
and financial metrics.
Models may also be misused. Model errors
or misuse may result in the Group making
inappropriate business decisions and being
subject to financial loss, regulatory risk,
reputational risk and/or inadequate
capital reporting.
vi) Conduct risk
There is the risk of detriment to customers,
clients, market integrity, competition or Barclays
from the inappropriate supply of financial
services, including instances of wilful or
negligent misconduct. This risk could manifest
itself in a variety of ways:
a) Product governance and life cycle
Ineffective product governance, including
design, approval and review of products,
inappropriate controls over internal and third
party sales channels and post sales services
could lead to poor customer outcomes, as
well as regulatory sanctions, financial loss
and reputational damage.
b) Financial crime
The Group may be adversely affected if it fails to
effectively mitigate the risk that its employees or
third parties facilitate, or that its products and
services are used to facilitate financial crime
(money laundering, terrorist financing, bribery
and corruption and sanctions evasion). A major
focus of US and UK government policy relating
to financial institutions continues to be
combating money laundering and enforcing
compliance with US and EU economic
sanctions. The failure to comply with such
regulations may result in enforcement actions
by the regulators and in the imposition of severe
penalties, with a consequential impact on the
Group’s reputation and financial results.
c) Data protection and privacy
Proper handling of personal data is critical to
sustaining long-term relationships with our
customers and clients and to meeting privacy
laws and obligations. Failure to protect personal
data can lead to potential detriment to our
customers and clients, reputational damage,
regulatory sanctions and financial loss, which
under the new EU Data Protection Regulation
may be substantial.
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Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance compliance program designed to prevent and
detect the conduct that gave rise to the plea
agreement, and (iii) strengthen its compliance
and internal controls as required by relevant
regulatory or enforcement agencies. Potential
consequences of breaching the plea agreement
include the imposition of additional terms and
conditions on the Group, an extension of the
agreement, or the criminal prosecution of
Group entities, which could, in turn, entail
further financial penalties and collateral
consequences and have a material adverse
effect on the Group’s business, operating results
or financial position.
There is also a risk that the outcome of any
legal, competition or regulatory matters in
which the Group is involved may give rise to
changes in law or regulation as part of a wider
response by relevant law makers and regulators.
A decision in any matter, either against the
Group or another financial institution facing
similar claims, could lead to further claims
against the Group.
Material existing and emerging risks
d) Regulatory focus on culture and
accountability
Regulators around the world continue to
emphasise the importance of culture and
personal accountability and the adoption and
enforcement of adequate internal reporting
and whistleblowing procedures in helping to
promote appropriate conduct and drive positive
outcomes for customers, clients and markets.
Failure to meet the requirements and
expectations of the UK Senior Managers
Regime, Certification Regime and Conduct
Rules may lead to regulatory sanctions, both
for the individuals and the firm.
vii) Reputation risk
Barclays’ association with sensitive sectors
and its impact on reputation
A risk arising in one business area can have an
adverse effect upon Barclays’ overall reputation;
any one transaction, investment or event that,
in the perception of key stakeholders reduces
their trust in the Group’s integrity and
competence, has the potential to give rise to
reputation risk for Barclays and may result in
loss of business, regulatory censure and missed
business opportunity.
Barclays’ association with sensitive sectors
is an area of concern for stakeholders and
the following topics are of regular interest:
■■ Disclosure of climate risks and opportunities,
including the activities of certain sections of
the client base. This is becoming the subject
of increased scrutiny from regulators, NGOs
and other stakeholders.
■■ The risks of association with human rights
violations through the perceived indirect
involvement in human rights abuses
committed by clients and customers.
■■ The manufacture and export of military and
riot control goods and services by clients
and customers.
viii) Legal risk and legal, competition and
regulatory matters
Legal disputes, regulatory investigations, fines
and other sanctions relating to conduct of
business and breaches of legislation and/or
regulations may negatively affect the Group’s
results, reputation and ability to conduct its
business. Legal outcomes can arise as a
consequence of legal risk or because of past
and future actions, behaviours and business
decisions as a result of other Principal Risks.
The Group conducts diverse activities in a
highly regulated global market and therefore is
exposed to the risk of fines and other sanctions
relating to the conduct of its business. In recent
years, authorities have increasingly investigated
past practices, pursued alleged breaches and
imposed heavy penalties on financial services
firms. This trend is expected to continue.
A breach of applicable legislation and/or
regulations could result in the Group or its
staff being subject to criminal prosecution,
regulatory censure, fines and other sanctions
in the jurisdictions in which it operates,
particularly in the UK and the US. Where clients,
customers or other third parties are harmed
by the Group’s conduct, this may also give rise
to legal proceedings, including class actions.
Other legal disputes may also arise between the
Group and third parties relating to matters such
as breaches, enforcement of legal rights or
obligations arising under contracts, statutes
or common law. Adverse findings in any such
matters may result in the Group being liable
to third parties seeking damages, or may
result in the Group’s rights not being enforced
as intended.
Details of legal, competition and regulatory
matters to which the Group is currently exposed
are set out in Note 29. In addition to matters
specifically described in Note 29, the Group is
engaged in various other legal proceedings in
the UK and US and a number of other overseas
jurisdictions which arise in the ordinary course
of business. The Group is also subject to
requests for information, investigations and
other reviews by regulators, governmental and
other public bodies in connection with business
activities in which the Group is, or has been,
engaged. The Group is cooperating with the
relevant authorities and keeping all relevant
agencies briefed as appropriate in relation to
these matters and others described in Note 29
on an ongoing basis.
The outcome of legal, competition and
regulatory matters, both those to which the
Group is currently exposed and any others
which may arise in the future, is difficult to
predict. However, in connection with such
matters the Group may incur significant
expense, regardless of the ultimate outcome,
and any such matters could expose the 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 in certain
circumstances; the loss of any existing agreed
protection from prosecution; regulatory
restrictions on the Group’s business operations
including the withdrawal of authorisations;
increased regulatory compliance requirements;
suspension of operations; public reprimands;
loss of significant assets or business; a negative
effect on the Group’s reputation; loss of
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 will not be
material to the Group’s results of 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
income otherwise reported for the period.
In January 2017, Barclays PLC was sentenced to
serve three years of probation from the date of
the sentencing order in accordance with the
terms of its May 2015 plea agreement with the
Department of Justice (DOJ). During the term of
probation Barclays PLC must, among other
things, (i) commit no crime whatsoever in
violation of the federal laws of the US, (ii)
implement and continue to implement a
126 Barclays PLC Annual Report 2017
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Risk review Risk review
Principal Risk management
Credit risk management
Credit risk (audited)
The risk of loss to the firm from the failure of clients, customers or counterparties, including sovereigns, to fully honour their obligations to the
firm, including the whole and timely payment of principal, interest, collateral and other receivables.
For wholesale portfolios, credit risk approval
is undertaken by experienced credit risk
professionals operating within a clearly
defined delegated authority framework, with
only the most senior credit officers entrusted
with the higher levels of delegated authority.
The largest credit exposures, which are
outside the Risk Sanctioning Unit or Risk
Distribution Committee authority require the
support of the Group Senior Credit Officers
(GSCOs), the Group’s most senior credit risk
sanctioners. For exposures in excess of the
GSCOs’ authority, approval from the Group
CRO is required. In the wholesale portfolios,
credit risk managers are organised in
sanctioning teams by geography, industry
and/or product.
The role of the Central Risk function is to
provide Group-wide direction, oversight and
challenge of credit risk taking. Central Risk
sets the Credit Risk Control Framework, which
provides the structure within which credit risk
is managed, together with supporting credit
risk policies.
Overview
The credit risk that the Group faces arises
mainly from wholesale and retail loans and
advances together with the counterparty
credit risk arising from derivative contracts
with clients. Other sources of credit risk
arise from trading activities, including: debt
securities, settlement balances with market
counterparties, available for sale assets and
reverse repurchase loans.
Credit risk management objectives are to:
■■ maintain a framework of controls to enable
credit risk taking to be based on sound
credit risk management principles
■■ identify, assess and measure credit risk
clearly and accurately across the Group
and within each separate business, from
the level of individual facilities up to the
total portfolio
■■ control and plan credit risk taking in line
with external stakeholder expectations
and avoiding undesirable concentrations
■■ monitor credit risk and adherence to
agreed controls
■■ enable risk-reward objectives to be met.
More information covering the reporting of
credit risk can be found in Barclays PLC
Pillar 3 Report 2017.
Organisation and structure
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 larger in number but
smaller in value and are, therefore, managed
on a homogeneous portfolio basis.
Credit risk management responsibilities have
been structured so that decisions are taken
as close as possible to the business, while
enforcing robust review and challenge of
performance, risk infrastructure and strategic
plans. The credit risk management teams in
each business are accountable to the relevant
Business CRO who, in turn, reports to the
Group CRO.
Roles and responsibilities
The responsibilities of the credit risk
management teams in the businesses, the
sanctioning team and other shared services
include: sanctioning new credit agreements
(principally wholesale); setting policies for
approval of transactions (principally retail);
setting risk appetite; monitoring risk against
limits and other parameters; maintaining
robust processes, data gathering, quality,
storage and reporting methods for effective
credit risk management; performing effective
turnaround and workout scenarios for
wholesale portfolios via dedicated
restructuring and recoveries teams;
maintaining robust collections and recovery
processes/units for retail portfolios; and
review and validation of credit risk
measurement models.
Organisation and structure
Board Risk Committee
■ reviews and recommends to the Board the Group’s risk appetite for wholesale and retail credit risk
■ reviews the Group’s risk profile on behalf of the Board for wholesale and retail credit risk
■ commissions, receives and considers reports on wholesale and retail credit risk issues
Group Risk Committee
■ reviews appetite for wholesale and retail credit risk and makes recommendations on the setting of limits to the Board
■ monitors the risk profile for wholesale and retail credit risk
■ reviews and monitors the control environment for wholesale and retail credit risk
Business Unit Risk Committees
■ oversee activities and manage information relating to business unit portfolios,
Wholesale and Retail Credit Risk Management Committees
■ monitor the wholesale and retail credit risk profile against plan and agree
and identify actions needed to mitigate current and arising credit risks
■ review and approve business unit mandate and scale limits and, where
relevant, provide recommendations for limits managed by wholesale and retail
risk committees
■ review relevant decisions made by, and material issues and topics raised by,
other forums and committees
required actions
■ review key wholesale and retail risk issues
■ review credit risk policies and framework
■ monitor risk appetite consumption – key credit portfolio (mandate and
scale) limits
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Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Risk review
Principal Risk management
Credit risk management
Credit risk mitigation
The Group employs a range of techniques and
strategies to actively mitigate credit risks.
These can broadly be divided into three types:
■■ netting and set-off
■■ collateral
■■ risk transfer.
Netting and set-off
In most jurisdictions in which the Group
operates, credit risk exposures can be reduced
by applying netting and set-off. In exposure
terms, this credit risk mitigation technique has
the largest overall impact on net exposure to
derivative transactions, compared with other
risk mitigation techniques.
For derivative transactions, the Group’s
normal practice is to enter into standard
master agreements with counterparties (e.g.
ISDAs). These master agreements typically
allow for netting of credit risk exposure to a
counterparty resulting from 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 Group has the ability to call on collateral
in the event of default of the counterparty,
comprising:
■■ home loans: a fixed charge over residential
property in the form of houses, flats and
other dwellings. The value of collateral is
impacted by property market conditions
which drive demand and therefore value of
the property. Other regulatory interventions
on ability to repossess, longer period to
repossession and granting of forbearance
may also affect the collateral value
■■ wholesale lending: a fixed charge over
commercial property and other physical
assets, in various forms
■■ other retail lending: includes charges over
motor vehicle and other physical assets;
second lien charges over residential
property, which are subordinate to first
charges held either by the Group or by
another party; and finance lease receivables,
for which typically the Group retains legal
title to the leased asset and has the right
to repossess the asset on the default of
the borrower
■■ derivatives: the Group also often seeks to
enter into a margin agreement (e.g. Credit
Support Annex) with counterparties with
which the 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. The
Group may additionally negotiate the
receipt of an independent amount further
mitigating risk by collateralising potential
mark to market exposure moves
■■ reverse repurchase agreements: collateral
typically comprises highly liquid securities
which have been legally transferred to the
Group subject to an agreement to return
them for a fixed price
■■ financial guarantees and similar
off-balance sheet commitments: cash
collateral may be held against these
arrangements.
Risk transfer
A range of instruments including guarantees,
credit insurance, credit derivatives and
securitisation can be used to transfer credit
risk from one counterparty to another.
These mitigate credit risk in two main ways:
■■ if the risk is transferred to a counterparty
which is more creditworthy than the
original counterparty, then overall credit
risk is reduced
■■ where recourse to the first counterparty
remains, both counterparties must default
before a loss materialises. This is less likely
than the default of either counterparty
individually so credit risk is reduced.
Detailed policies are in place to appropriately
recognise and record credit risk mitigation
and more information can be found in the
Barclays PLC Pillar 3 Report 2017.
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Risk review
Principal Risk management
Market risk management
Market risk (audited)
The risk of loss arising from potential adverse changes in the value of the firm’s assets and liabilities from fluctuation in market variables including,
but not limited to, interest rates, foreign exchange, equity prices, commodity prices, credit spreads, implied volatilities and asset correlations.
Overview
Market risk arises primarily as a result of client
facilitation in wholesale markets, involving
market-making activities, risk management
solutions and execution of syndications. Upon
execution of a trade with a client, the Group
will look to hedge against the risk of the trade
moving in an adverse direction. Mismatches
between client transactions and hedges result
in market risk due to changes in asset prices.
Organisation and structure
Market risk in the businesses resides primarily
in Barclays International and Group Treasury.
These businesses have the mandate to incur
market risk. Market risk oversight and
challenge is provided by Business Committees
and Group Committees, including the Market
Risk Committee.
Roles and responsibilities
The objectives of market risk management
are to:
■■ understand and control market risk by
robust measurement, limit setting, reporting
and oversight
■■ facilitate business growth within a
controlled and transparent risk
management framework
■■ control market risk in the businesses
according to the allocated appetite.
To meet the above objectives, a well
established governance structure is in place to
manage these risks consistent with the ERMF.
See pages 119 and 120 on risk management
strategy, governance and risk culture.
The BRC recommends market risk appetite to
the Board for their approval. The Market Risk
Principal Risk Lead (PR Lead) is responsible
for the Market Risk Control Framework and,
under delegated authority from the Group
CRO, agrees with the Business CROs a limit
framework within the context of the approved
market risk appetite.
The Market Risk Committee approves and
makes recommendations concerning the
Group-wide market risk profile. This includes
overseeing the operation of the Market Risk
Framework and associated standards
and policies; reviewing arising market or
regulatory issues, limits and utilisation;
and risk appetite levels to the Board. The
Committee is chaired by the PR Lead and
attendees include the business heads of
market risk, business aligned market risk
managers and Internal Audit.
The head of each business is accountable for
all market risks associated with its activities,
while the head of the market risk team
covering each business is responsible for
implementing the risk control framework
for market risk.
More information on market risk
management can be found in Barclays PLC
Pillar 3 Report 2017.
Management Value at Risk
■■ estimates the potential loss arising from
unfavourable market movements, over
one day for a given confidence level
■■ differs from the Regulatory value at risk
(VaR) used for capital purposes in scope,
confidence level and horizon
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.
The Management VaR model in some
instances may not appropriately measure
some market risk exposures, especially for
market moves that are not directly observable
via prices. Market risk managers are required
to identify risks which are not adequately
captured in VaR (‘risks not in VaR’ or ‘RNIVs’).
When reviewing VaR estimates, the following
considerations are taken into account:
■■ the historical simulation uses the most
recent two years of past data to generate
possible future market moves, but the past
may not be a good indicator of the future
■■ the one-day time horizon may not fully
capture the market risk of positions that
cannot be closed out or hedged within
one day
■■ VaR is based on positions as at close of
business and consequently, it is not an
appropriate measure for intra-day risk
arising from a position bought and sold
on the same day
■■ VaR does not indicate the potential loss
beyond the VaR confidence level.
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.
■■ backtesting is performed to test the model
is fit for purpose.
See page 162 for a review of management
VaR in 2017.
Organisation and structure
Board Risk Committee
■ reviews and recommends to the Board the Group’s risk appetite for market risk
■ reviews material events impacting market risk
Group Risk Committee
■ monitors risk profile with respect to financial risk appetite
■ debates and agrees actions on the financial risk profile and risk strategy across the Group
■ considers issues escalated by Risk Type Heads and Business Risk Directors
Market Risk Committee
■ oversees the management of the Group’s market risk profile
■ reviews market risk appetite proposals from the business
■ reviews arising market or regulatory issues
■ reviews state of the implementation of the risk frameworks in the businesses
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Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Risk review
Principal Risk management
Treasury and capital risk management
Treasury and capital risk
Liquidity risk: The risk that the firm is unable to meet its contractual or contingent obligations or that it does not have the appropriate amount,
tenor and composition of funding and liquidity to support its assets.
Capital risk: The risk that the firm has an insufficient level or composition of capital to support its normal business activities and to meet its
regulatory capital requirements under normal operating environments or stressed conditions (both actual and as defined for internal planning
or regulatory testing purposes). This includes the risk from the firm’s pension plans.
Interest rate risk in the banking book: The risk that the firm is exposed to capital or income volatility because of a mismatch between the
interest rate exposures of its (non-traded) assets and liabilities.
Overview
Barclays Treasury manages treasury and
capital risk on a day-to-day basis with the
Treasury Committee acting as the principal
management body. To enforce effective
oversight and segregation of duties and in line
with the ERMF, the Treasury and Capital risk
function is responsible for oversight of key
capital, liquidity, interest rate risk in the
banking book (IRRBB) and pension risk
management activities. The following
describes the structure and governance
associated with the risk types within the
Treasury and Capital risk function.
Liquidity risk management
(audited)
Overview
The efficient management of liquidity is
essential to the Group in retaining the
confidence of the financial markets and
maintaining that the business is sustainable.
There is a control framework in place for
managing liquidity risk and this is designed
to meet the following objectives:
■■ to maintain liquidity resources that are
sufficient in amount and quality and a
funding profile that is appropriate to meet
the liquidity risk appetite as expressed by
the Board
■■ to maintain market confidence in the
Group’s name.
Organisation and structure
This is achieved via a combination of policy
formation, review and governance, analysis,
stress testing, limit setting and monitoring.
Together, these meet internal and regulatory
requirements.
Roles and responsibilities
The Treasury and Capital Risk function is
responsible for the management and
governance of the liquidity risk mandate
defined by the Board and the production of
ILAAPs. Treasury has the primary responsibility
for managing liquidity risk within the set risk
appetite. The CRO for treasury and capital risk
reports to the Group CRO.
Barclays’ comprehensive control framework
for managing the Group’s liquidity risk is
designed to deliver the appropriate term
and structure of funding consistent with the
Liquidity Risk Appetite (LRA) set by the Board.
The Board sets the LRA based on the internal
liquidity risk model and external regulatory
requirements namely the Liquidity Coverage
Ratio (LCR). The LRA is represented as
the level of risk the Group chooses to take
in pursuit of its business objectives and
in meeting its regulatory obligations.
The approved LRA is implemented in line
with the control framework and policy for
liquidity risk.
The control framework incorporates a range
of ongoing business management tools to
monitor, limit and stress test the Group’s
balance sheet and contingent liabilities and
Board Risk Committee
■ reviews and recommends to the Board the Group’s risk appetite for treasury and capital risk
■ reviews material issues impacting treasury and capital risk
■ approves the ICAAP and ILAAP
Group Risk Committee
■ reviews and recommends risk appetite to the BRC
■ escalates material issues impacting treasury and capital risk to the BRC
■ reviews and recommends the ICAAP and ILAAP to the BRC for approval
Treasury and Capital Risk Committee
■ manages treasury and capital risk appetite
■ monitors the treasury and capital risk profile
■ monitors the treasury and capital risk control environment
■ reviews and recommends risk appetite to the GRC and BRC
■ escalates material issues impacting treasury and capital risk to the GRC and BRC
the Recovery Plan. Limit setting and transfer
pricing are tools that are designed to control
the level of liquidity risk taken and drive the
appropriate mix of funds. Together, these
tools reduce the likelihood that a liquidity
stress event could lead to an inability to
meet the Group’s obligations as they fall due.
The control framework is subject to internal
conformance testing and internal audit review.
The liquidity stress tests assess the potential
contractual and contingent stress outflows
under a range of scenarios, which are then
used to determine the size of the liquidity
pool that is immediately available to meet
anticipated outflows if a stress occurs.
The Group maintains a range of management
actions for use in a liquidity stress, these are
documented in the Group Recovery Plan. Since
the precise nature of any stress event cannot
be known in advance, the actions are designed
to be flexible to the nature and severity of the
stress event and provide a menu of options
that can be drawn upon as required. The
Barclays Group Recovery Plan also contains
more severe recovery options to generate
additional liquidity in order to facilitate recovery
in a severe stress. Any stress event would be
regularly monitored and reviewed using key
management information by key Treasury,
Risk and business representatives.
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.
Roles and responsibilities
The management of capital risk is integral
to the Group’s approach to financial stability
and sustainability management, and is
embedded in the way businesses and legal
entities operate.
Capital risk management is underpinned by
a control framework and policy. The capital
management strategy, outlined in the Group
and legal entity capital plans, is developed in
alignment with the control framework and
policy for capital risk, and is implemented
consistently in order to deliver on the
Group’s objectives.
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Risk review ■■ lag risk: arises from the delay in
repricing customer rates for certain
variable/managed rate products, following
an underlying change to market interest
rates. This is typically driven by either
regulatory constraint around customer
notification on pricing changes, processing
time for the Group’s notification systems or
contractual agreements within a product’s
terms and conditions
■■ asset swap spread risk: the spread between
Libor and sovereign bond yields that arises
from the management of the liquidity buffer
investments and its associated hedges.
Furthermore, liquidity buffer investments
are generally subject to available for sale
accounting rules, whereby changes in the
value of these assets impact capital via other
comprehensive income (OCI), creating
volatility in capital directly.
Roles and responsibilities
The non-traded market risk team provides
risk management oversight and monitoring
of all traded and non-traded market risk in
Treasury and customer banking books, which
specifically includes:
■■ interest rate risk assessment in the
customer banking books
■■ review and challenge the behavioural
assumptions used in hedging and
transfer pricing
■■ risk management of the liquidity buffer
investments and funding activities
■■ oversight of balance sheet hedging
■■ review of residual risk in the hedge
accounting solution and hedging
of net investments
■■ proposes and monitors risk limits to
manage traded and non-traded market
risk within the agreed risk appetite.
The Board approves the Group capital plan,
internal stress tests and results of regulatory
stress tests, and the Group recovery plan.
The Treasury Committee is responsible for
monitoring and managing capital risk in
line with the Group’s capital management
objectives, capital plan and risk frameworks.
The Treasury and Capital Risk Committee
monitors and reviews the capital risk profile
and control environment, providing Second
Line oversight of the management of capital
risk. The BRC reviews the risk profile, and
annually reviews risk appetite and the impact
of stress scenarios on the Group capital plan/
forecast in order to agree the Group’s
projected capital adequacy.
Local management assures compliance with
an entity’s minimum regulatory capital
requirements by reporting to local Asset and
Liability Committees with oversight by the
Group’s Treasury Committee, as required.
Treasury has the primary responsibility for
managing and monitoring capital and reports
to the Group Finance Director. The Treasury
and Capital Risk function contains a Capital
Risk Oversight team, and is an independent
risk function that reports to the Group CRO
and is responsible for oversight of capital risk
and production of ICAAPs.
Pension risk
The Group maintains a number of defined
benefit pension schemes for past and current
employees. The ability of the pension fund
to meet the projected pension payments is
maintained principally through investments.
Pension risk arises because the estimated
market value of the pension fund assets might
decline; investment returns might reduce; or
the estimated value of the pension liabilities
might increase. The Group monitors the
pension risks arising from its defined benefit
pension schemes and works with Trustees to
address shortfalls. In these circumstances the
Group could be required or might choose to
make extra contributions to the pension fund.
The Group’s main defined benefit scheme was
closed to new entrants in 2012.
Interest rate risk in the
banking book management
Overview
Banking book operations generate non-traded
market risk, primarily through the mismatch
between the duration of assets and liabilities
and where interest rates on products reset
at different dates. As per the Group’s policy
to remain within the defined risk appetite,
interest rate and FX risks residing in the
banking books of the businesses are
transferred to Treasury where they are
centrally managed. Currently, these risks
are transferred to Treasury via funding
arrangements, interest rate or FX swaps.
However, the businesses remain susceptible
to market risk from seven key sources:
■■ repricing/residual risk: the impact from the
mismatch between the run-off of product
balances and the associated interest rate
hedges or from unhedged liquidity buffer
investments
■■ structural risk: the change to the net
interest income on hedge replenishment
due to adverse movements in interest
rates, assuming that the balance sheet
is held static
■■ prepayment risk: the potential loss in value
if actual prepayment or early withdrawal
behaviour from customers deviates from
the expected or contractually agreed
behaviour, which may result in a hedge or
funding adjustment at a cost to the bank.
Exposures are typically considered (where
appropriate) net of any applicable offsetting
early repayment charges. This risk
principally relates to early repayment of
fixed rate loans or withdrawal from fixed
rate savings products
■■ recruitment risk: the potential loss in value
if the actual completion or drawdown
behaviour from customers deviates from
the expected behaviour, which may result in
a hedge or funding adjustment at a cost to
the bank. This risk principally relates to the
completion timing around the Bank’s fixed
rate mortgage pipeline process
■■ margin compression risk: the effect of
internal or market forces on a bank’s net
margin where, for example, in a low rate
environment any fall in rates will further
decrease interest income earned on the
assets whereas funding cost cannot be
reduced as it is already at the minimum level
Capital risk management primary objectives
Capital risk management core practices
■ maintain adequate capital to withstand the impact of the risks that may arise
under the normal and stressed conditions analysed by the Group
■ maintain adequate capital to cover the Group’s current and forecast business
needs and associated risks in order to provide a viable and sustainable
business offering
■ meet minimum regulatory requirements in all jurisdictions
■ maintain capital buffers over regulatory minimums
■ perform Group-wide internal and regulatory stress tests
■ develop contingency plans for severe and extreme stresses, which include
stress management actions and recovery actions
■ maintain capital ratios aligned with rating agency expectations
■ maintain a capital plan on a short-term and medium-term basis aligned with
the Group’s strategic objectives, balancing capital generation of the business
with business growth and shareholder distributions
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Principal Risk management
Operational risk management
Operational risk
The risk of loss to the firm from inadequate or failed processes, 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:
■■ deliver an operational risk capability owned
and used by business leaders which is
pragmatic, relevant, and enables business
leaders to make sound risk decisions over
the long term
■■ provide the frameworks, policies and tools
to enable management to meet their risk
management responsibilities while the
Second Line of Defence provides robust,
independent, and effective oversight
and challenge
■■ deliver a consistent and aggregated
measurement of operational risk that
will provide clear and relevant insights,
so that the right management actions can
be taken to keep the operational risk profile
consistent with the Group’s strategy, the
stated risk appetite, the client franchise,
and other stakeholder needs.
The Group is committed to the management
and measurement of operational risk and was
granted a waiver by the FSA (now the PRA) to
operate an advanced measurement approach
(AMA) for operational risk, which commenced
in January 2008. The majority of the Group
calculates regulatory capital requirements
using AMA (94% of capital requirements),
except for small parts of the organisation
acquired since the original permission
(6% of capital requirements) using the basic
indicator approach (BIA). The Group works
to benchmark its internal operational risk
management and measurement practices
with peer banks.
■■ fraud risk: The risk of financial loss when
an internal or external party acts dishonestly
with the intent to obtain an undue benefit,
cause a loss to, or to expose either the
Group or its customers and clients to
a risk of loss
The Group is committed to operating within a
strong system of internal controls that enables
business to be transacted and risk taken
without exposing the Group to unacceptable
potential losses or reputational damages.
The Group has an overarching ERMF that
sets out the approach to internal governance.
The ERMF establishes the mechanisms and
processes by which the Board directs the
organisation, through setting the tone and
expectations from the top, delegating
authority and monitoring compliance.
Organisation and structure
Operational risk comprises a number of
specific risks defined as follow:
■■ data management and information risk:
The risk that Barclays information is not
captured, retained, used or protected in
accordance with its value and legal and
regulatory requirements
■■ financial reporting risk: The risk of a
material misstatement or omission within
the Group’s external financial, regulatory
reporting or internal management reporting
■■ payments process risk: The risk of
payments being processed inaccurately,
with delays, without appropriate
authentication and authorisation
■■ people risk: The risk that Barclays is
exposed to by virtue of being an employer
(excluding Health and Safety related risk)
■■ premises and security risk: The risk of
interruption to Barclays’ business due to the
unavailability of premises and infrastructure
as a result of intentional or accidental
damage to premises and moveable assets,
physical security breaches and safety and
security incidents
■■ supplier risk: The risk that is introduced
to the firm or entity as a consequence of
obtaining services or goods from another
legal entity as a result of inadequate
selection, inadequate exit and supplier
management, resulting in operational,
financial, or reputational risk to the
bank, failure of services and/or negative
customer impact
Organisation and structure
Board Risk Committee
■ approves Operational Risk Management Framework
■ operational risk capital oversight
■ recommends and monitors operational risk appetite and the residual risk
position, supported by feedback from the Board Audit Committee/Group Chief
Controls Officer
Board Audit Committee
■ oversees that the operating effectiveness of the control environment is satisfactory
■ oversees remediation of control issues
■ feedback to the Board Risk Committee where concerns exist over the impact on
residual risk through either the design or operating effectiveness of the control
environment
Group Risk Committee
■ reviews and recommends risk appetite and risk limits across the Principal Risks
to the Board
■ monitors the Group risk profile and the utilisation of risk appetite
■ reviews appetite, limit usage and risk management within tolerance agreed
by the Board
■ reviews deep dives of specific risks as requested
■ reviews the impact of any material acquisitions and disposals on the risk profile
■ reviews remediation plans and actions taken, and agrees any further action
required
■ escalations to Board level
Group Controls Committee
■ oversees effectiveness of control environment
■ reviews and recommends control framework
■ oversees control remediation activities
■ oversees execution of Operational Risk Management Framework consistently
across the Group
■ oversees risk and internal control matters including significant issues
■ escalations to Board level
Business and Function Risk Committees
■ manage and oversee the risk at the Business Unit/Function level
■ escalate to Group level
Business and Function Control Committees
■ manage and oversee the control environment at the Business Unit/
Function level
■ escalate to Group level
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[•]
Risk review The Group Head of Operational Risk is
responsible for establishing, owning and
maintaining an appropriate Group-wide
Operational Risk Management Framework
and for overseeing the portfolio of operational
risk across the Group.
Operational Risk Management (ORM) acts
in a Second Line of Defence capacity, and is
responsible for defining and overseeing the
implementation of the framework and
monitoring Barclays operational risk profile.
ORM alerts management when risk levels
exceed acceptable ranges or risk appetite in
order to drive timely decision-making and
actions by the First Line of Defence. Through
attendance at Business Risk Committee
meetings, ORM provide specific risk input
into the issues highlighted and the overall risk
profile of the business. 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 BRC or the BAC.
For further information on operational
risk management, risk and control self-
assessments and risk scenarios, please
refer to the operational risk management
section on pages 170 to 173 in Barclays PLC
Pillar 3 Report 2017.
■■ tax risk: The risk of unexpected tax cost
in relation to any tax for which Barclays is
liable, or of reputational damage on tax
matters with key stakeholders such as tax
authorities, regulators, shareholders or the
public. Tax cost includes tax, interest or
penalties levied by a taxing authority
■■ technology risk: The risk that comes
about due to dependency on technological
solutions and is defined as failure to
develop, deploy and maintain technology
solutions that are stable, reliable and deliver
what the business needs
■■ transaction operations risk: The risk of
Customer/Client or Bank detriment due
to unintentional error and/or failure in the
end-to-end process of initiation, processing
and fulfilment of an interaction between
a Customer/Client and the Bank with
an underlying financial instrument
(e.g. mortgage, derivative product,
trade product etc.).
These risks may result in financial and/or
non-financial impacts including legal/
regulatory breaches or reputational damages.
Roles and responsibilities
The prime responsibility for the management
of operational risk and compliance with
control requirements rests with the business
and functional units where the risk arises.
The operational risk profile and control
environment is reviewed by business
management through specific meetings
which cover governance, risk and control.
Businesses are required to report their
operational risks on both a regular and an
event-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.
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Principal Risk management
Model risk management
Model risk
The risk of the potential adverse consequences from financial assessments or decisions based on incorrect or misused model outputs
and reports.
Overview
Barclays uses models to support a broad
range of activities, including informing
business decisions and strategies, measuring
and limiting risk, valuing exposures,
conducting stress testing, assessing capital
adequacy, managing client assets, and
meeting reporting requirements.
Since models are imperfect and incomplete
representations of reality, they may be subject
to errors affecting the accuracy of their
output. Model errors can result in
inappropriate business decisions being made,
financial loss, regulatory risk, reputational risk
and/or inadequate capital reporting. Models
may also be misused, for instance applied to
products that they were not intended for, or
not adjusted, where fundamental changes to
their environment would justify re-evaluating
their core assumptions. Errors and misuse are
the primary sources of model risk.
Robust model risk management is crucial to
assessing and managing model risk within a
defined risk appetite. Strong model risk
culture, appropriate technology environment,
and adequate focus on understanding and
resolving model limitations are crucial
components.
Organisation and structure
Barclays allocates substantial resources to
identify and record models and their usage,
document and monitor the performance of
models, validate models and adequately
address model limitations. Barclays manages
model risk as an enterprise level risk similar to
other Principal Risks.
Barclays has a dedicated Model Risk
Management (MRM) function that consists of
two main units: the Independent Validation
Unit (IVU), responsible for model validation
and approval, and Model Governance and
Controls (MGC), covering model risk
governance, controls and reporting, including
ownership of model risk policy and the model
inventory.
The model risk management framework
consists of the model risk policy and
standards. The policy prescribes group-wide,
end-to-end requirements for the identification,
measurement and management of model risk,
covering model documentation, development,
implementation, monitoring, annual review,
independent validation and approval, change
and reporting processes. The policy is
supported by global standards covering model
inventory, documentation, validation,
complexity and materiality, testing and
monitoring, overlays, risk appetite, as well as
vendor models and stress testing challenger
models.
Barclays is continuously enhancing model risk
management. The function reports to the
Group CRO and operates a global framework.
Implementation of best practice standards is a
central objective of the Group. Model risk
reporting flows to senior management as
depicted below.
Roles and responsibilities
The key model risk management activities
include:
■■ Correctly identifying models across all
relevant areas of the firm, and recording
models in the Group Models Database
(GMD), the Group-wide model inventory.
The heads of the relevant model ownership
areas (typically, the Business Chief Risk
Officers, Business Chief Executive Officers,
the Treasurer, the Chief Financial Officer,
etc.) annually attest to the completeness
and accuracy of the model inventory. MGC
undertakes regular conformance reviews on
the model inventory.
■■ Enforcing that every model has a model
owner who is accountable for the model.
The model owner must sign off models
prior to submission to IVU for validation.
The model owner works with the relevant
technical teams (model developers,
implementation, monitoring, data services,
regulatory) to maintain that the model
presented to IVU is and remains fit for
purpose.
■■ Overseeing that every model is subject to
validation and approval by IVU, prior to
being implemented and on a continual
basis. While all models are reviewed and
re-approved for continued use each year,
the validation frequency and the level of
review and challenge applied by IVU is
tailored to the materiality and complexity of
each model. Validation includes a review of
the model assumptions, conceptual
soundness, data, design, performance
testing, compliance with external
requirements if applicable, as well as any
limitations, proposed remediation and
overlays with supporting rationale. Material
model changes are subject to prioritised
validation and approval.
■■ Defining model risk appetite in terms of risk
tolerance, and qualitative metrics which are
used to track and report model risk.
■■ Maintaining specific standards that cover
model risk management activities relating
to stress testing challenger models, model
overlays, vendor models, and model
complexity and materiality.
Organisation and structure
Board Risk Committee
■ reviews and recommends to the Board the Group’s risk appetite for model risk
■ reviews the effectiveness of the processes and policies by which Barclays identifies and manages model risk
■ assesses performance relative to model risk appetite
Group Risk Committee
■ reviews risk appetite across model risk
■ monitors the Group risk profile for model risk, including emerging risks, against expected trends, and the utilisation of risk appetite
Business Unit Risk Committees
■ review critical updates on model risk e.g. updates on Group-wide remediation plans
■ review targeted updates on progress toward meeting regulatory deliverables
■ review identified policy breaches
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Risk review Risk review
Principal Risk management
Conduct risk management
Conduct risk
The risk of detriment to customers, clients, market integrity, competition or Barclays from the inappropriate supply of financial services,
including instances of wilful or negligent misconduct.
The Business Unit Risk Committees and
the Financial Crime Business Oversight
Committees are the primary Second Line
governance forums for oversight of conduct
risk profile and implementation of the CRMF.
The responsibilities of the Business Unit Risk
Committees include approval of the conduct
risk tolerance and the business defined key
indicators. Additional responsibilities include
the identification and discussion of any
emerging conduct risks exposures which
have been identified.
Overview
The Group defines, manages and mitigates
conduct risk with the goal of providing
positive customer and client outcomes,
protecting market integrity and promoting
effective competition. This includes taking
reasonable steps to assure the Group’s culture
and strategy are appropriately aligned to these
goals, products and services are reasonably
designed and delivered to meet the needs of
customers and clients, as well as promoting
the fair and orderly operation of the markets
in which the Group does business and that the
Group does not commit or facilitate money
laundering, terrorist financing, bribery and
corruption or breaches of economic sanctions.
Product Lifecycle, Culture and Strategy and
Financial Crime are the risk categories under
conduct risk.
Organisation and structure
The governance of conduct risk within
Barclays 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 GRC is the most senior executive body
responsible for reviewing and monitoring the
effectiveness of Barclays’ management of
conduct risk.
Roles and responsibilities
The Conduct Risk Management Framework
(CRMF) comprises a number of elements that
allow the Group to manage and measure its
conduct risk profile.
Senior Managers have ownership within
their areas for managing conduct risk.
These individuals have a Statement of
Responsibilities identifying the activities and
areas for which they are accountable. The
primary responsibility for managing conduct
risk and compliance with control requirements
sits with the business where the risk arises.
The First Line Business Control Committees
provide oversight of controls relating to
conduct risk.
The Group Chief Compliance Officer is
responsible for owning and maintaining an
appropriate Group-wide CRMF for overseeing
Group-wide conduct risk management. This
includes defining and owning the relevant
conduct risk policies and oversight of the
implementation of controls to manage the
risk.
Businesses are required to report their
conduct risks on both a quarterly and an
event-driven basis. The quarterly reports detail
conduct risks inherent within the business
strategy and include forward-looking horizon
scanning analysis as well as backward-looking
evidence-based indicators from both internal
and external sources.
Organisation and structure
Board Reputation Committee
■ reviews and recommends to the Board the Group’s risk appetite for conduct risk
■ reviews the effectiveness of the processes and policies by which Barclays identifies and manages conduct risk
■ monitors the conduct risk profile of the Group
■ monitors culture and cultural transformation
Group Risk Committee
■ reviews and monitors the effectiveness of conduct risk management
Business Unit Risk Committees and Financial Crime Business Oversight Committees
■ oversee the management of the Group’s conduct risk profile as the primary Second Line governance forum
■ oversee the implementation of the Conduct Risk Management Framework (CRMF)
■ oversee existing and emerging conduct risk exposures
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Principal Risk management
Reputation risk management
Reputation risk
The risk that an action, transaction, investment or event will reduce trust in the firm’s integrity and competence by clients, counterparties,
investors, regulators, employees or the public.
Overview
A reduction of trust in Barclays’ integrity and
competence may reduce the attractiveness of
Barclays to stakeholders and could lead to
negative publicity, loss of revenue, regulatory
or legislative action, loss of existing and
potential client business, reduced workforce
morale and difficulties in recruiting talent.
Ultimately it may destroy shareholder value.
Organisation and structure
The GRC is the most senior executive body
responsible for reviewing and monitoring the
effectiveness of Barclays’ management of
reputation risk.
Roles and responsibilities
The Chief Compliance Officer is accountable
for developing a reputation risk framework
and policies including limits against which
data is monitored, reported on and escalated,
as required.
Reputation risk is by nature pervasive and can
be difficult to quantify, requiring more
subjective judgement than many other risks.
The Reputation Risk Framework sets out
what is required to manage reputation risk
effectively and consistently across the Bank.
The primary responsibility for identifying
and managing reputation risk and adherence
to the control requirements sits with the
business and support functions where
the risk arises.
Barclays International and Barclays UK are
required to operate within established
reputation risk appetite and their component
businesses submit quarterly reports to the
Group Reputation Management team,
highlighting their most significant current and
potential reputation risks and issues and how
they are being managed. These reports are a
key internal source of information for the
quarterly reputation risk reports which are
prepared for the GRC and RepCo.
Organisation and structure
Board Reputation Committee
■ reviews the effectiveness of the processes and policies by which Barclays identifies and manages reputation risk
■ considers and evaluates regular reports on Barclays’ reputation risk issues and exposures
■ considers whether significant business decisions will compromise Barclays’ ethical policies or core business beliefs and values
Group Risk Committee
■ reviews the monitoring processes utilised by Compliance and Citizenship and Reputation for appropriateness given the level of risk identified in the businesses
■ reports reputation issues in accordance with Barclays’ Reputation Risk Framework for all material issues which may have the potential to incur reputation risk for Barclays
Business Unit Risk Committees
■ review and escalate reputation risks in accordance with the Reputation Risk Framework
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Risk review Risk review
Principal Risk management
Legal risk management
Legal risk
The risk of loss or imposition of penalties, damages or fines from the failure of the firm to meet its legal obligations including regulatory
or contractual requirements.
Overview
The Legal Risk Management Framework
(LRMF) prescribes Group-wide requirements
for the identification, escalation, measurement
and management of legal risk, covering
assessment, risk tolerance, key indicators and
governance. The LRMF is supported by
Group-wide legal risk policies and associated
standards aligned to the following legal risks:
■■ contractual arrangements – the Group’s
rights and remedies in its relationships with
other parties not being enforceable as
intended due to the absence of appropriate
contractual documentation or defects
therein
■■ litigation management – failure to
adequately manage litigation involving
the Group
■■ intellectual property (IP) – failure to protect
the Group’s IP assets or the Group infringing
valid IP rights of third parties
■■ competition/anti-trust – failure to
adequately manage competition/anti-trust
issues or failure to manage relationships
with competition/anti-trust authorities.
■■ use of law firms – failure to control
instruction of external law firms
■■ contact with regulators – failure to manage
interactions with regulators or failure to
manage the receipt and handling of
regulatory information from a regulatory or
government agency appropriately.
The LRMF requires businesses and functions
to integrate the management of legal risk
within their strategic planning and business
decision-making, including adopting
processes to identify legal risk exposures
and managing adherence to the minimum
control requirements.
In addition to legal risk detailed above, legal
outcomes, including losses or the imposition
of penalties, damages, fines and sanctions,
may arise because of past and future actions,
behaviours and business decisions aligned
to the Principal Risk which gave rise to the
outcome, including but not limited to conduct
and operational risk. Details of current
contentious legal matters in relation to the
Group are set out in Note 29.
Organisation and structure
Business/function risk forums have oversight
of their legal risk profile and implementation
of the LRMF. The Legal Executive Committee
oversees, challenges and monitors legal risk
across the Group. The GRC is the most senior
executive body responsible for reviewing and
monitoring the effectiveness of Barclays’
management of risk. Escalation paths from
this forum exist to the BRC.
Roles and responsibilities
The primary responsibility for identifying and
managing legal risk and adherence to the
minimum control requirements sits with the
businesses/functions where the risk resides.
On behalf of the businesses/functions, the
aligned General Counsel or members of
Legal senior management provide oversight
and challenge of the legal risk profile, for
example by undertaking legal risk tolerance
assessments, and providing advice on legal
risk management. Legal risk tolerance
assessments include both quantitative and
qualitative criteria such as:
■■ risk and control self-assessment, lessons
learned, testing and monitoring processes
■■ analysis of legal risk material control issues
or weaknesses
■■ potential legal risks resulting from
upcoming changes in the control
environment, systems, or internal
organisational structures
■■ potential implications on the Group of
forthcoming changes in the external legal
and regulatory environment and/or
prevailing decisions from courts and
enforcing authorities as they relate to
defined legal risks.
The Group General Counsel supported by the
Global Head of Legal Risk, Governance and
Control is responsible for maintaining an
appropriate LRMF and for overseeing
Group-wide legal risk management.
Organisation and structure
Board Risk Committee
■ approves risk tolerances
■ reviews risk profile and material risk issues
■ commissions, receives and considers reports on key risk issues
Group Risk Committee
■ monitors risk profile with respect to non-financial risk tolerances
■ debates and agrees actions on the non-financial risk profile and risk strategy across the Group
■ considers escalated issues
Legal Executive Committee
■ oversees, challenges and monitors legal risk across the Group
■ oversees and challenges effectiveness of the non-financial risk and control environment within the legal function
■ considers issues of significance relating to legal risk and control
Business/Function Risk Forums and Committees
■ oversee the legal risk profile of the relevant business/function
■ review conclusions from risk and control assessments and emerging risk issues
■ oversee significant risk events and lessons learned assessments
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Risk performance
Credit risk
Summary of contents
Credit risk represents a significant risk to the
Group and mainly arises from exposure to
wholesale and retail loans and advances
together with the counterparty credit risk
arising from derivative contracts entered
into with clients.
This section provides a macro view of the
Group’s credit exposures.
The Group reviews and monitors risk
concentrations in a variety of ways.
This sections outlines performance against
key concentration risks at a macro Group
level.
In addition to Group wide concentrations,
credit risk monitors exposure performance
across a range of specific portfolios.
The Group monitors exposures to assets
where there is a heightened likelihood of
default and assets where an actual default
has occurred.
This section outlines the exposure to assets
that have been classified as impaired
analysing the exposures between business
units and by key product types.
The Group, from time to time, agrees
to the suspension of certain aspects
of customer/client credit agreements,
generally during temporary periods of
financial difficulties where the Group is
confident that the customer/client will
be able to remedy the suspension.
This section outlines the Group’s current
exposure to assets with this treatment.
The Group holds impairment provisions on
the balance sheet as a result of the raising of
a charge against profit for incurred losses in
the lending book. An impairment allowance
may either be identified or unidentified and
individual or collective.
This section outlines the movements in
allowance for impairment by asset class
exposure, material management adjustments
to model output, analysis of debt securities
and derivatives.
■■ Credit risk overview and summary of performance
■■ The Group’s maximum exposure and collateral and other credit enhancements held
■■ The Group’s approach to management and representation of credit quality
– Asset credit quality
– Debt securities
– Balance sheet credit quality
■■ Analysis of the concentration of credit risk
– Geographic concentrations
– Industrial concentrations
■■ Loans and advances to customers and banks
■■ Analysis of specific portfolios and asset types
– Secured home loans
– Credit cards and unsecured loans
– Wholesale loans and advances at amortised cost
■■ Analysis of problem loans
– Age analysis of loans and advances that are past due but not impaired
– Analysis of loans and advances assessed as impaired
– Potential credit risk loans and coverage ratios
– Impaired loans
– Forbearance
■■ Impairment
– Impairment allowances
– Management adjustments to models for impairment
■■ Analysis of debt securities
■■ Analysis of derivatives
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Risk performanceCredit riskRisk review Credit risk
The risk of loss to the firm from the failure of clients, customers or counterparties, including
sovereigns, to fully honour their obligations to the firm, including the whole and timely
payment of principal, interest, collateral and other receivables.
All disclosures in this section (pages 139 to 158) are unaudited unless otherwise stated.
Key metrics
Loan impairment charges in 2017 were 1% lower than 2016:
Group
-£19m
Loan impairment reduced slightly reflecting lower charges in Barclays
UK and in the Barclays International wholesale portfolios partially offset
by an adjustment relating to an asset sale in US cards.
Retail
Overall the retail portfolios have remained stable and broadly within
expectations. Notwithstanding this, impairment charges increased
primarily due to an adjustment relating to an asset sale in US cards.
Wholesale
Impairment charges have decreased, despite a large single name
impairment, driven by a range of releases and materially lower charges
to the oil sector.
+£42m
-£61m
Overview
Credit risk represents a significant risk to the
Group and mainly arises from exposure to
wholesale and retail loans and advances
together with the counterparty credit risk
arising from derivative contracts entered into
with clients. A summary of performance may
be found below.
This section provides an analysis of areas
of particular interest or potentially of higher
risk, including: i) balance sheet, including the
maximum exposure, collateral, credit quality,
and loans and advances; ii) areas of
concentrations; iii) exposure to and
performance metrics for specific portfolios
and assets types, including home loans and
credit cards; iv) problem loans, including
credit risk loans (CRLs) and forbearance;
and v) impairment, including impairment
allowances and management adjustments
to model outputs.
Please see the credit risk management section
on pages 127 to 128 for details of governance,
policies and procedures.
Summary of performance in
the period
Loan impairment charges decreased £19m
to £2,333m. Total loans and advances net of
impairment decreased by £34.1bn to £415.4bn
driven by a net £12.7bn decrease in cash
collateral and settlement balances and a
£21.4bn decrease in other lending, primarily
in Corporate and Investment Bank. Overall,
this resulted in a 4bps increase in the LLR to
57bps.
Credit risk loans (CRLs) decreased to £6.0bn
(December 2016: £6.5bn) and the CRL
coverage ratio increased to 78%
(December 2016: 71%) mainly within
retail portfolios.
Analysis of the balance sheet
Group’s maximum exposure
and collateral and other credit
enhancements held
Basis of preparation
The following tables present a reconciliation
between the Group’s maximum exposure
and its net exposure to credit risk; reflecting
the financial effects of collateral, credit
enhancements and other actions taken
to mitigate the Group’s exposure.
For financial assets recognised on the balance
sheet, maximum exposure to credit risk
represents the balance sheet carrying
value after allowance for impairment. For
off-balance sheet guarantees, the maximum
exposure is the maximum amount that the
Group would have to pay if the guarantees
were to be called upon. For loan commitments
and other credit related commitments that
are irrevocable over the life of the respective
facilities, the maximum exposure is the full
amount of the committed facilities.
home.barclays/annualreport
Barclays PLC Annual Report 2017 139
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance This and subsequent analyses of credit risk include only financial assets subject to credit risk. They exclude other financial assets not subject to
credit risk, mainly equity securities held for trading, as available for sale or designated at fair value, and traded commodities. Assets designated at
fair value in respect of linked liabilities to customers under investment contracts have also not been included as the Group is not exposed to credit
risk on these assets. Credit losses in these portfolios, if any, would lead to a reduction in the linked liabilities and not result in a loss to the Group.
For off-balance sheet exposures certain contingent liabilities not subject to credit risk such as performance guarantees are excluded.
The Group mitigates the credit risk to which it is exposed through netting and set-off, collateral and risk transfer. Further detail on the Group’s
policies to each of these forms of credit enhancement is presented on pages 146 to 149 of the Barclays PLC Pillar 3 Report 2017.
Overview
As at 31 December 2017, the Group’s net exposure to credit risk after taking into account netting and set-off, collateral and risk transfer increased
7% to £790.5bn. Overall, the extent to which the Group holds mitigation against its total exposure decreased to 43% (2016: 47%).
Of the remaining exposure left unmitigated, a significant portion relates to cash held at central banks, financial investment debt securities issued
by governments and cash collateral and settlement balances, all of which are considered to be lower risk. Increases in cash held at central banks
and financial investment debt securities in the period have driven the increase in the Group’s net exposure to credit risk. Trading portfolio liability
positions, which to a significant extent economically hedge trading portfolio assets but which are not held specifically for risk management
purposes, are excluded from the analysis. The credit quality of counterparties to derivatives, financial investments and wholesale loan assets are
predominantly investment grade. Further analysis on the credit quality of assets is presented on pages 142 to 143.
Where collateral has been obtained in the event of default, the Group does not, as a rule, use such assets for its own operations and they are
usually sold on a timely basis. The carrying value of assets held by the Group as at 31 December 2017, as a result of the enforcement of collateral,
was £nil (2016: £16m).
Maximum exposure and effects of collateral and other credit enhancements (audited)
As at 31 December 2017
On-balance sheet:
Cash and balances at central banks
Items in the course of collection from other banks
Trading portfolio assets:
Debt securities
Traded loans
Total trading portfolio assets
Financial assets designated at fair value:
Loans and advances
Debt securities
Reverse repurchase agreements
Other financial assets
Total financial assets designated at fair value
Derivative financial instruments
Loans and advances to banks
Loans and advances to customers:
Home loans
Credit cards, unsecured and other retail lending
Corporate loans
Total loans and advances to customers
Reverse repurchase agreements and other similar secured lending
Financial investments – debt securities
Other assets
Total on-balance sheet
Off-balance sheet:
Contingent liabilities
Documentary credits and other short-term trade-related transactions
Standby facilities, credit lines and other commitments
Total off-balance sheet
Maximum
exposure
£m
Netting
and set-off
£m
Collateral
Cash
£m
Non-cash
£m
Risk transfer
£m
Net exposure
£m
171,082
2,153
51,200
3,140
54,340
11,037
15
100,040
519
111,611
237,669
35,663
147,002
55,767
162,783
365,552
12,546
57,129
869
1,048,614
19,012
812
314,761
334,585
–
–
–
–
–
–
–
–
–
–
–
–
–
(128)
(128)
–
–
–
–
–
–
–
–
–
–
(184,265)
–
–
–
(6,617)
(6,617)
–
–
–
(190,882)
(440)
–
(426)
–
(866)
(33,092)
(6)
(158)
(241)
(224)
(623)
–
–
–
(34,587)
(5,497)
–
(99,428)
–
(104,925)
(6,170)
(583)
(146,554)
(3,995)
(45,819)
(196,368)
(12,226)
(463)
–
(320,863)
(344)
–
–
–
(344)
(5,885)
(37)
–
(16)
(4,341)
(4,357)
–
(853)
–
(11,476)
171,082
2,153
51,200
3,012
54,212
4,756
15
186
519
5,476
8,257
35,037
290
51,515
105,782
157,587
320
55,813
869
490,806
–
–
–
–
(318)
(27)
(46)
(391)
(1,482)
(11)
(31,058)
(32,551)
(228)
(4)
(1,753)
(1,985)
16,984
770
281,904
299,658
Total
1,383,199
(190,882)
(34,978)
(353,414)
(13,461)
790,464
140 Barclays PLC Annual Report 2017
home.barclays/annualreport
Risk performanceCredit riskRisk review Maximum exposure and effects of collateral and other credit enhancements (audited)
As at 31 December 2016
On-balance sheet:
Cash and balances at central banks
Items in the course of collection from other banks
Trading portfolio assets:
Debt securities
Traded loans
Total trading portfolio assets
Financial assets designated at fair value:
Loans and advances
Debt securities
Reverse repurchase agreements
Other financial assets
Total financial assets designated at fair value
Derivative financial instruments
Loans and advances to banks
Loans and advances to customers:
Home loans
Credit cards, unsecured and other retail lending
Corporate loans
Total loans and advances to customers
Reverse repurchase agreements and other similar secured lending
Financial investments – debt securities
Other assets
Total on-balance sheet
Off-balance sheet:
Contingent liabilities
Documentary credits and other short-term trade-related transactions
Standby facilities, credit lines and other commitments
Total off-balance sheet
Maximum
exposure
£m
Netting
and set-off
£m
Collateral
Cash
£m
Non-cash
£m
Risk transfer
£m
Net exposure
£m
102,353
1,467
38,789
2,975
41,764
10,519
70
63,162
262
74,013
346,626
43,251
144,765
57,808
190,211
392,784
13,454
62,879
1,205
1,079,796
19,908
1,005
302,681
323,594
–
–
–
–
–
–
–
–
–
–
–
–
–
(270)
(270)
–
–
–
–
–
(273,602)
–
–
–
(8,622)
(8,622)
–
–
–
(282,224)
(17)
–
(688)
–
(705)
(41,641)
(4)
(184)
(235)
(320)
(739)
(79)
–
–
(43,168)
(4,107)
–
(62,233)
–
(66,340)
(8,282)
(4,896)
(143,912)
(5,258)
(52,029)
(201,199)
(13,242)
(533)
–
(294,762)
–
–
–
–
–
(432)
–
–
–
(432)
(5,205)
(22)
–
(95)
(5,087)
(5,182)
–
(1,286)
–
(12,127)
102,353
1,467
38,789
2,705
41,494
5,963
70
241
262
6,536
17,896
38,329
669
52,220
124,153
177,042
133
61,060
1,205
447,515
–
–
–
–
(247)
(24)
(321)
(592)
(1,403)
(18)
(26,548)
(27,969)
(130)
(3)
(1,704)
(1,837)
18,128
960
274,108
293,196
Total
1,403,390
(282,224)
(43,760)
(322,731)
(13,964)
740,711
home.barclays/annualreport
Barclays PLC Annual Report 2017 141
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance The Group’s approach to management and representation of credit quality
Asset credit quality
All loans and advances are categorised as either ‘neither past due nor impaired’, ‘past due but not impaired’, or ‘past due and impaired’, which
includes restructured loans. For the purposes of the disclosures in the balance sheet credit quality section below and the analysis of loans and
advances and impairment section (page 156):
■■ loans neither past due nor impaired consist predominantly of wholesale and retail loans that are performing. These loans, although unimpaired
may carry an unidentified impairment
■■ a loan is considered past due and classified as ‘Higher risk’ when the borrower has failed to make a payment when due under the terms
of the loan contract
■■ loans on forbearance programmes, as defined on page 153, are categorised as ‘Higher risk’
■■ the impairment allowance includes allowances against financial assets that have been individually impaired and those subject to collective
impairment.
The Group uses the following internal measures to determine credit quality for loans that are performing:
Default Grade
1-3
4-5
6-8
9-11
12-14
15-19
20-21
Wholesale lending
Probability of
default
0.0-0.05%
0.05-0.15%
0.15-0.30%
0.30-0.60%
0.60-2.15%
2.15-11.35%
11.35%+
Credit Quality
Description
Strong
Satisfactory
Higher Risk
For retail clients, a range of analytical tools is used to derive the probability of default of clients at inception and on an ongoing basis.
For loans that are performing, these descriptions can be summarised as follows:
Strong: there is a very high likelihood of the asset being recovered in full.
Satisfactory: while there is a high likelihood that the asset will be recovered and therefore, of no cause for concern to the Group, the asset may
not be collateralised, or may relate to unsecured retail facilities. At the lower end of this grade there are customers that are being more carefully
monitored, for example, corporate customers which are indicating some evidence of deterioration, mortgages with a high loan to value, and
unsecured retail loans operating outside normal product guidelines.
Higher risk: there is concern over the obligor’s ability to make payments when due. However, these have not yet converted to actual delinquency.
There may also be doubts over the value of collateral or security provided. However, the borrower or counterparty is continuing to make payments
when due and is expected to settle all outstanding amounts of principal and interest.
Loans that are past due are monitored closely, with impairment allowances raised as appropriate and in line with the Group’s impairment policies.
These loans are all considered higher risk for the purpose of this analysis of credit quality.
Debt securities
For assets held at fair value, the carrying value on the balance sheet will include, among other things, the credit risk of the issuer. Most listed
and some unlisted securities are rated by external rating agencies. The Group mainly uses external credit ratings provided by Standard & Poor’s,
Fitch or Moody’s. Where such ratings are not available or are not current, the Group will use its own internal ratings for the securities.
Balance sheet credit quality
The following tables present the credit quality of Group assets exposed to credit risk.
Overview
As at 31 December 2017, the ratio of the Group’s assets classified as strong, remained broadly stable at 89% (2016: 86%) of total assets exposed
to credit risk.
Further analysis of debt securities by issuer and issuer type and netting and collateral arrangements on derivative financial instruments is
presented on pages 157 and 158 respectively.
142 Barclays PLC Annual Report 2017
home.barclays/annualreport
Risk performanceCredit riskRisk review
Balance sheet credit quality (audited)
As at 31 December 2017
Cash and balances at central banks
Items in the course of collection from
other banks
Trading portfolio assets:
Debt securities
Traded loans
Total trading portfolio assets
Financial assets designated at fair value:
Loans and advances
Debt securities
Reverse repurchase agreements
Other financial assets
Total financial assets designated at fair value
Derivative financial instruments
Loans and advances to banks
Loans and advances to customers:
Home loans
Credit cards, unsecured and other retail
lending
Corporate loans
Total loans and advances to customers
Reverse repurchase agreements and other
similar secured lending
Financial investments – debt securities
Other assets
Total assets
Balance sheet credit quality (audited)
As at 31 December 2016
Cash and balances at central banks
Items in the course of collection from
other banks
Trading portfolio assets:
Debt securities
Traded loans
Total trading portfolio assets
Financial assets designated at fair value:
Loans and advances
Debt securities
Reverse repurchase agreements
Other financial assets
Total financial assets designated at fair value
Derivative financial instruments
Loans and advances to banks
Loans and advances to customers:
Home loans
Credit cards, unsecured and other retail
lending
Corporate loans
Total loans and advances to customers
Reverse repurchase agreements and other
similar secured lending
Financial investments – debt securities
Other assets
Total assets
26,026
113,505
275,107
11,430
57,107
482
923,271
Strong
(including
investment
grade)
£m
102,353
Strong
(including
investment
grade)
£m
171,082
Satisfactory
(BB+ to B)
£m
–
Higher risk
(B- and
below)
£m
–
Maximum
exposure to
credit risk
£m
171,082
Strong
(including
investment
grade)
%
100
Satisfactory
(BB+ to B)
%
–
Higher risk
(B- and
below)
%
–
Maximum
exposure to
credit risk
%
100
2,088
56
9
2,153
48,489
1,432
49,921
9,457
–
82,263
482
92,202
229,262
34,590
2,085
1,189
3,274
817
15
17,692
37
18,561
7,863
926
626
519
1,145
51,200
3,140
54,340
763
–
85
–
848
544
147
11,037
15
100,040
519
111,611
237,669
35,663
135,576
5,781
5,645
147,002
24,801
36,786
67,368
1,101
18
355
99,522
4,940
12,492
23,077
55,767
162,783
365,552
15
4
32
12,546
57,129
869
25,821 1,048,614
97
95
45
92
86
–
82
93
82
96
97
92
47
70
76
91
100
55
89
3
4
38
6
7
100
18
7
17
4
3
4
44
22
18
9
–
41
9
–
100
1
17
2
7
–
–
–
1
–
–
4
9
8
6
–
–
4
2
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Satisfactory
(BB+ to B)
£m
–
Higher risk
(B- and
below)
£m
–
Maximum
exposure to
credit risk
£m
102,353
Strong
(including
investment
grade)
%
100
Satisfactory
(BB+ to B)
%
–
Higher risk
(B- and
below)
%
–
Maximum
exposure to
credit risk
%
100
1,328
130
9
1,467
37,037
594
37,631
9,692
59
53,151
244
63,146
330,737
39,159
1,344
1,977
3,321
533
11
9,999
18
10,561
14,963
3,830
408
404
812
294
–
12
–
306
926
262
38,789
2,975
41,764
10,519
70
63,162
262
74,013
346,626
43,251
136,922
2,589
5,254
144,765
5,343
140,414
282,679
9,364
62,842
1,085
930,324
50,685
37,170
90,444
4,090
30
117
127,486
1,780
12,627
19,661
57,808
190,211
392,784
–
7
3
13,454
62,879
1,205
21,986 1,079,796
91
96
20
90
92
84
84
93
85
95
91
95
9
74
72
70
100
90
86
9
3
66
8
5
16
16
7
14
5
9
1
88
19
23
30
–
10
12
–
1
14
2
3
–
–
–
1
–
–
4
3
7
5
–
–
–
2
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
home.barclays/annualreport
Barclays PLC Annual Report 2017 143
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Analysis of the concentration of credit risk
A concentration of credit risk exists when a number of counterparties are located in a geographical region or are engaged in similar activities
and have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in
economic or other conditions. The Group implements limits on concentrations in order to mitigate the risk. The analyses of credit risk
concentrations presented below are based on the location of the counterparty or customer or the industry in which they are engaged. Further
detail on the Group’s policies with regard to managing concentration risk is presented on page 149 of Barclays PLC Pillar 3 Report 2017.
Geographic concentrations
As at 31 December 2017, the geographic concentration of the Group’s assets remained broadly consistent with 2016. Exposure is concentrated in
the UK 42% (2016: 41%), in the Americas 33% (2016: 33%) and Europe 21% (2016: 21%).
Credit risk concentrations by geography (audited)
As at 31 December 2017
On-balance sheet:
Cash and balances at central banks
Items in the course of collection from other banks
Trading portfolio assets
Financial assets designated at fair value
Derivative financial instruments
Loans and advances to banks
Loans and advances to customers
Reverse repurchase agreements and other similar secured lending
Financial investments – debt securities
Other assets
Total on-balance sheet
United
Kingdom
£m
53,068
987
10,603
33,922
81,656
10,251
253,702
203
17,471
592
462,455
Europe
£m
Americas
£m
Africa and
Middle East
£m
Asia
£m
Total
£m
57,179
1,166
13,620
23,725
81,566
11,847
39,687
375
23,598
13
252,776
56,034
–
25,680
46,288
57,858
8,044
63,246
10,521
14,110
148
281,929
63
–
473
1,611
2,792
1,714
2,541
32
114
33
9,373
–
4,738
171,082
2,153
54,340
111,611
237,669
35,663
365,552
12,546
57,129
869
42,081 1,048,614
3,964
6,065
13,797
3,807
6,376
1,415
1,836
83
Off-balance sheet:
Contingent liabilities
Documentary credits and other short-term trade related transactions
Standby facilities, credit lines and other commitments
Total off-balance sheet
Total
7,603
800
105,112
113,515
575,970
3,039
5
36,079
39,123
291,899
6,708
–
168,003
174,711
456,640
529
7
1,601
2,137
11,510
–
1,133
19,012
812
314,761
334,585
47,180 1,383,199
3,966
5,099
Credit risk concentrations by geography (audited)
As at 31 December 2016
On-balance sheet:
Cash and balances at central banks
Items in the course of collection from other banks
Trading portfolio assets
Financial assets designated at fair value
Derivative financial instruments
Loans and advances to banks
Loans and advances to customers
Reverse repurchase agreements and other similar secured lending
Financial investments – debt securities
Other assets
Total on-balance sheet
Off-balance sheet:
Contingent liabilities
Documentary credits and other short-term trade related transactions
Standby facilities, credit lines and other commitments
Total off-balance sheet
Total
United
Kingdom
£m
30,485
969
8,981
25,821
108,559
7,458
253,752
218
18,126
987
455,356
8,268
915
106,427
115,610
570,966
Europe
£m
Americas
£m
Africa and
Middle East
£m
40,439
498
9,171
10,244
107,337
12,674
47,050
309
27,763
–
255,485
3,275
9
35,476
38,760
294,245
24,859
–
19,848
33,181
105,129
16,894
81,045
11,439
12,030
137
304,562
6,910
–
156,077
162,987
467,549
Asia
£m
Total
£m
6,493
–
3,329
4,034
24,108
4,447
7,848
1,396
4,709
71
102,353
1,467
41,764
74,013
346,626
43,251
392,784
13,454
62,879
1,205
56,435 1,079,796
77
–
435
733
1,493
1,778
3,089
92
251
10
7,958
702
40
1,694
2,436
10,394
753
41
3,007
3,801
19,908
1,005
302,681
323,594
60,236 1,403,390
144 Barclays PLC Annual Report 2017
home.barclays/annualreport
Risk performanceCredit riskRisk review Industry concentrations
The concentration of the Group’s assets by industry remained broadly consistent year on year. As at 31 December 2017, total assets concentrated
towards banks and other financial institutions was 36% (2016: 43%), predominantly within derivative financial instruments. The proportion of the
overall balance concentrated towards governments and central banks increased to 20% (2016: 14%) and towards home loans remained stable at
11% (2016: 11%).
Credit risk concentrations by industry (audited)
Other
financial
insti-
tutions
£m
Manu-
facturing
£m
Const-
ruction
and
property
£m
Govern-
ment and
central
bank
£m
Banks
£m
Wholesale
and retail
distribu-
tion and
leisure
£m
Energy
and
water
£m
Business
and other
services
£m
Home
loans
£m
Cards,
unsecured
loans and
other
personal
lending
£m
Other
£m
Total
£m
2
3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
38
28
598
888
128
–
–
3,324
2,383
2,103
3,900
2,083
4,666
3,311
5,811
8,179
4,812
27,780
– 171,082
– 171,082
807 26,030
2,153
54,340
21,468 78,506
126,248 87,272
2,153
4,682 10,672
As at 31 December 2017
On-balance sheet:
Cash and balances at
central banks
Items in the course of
collection from other
banks
Trading portfolio assets
Financial assets
designated at fair value
Derivative financial
instruments
Loans and advances to
banks
Loans and advances to
customers
Reverse repurchase
agreements and other
similar secured lending
Financial investments
57,129
– 44,827
– debt securities
Other assets
869
21
–
Total on-balance sheet 199,865 258,297 14,981 31,435 270,206 18,288 13,627 29,537 147,158 54,205 11,015 1,048,614
Off-balance sheet:
Contingent liabilities
Documentary credits and
other short-term trade
related transactions
Standby facilities, credit
lines and other
commitments
Total off-balance sheet
Total
314,761
334,585
202,987 293,280 56,322 45,066 270,598 52,595 29,103 68,899 157,947 180,763 25,639 1,383,199
384 31,702 14,436 34,392 10,785 126,169 13,571
392 34,307 15,476 39,362 10,789 126,558 14,624
1,026 31,427 37,913 12,956
3,122 34,983 41,341 13,631
6,104 12,450 20,483 147,002 54,205
10,146
147
9,249 23,706
1,379
701
– 74,923
365,552
237,669
111,611
12,546
19,012
35,663
1,051
4,947
7,997
2,972
2,605
1,572
3,236
9,433
7,241
2,125
7,883
4,844
3,556
–
–
–
–
–
–
–
–
–
–
969
389
153
103
674
307
675
576
192
524
812
71
23
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4
2
1
8
5
home.barclays/annualreport
Barclays PLC Annual Report 2017 145
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Credit risk concentrations by industry (audited)
Other
financial
insti-
tutions
£m
Banks
£m
–
–
–
–
7,998
38,932
14,714
49,783
1,467
2,231
182,664 139,066
As at 31 December 2016
On-balance sheet:
Cash and balances at
central banks
Items in the course of
collection from other
banks
Trading portfolio assets
Financial assets
designated at fair value
Derivative financial
instruments
Loans and advances to
banks
Loans and advances to
customers
Reverse repurchase
agreements and other
similar secured lending
Financial investments
4,877
– debt securities
Other assets
205
Total on-balance sheet 256,421 304,309
Off-balance sheet:
Contingent liabilities
Documentary credits and
other short-term trade
related transactions
Standby facilities, credit
lines and other
commitments
Total off-balance sheet
Total
29,329
33,561
259,359 337,870
12,842
975
1,021
2,938
– 91,812
10,568
2,596
1,484
4,232
433
–
Const-
ruction
and
property
£m
Govern-
ment and
central
bank
£m
Manu-
facturing
£m
Wholesale
and retail
distribu-
tion and
leisure
£m
Energy
and
water
£m
Business
and other
services
£m
Home
loans
£m
Cards,
unsecured
loans and
other
personal
lending
£m
–
–
– 102,353
–
–
–
–
–
–
–
–
1,625
565
21,047
3,733
324
2,972
–
–
257
3
5,699
856
5
33
2,811
33
–
–
–
2
Other
£m
Total
£m
– 102,353
–
1,012
1,467
41,764
74
74,013
2,913
3,488
6,547
4,585
810
3,392
–
–
4,319
–
–
–
–
–
–
3,161
346,626
–
–
43,251
12,337
24,200
12,028
7,384
12,967
21,838 144,765
56,730
8,723
392,784
–
–
–
16,878
38
252
–
–
44,263
25
33,990 191,690
–
–
–
–
43
–
–
807
–
–
–
–
–
–
–
15,707
14,177
31,820 145,055
56,732
–
13,454
47
–
62,879
1,205
13,017 1,079,796
3,387
707
377
–
8
–
2,649
1,032
4,847
40
531
991
19,908
–
157
38
–
–
–
1,005
38,829
42,593
59,471
400
11,876
12,583
408
46,573 192,098
29,699
32,348
48,055
14,741
15,930
30,107
9,610 126,708
26,359
31,244
9,650 127,239
63,064 154,705 183,971
302,681
14,109
15,100
323,594
28,117 1,403,390
146 Barclays PLC Annual Report 2017
home.barclays/annualreport
Risk performanceCredit riskRisk review Loans and advances to customers and banks
As the principal source of credit risk to the Group, loans and advances to customers and banks is analysed in detail below:
Analysis of loans and advances and impairment to customers and banks
As at 31 December 2017
Barclays UK
Barclays International
Head Office
Barclays Non-Coreb
Total Group retail
Barclays UK
Barclays International
Head Office
Barclays Non-Coreb
Total Group wholesale
Total loans and advances at amortised cost
Traded loans
Loans and advances designated at fair value
Loans and advances held at fair value
Total loans and advances
As at 31 December 2016
Barclays UK
Barclays International
Barclays Non-Core
Total Group retail
Barclays UK
Barclays International
Head Office
Barclays Non-Core
Total Group wholesale
Total loans and advances at amortised cost
Traded loans
Loans and advances designated at fair value
Loans and advances held at fair value
Total loans and advances
Gross
L&A
£m
159,397
30,775
9,333
–
199,505
28,960
170,299
7,103
–
206,362
405,867
3,140
11,037
14,177
420,044
155,729
33,485
10,319
199,533
15,204
180,102
4,410
41,406
241,122
440,655
2,975
10,519
13,494
454,149
Impairment
allowance
£m
1,649
1,542
296
–
3,487
190
862
113
–
1,165
4,652
n/a
n/a
n/a
4,652
1,519
1,492
385
3,396
282
748
–
194
1,224
4,620
n/a
n/a
n/a
4,620
L&A net of
impairment
£m
157,748
29,233
9,037
–
196,018
28,770
169,437
6,990
–
205,197
401,215
3,140
11,037
14,177
415,392
154,210
31,993
9,934
196,137
14,922
179,354
4,410
41,212
239,898
436,035
2,975
10,519
13,494
449,529
Credit risk
loans
£m
1,950
1,275
710
–
3,935
432
1,421
206
–
2,059
5,994
n/a
n/a
n/a
5,994
2,044
1,249
838
4,131
591
1,470
–
299
2,360
6,491
n/a
n/a
n/a
6,491
CRLs % of
gross L&A
%
1.2
4.1
7.6
–
2.0
1.5
0.8
2.9
–
1.0
1.5
Loan
impairment
chargesa
£m
764
1,285
16
30
2,095
19
219
1
(1)
238
2,333
Loan loss
rates
bps
48
418
17
–
105
7
13
1
–
12
57
1.3
3.7
8.1
2.1
3.9
0.8
–
0.7
1.0
1.5
866
1,085
102
2,053
30
258
–
11
299
2,352
56
324
99
103
20
14
–
3
12
53
Notes
a Excluding impairment charges on available for sale investments and reverse repurchase agreements.
b Barclays Non-Core represents charges for the six months ended 30 June 2017, primarily relating to Italian mortgages transferred into Head Office on 1 July 2017.
Total loans and advances decreased by £34.1bn to £415.4bn, including a net £12.7bn decrease in cash collateral and settlement balances
and a £21.4bn decrease in other lending, primarily in Corporate and Investment Bank.
Credit risk loans (CRLs) decreased to £6.0bn (2016: £6.5bn) and the ratio of CRLs to gross loans and advances remained stable at 1.5%
(2016: 1.5%). Loan impairment charges decreased £19m to £2,333m. Overall, this resulted in an increase of 4bps in the loan loss rate to 57bps.
home.barclays/annualreport
Barclays PLC Annual Report 2017 147
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Analysis of specific portfolios and asset types
This section provides an analysis of principal portfolios and businesses in the retail segments. In particular, home loans, credit cards and
unsecured loans.
Secured home loans
The UK home loans portfolio comprises first lien home loans and accounts for 90% (2016: 89%) of the Group’s total home loan balances.
Home loans principal portfoliosa
As at 31 December
Gross loans and advances (£m)
90 day arrears rate, excluding recovery book (%)
Non-performing proportion of outstanding balances (%)
Annualised gross charge-off rates (%)
Recovery book proportion of outstanding balances (%)
Recovery book impairment coverage ratio (%)
Barclays UK
2017
132,132
0.1
0.4
0.2
0.3
11.2
2016
129,136
0.2
0.6
0.3
0.4
9.1
Note
a Gross loans and advances include loans and advances to customers and banks. Risk metrics based on exposures to customers only.
Portfolio performance remained steady reflecting the continuing low base rate environment and stable economic conditions. The non-performing
proportion of outstanding balances decreased due to an improved performance and a reduction in repossession stock. The recovery book
impairment coverage ratio increased driven by a reduction in the number of customers entering recoveries, reflecting lower entries into collections
and better customer payments rates from those in collections.
Within the UK home loans portfolio:
■■ owner-occupied interest-only home loans comprised 28% (2016: 31%) of total balances. The decrease was driven by a greater attrition
rate compared to new business flow. The average balance weighted LTV on these loans reduced to 39.7% (2016: 41.7%) primarily driven
by increases in the House Price Index (HPI) across core regions and the 90 day arrears rate excluding recovery book remained steady at
0.3% (2016: 0.2%)
■■ buy-to-let home loans comprised 11% (2016: 9%) of total balances. The average balance weighted LTV increased to 53.7% (2016: 52.6%),
and the 90 day arrears rate excluding recovery book remained steady at 0.1% (2016: 0.1%).
Home loans principal portfolios – distribution of balances by LTVa
Distribution of
balances
Impairment coverage
ratio
2017
%
2016
%
Non-performing
proportion of
outstanding balances
2016
%
2017
%
Non-performing
balances impairment
coverage ratio
2017
%
2016
%
Recovery book
proportion of
outstanding balances
2016
%
2017
%
As at 31 December
Barclays UK
<=75%
>75% and <=80%
>80% and <=85%
>85% and <=90%
>90% and <=95%
>95% and <=100%
>100%
2017
%
91.1
4.1
2.6
1.2
0.6
0.2
0.2
2016
%
91.8
3.5
2.1
1.3
0.8
0.3
0.2
0.1
0.1
0.1
0.2
0.4
0.6
4.2
0.1
0.2
0.2
0.3
0.4
0.7
3.1
0.5
0.5
0.4
0.5
0.9
1.2
6.7
0.6
0.6
0.8
0.7
1.1
1.9
5.7
4.3
18.6
16.4
23.8
28.7
25.6
42.0
4.2
17.1
20.4
23.0
28.3
23.4
38.6
0.2
0.3
0.2
0.3
0.6
0.9
5.9
0.4
0.4
0.6
0.6
0.8
1.5
5.0
Recovery book
impairment coverage
ratio
2017
%
7.5
28.0
27.8
30.7
38.9
27.7
47.2
2016
%
5.9
22.1
25.0
25.4
33.7
27.0
40.9
Note
a Portfolio marked to market based on the most updated valuation including recovery book balances. Updated valuations reflect the application of the latest HPI available as at
31 December 2017.
Home loans principal portfolios – Average LTV
As at 31 December
Portfolio marked to market LTV (%):
Balance weighted
Valuation weighted
Performing balances (%):
Balance weighted
Valuation weighted
Non-performing balances (%):
Balance weighted
Valuation weighted
For >100% LTVs:
Balances (£m)
Marked to market collateral (£m)
Average LTV: balance weighted (%)
Average LTV: valuation weighted (%)
% of balances in recovery book
Barclays UK
2017
2016
47.6
35.2
47.6
35.6
49.8
39.1
215
188
127.7
118.6
5.9
47.7
35.6
47.3
35.5
52.5
41.7
239
210
118.4
113.1
5.0
Balance pay down coupled with benefits from the HPI increase resulted in a 10% reduction in home loans that have LTV >100% to £215m (2016: £239m).
148 Barclays PLC Annual Report 2017
home.barclays/annualreport
Risk performanceCredit riskRisk review Home loans principal portfolios – new lending
As at 31 December
New bookings (£m)
New mortgages proportion above 85% LTV (%)
Average LTV on new mortgages: balance weighted (%)
Average LTV on new mortgages: valuation weighted (%)
Barclays UK
2017
22,665
6.0
63.8
56.0
2016
19,885
8.6
63.4
54.4
Barclays UK: New lending during 2017 increased by 14%, reflecting heightened market activity while maintaining a steady risk profile.
Average balance weighted LTV on new lending remained broadly stable at 63.8% (2016: 63.4%).
Head Office: Italian home loans of £9.2bn (2016: £10.0bn) are secured on residential property with an average balance weighted marked to
market LTV of 61.0% (2016: 61.8%) and CRL coverage of 41% (2016: 36%). 90 day arrears and gross charge-off rates remained stable at 1.4%
(2016: 1.2%) and 0.8% (2016: 0.8%) respectively while the CRL book coverage ratio increased, as a result of an update in the collateral valuation
for accounts in the recovery book.
Credit cards, unsecured loans and other retail lending
The principal portfolios listed below accounted for 87% (2016: 88%) of the Group’s total credit cards, unsecured loans and other retail lending.
Credit cards, unsecured loans and other retail lending principal portfolios
As at 31 December 2017
Barclays UK
UK cardsb
UK personal loans
Barclays International
US cardsb
Barclays Partner Finance
Germany cards
As at 31 December 2016
Barclays UK
UK cardsb
UK personal loans
Barclays International
US cardsb
Barclays Partner Finance
Germany cards
Gross loans
and
advancesa
£m
30 day
arrears,
excluding
recovery
book
%
90 day
arrears,
excluding
recovery
book
%
Annualised
gross
charge-off
rate
%
Recovery
book
proportion of
outstanding
balances
%
Recovery
book
impairment
coverage
ratio
%
17,686
6,255
21,350
3,814
1,976
17,833
6,076
23,915
4,041
1,812
1.8
2.5
2.6
1.3
2.5
1.9
2.1
2.6
1.5
2.6
0.8
1.2
1.3
0.5
1.0
0.9
0.9
1.3
0.6
1.0
5.0
3.3
5.0
2.6
3.8
5.5
3.1
4.5
2.5
3.7
3.4
4.7
2.8
2.4
2.7
3.0
4.7
2.4
2.6
2.7
80.5
77.2
82.9
78.1
78.0
83.8
77.2
83.6
81.5
79.0
Notes
a Gross loans and advances includes loans and advances to customers and banks. Risk metrics based on exposures to customers.
b For UK and US cards, outstanding recovery book balances for acquired portfolios recognised at fair value (which have no related impairment allowance) have been excluded from
the recovery book impairment coverage ratio. Losses have been recognised where related to additional spend from acquired accounts in the period post acquisition.
UK cards: The annualised gross charge-off rate, which was higher in 2016 due to accelerated asset sales, normalised in 2017 to 5.0% (2016: 5.5%)
in line with expectations. The recovery book proportion of outstanding balances increased, reflecting accelerated charge-off of non-compliant
forbearance plans. However, the recovery book impairment coverage ratio decreased, reflecting the one time asset sale impact of accounts with
lower recovery expectations.
UK personal loans: The 30 day arrears rate increased to 2.5% (2016: 2.1%) and the 90 day arrears rate increased to 1.2% (2016: 0.9%) reflecting
increased flow into delinquency from some 2016 bookings due to higher incidences of fraud and poorer performance on customers with multiple
loans, coupled with a weaker performance in collections operations. Both the recovery book proportion of outstanding balances of 4.7%
(2016: 4.7%) and the recovery book impairment coverage ratio of 77.2% (2016: 77.2%) remained stable.
US cards: The annualised gross charge-off rate increased to 5.0% (2016: 4.5%) broadly in line with trends across the industry and also reflecting
a one-off asset sale contributing to a drop in outstanding balances. As a result, recovery book proportion of outstanding balances increased to
2.8% (2016: 2.4%).
Barclays Partner Finance: Portfolio arrears and the annualised gross charge-off rate remained broadly stable during 2017.
Germany cards: 90 day arrears and the annualised gross charge-off rate remained stable, while the recovery book coverage ratio improved
reflecting better recoveries. In addition, Germany consumer loans increased to £1.4bn (2016: £1.2bn).
home.barclays/annualreport
Barclays PLC Annual Report 2017 149
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Wholesale loans and advances at amortised cost
Analysis of wholesale loans and advances at amortised cost
Gross
L&A
£m
Impairment
allowance
£m
L&A net of
impairment
£m
Credit risk
loans
£m
CRLs % of
gross L&A
%
Loan
impairment
charges
£m
Loan loss
rates
bps
As at 31 December 2017
Banks
Other financial institutions
Manufacturing
Construction
Property
Government and central bank
Energy and water
Wholesale and retail distribution and leisure
Business and other services
Home loansa
Cards, unsecured loans and other personal lendinga
Other
Total wholesale loans and advances at amortised cost
As at 31 December 2016
Banks
Other financial institutions
Manufacturing
Construction
Property
Government and central bank
Energy and water
Wholesale and retail distribution and leisure
Business and other services
Home loansa
Cards, unsecured loans and other personal lendinga
Other
Total wholesale loans and advances at amortised cost
27,520
73,849
9,193
3,180
20,353
16,403
6,214
12,497
20,147
5,598
4,452
6,956
206,362
35,979
91,673
12,373
3,418
20,541
15,847
7,569
12,995
21,210
5,497
5,329
8,691
241,122
–
20
64
34
61
1
124
217
505
48
33
58
1,165
–
14
130
40
137
–
181
169
284
48
129
92
1,224
27,520
73,829
9,129
3,146
20,292
16,402
6,090
12,280
19,642
5,550
4,419
6,898
205,197
35,979
91,659
12,243
3,378
20,404
15,847
7,388
12,826
20,926
5,449
5,200
8,599
239,898
–
108
162
21
256
35
235
253
361
268
272
88
2,059
–
89
226
58
464
–
348
258
331
190
207
189
2,360
–
0.1
1.8
0.7
1.3
0.2
3.8
2.0
1.8
4.8
6.1
1.3
1.0
–
0.1
1.8
1.7
2.3
–
4.6
2.0
1.6
3.5
3.9
2.2
1.0
–
2
(46)
(6)
(27)
–
(21)
53
264
11
(4)
12
238
–
6
37
5
27
–
102
38
54
9
6
15
299
–
–
(50)
(19)
(13)
–
(34)
42
131
20
(9)
17
12
–
1
30
15
13
–
135
29
25
16
11
17
12
Note
a Included in the above analysis are Wealth and Private Banking exposures measured on an individual customer exposure basis.
Wholesale loans and advances decreased £34.8bn to £206.4bn (2016: £241.1bn), including a net £12.7bn decrease in settlement and cash
collateral balances and a £22.1bn decrease in other lending, mainly in the Corporate and Investment Bank.
CRLs decreased £0.3bn to £2.1bn (2016: £2.4bn), primarily in the property and energy sectors, with fewer large name exposures arising this year
compared to 2016.
Loan impairment charges decreased to £238m (2016: £299m), reflecting the trend in CRLs. The loan loss rate remained stable at 12bps
(2016: 12bps).
150 Barclays PLC Annual Report 2017
home.barclays/annualreport
Risk performanceCredit riskRisk review Analysis of problem loans
Loans that are past due or assessed as impaired within this section are reflected in the balance sheet credit quality tables on page 143 as being
Higher risk.
Age analysis of loans and advances that are past due but not impaired
The following table presents an age analysis of gross loans and advances that are past due but not impaired. Loans that are past due but not
impaired consist predominantly of wholesale loans that are past due but individually assessed as not being impaired. These loans although
individually assessed as unimpaired may carry an unidentified impairment provision.
Loans and advances past due but not impaired (audited)
As at 31 December 2017
Loans and advances designated at fair value
Home loans
Credit cards, unsecured and other retail lending
Corporate loans
Total
As at 31 December 2016
Loans and advances designated at fair value
Home loans
Credit cards, unsecured and other retail lending
Corporate loans
Total
Past due
up to 1
month
£m
Past due
1-2
months
£m
Past due
2-3
months
£m
Past due
3-6
months
£m
Past due
6 months
and over
£m
653
3
–
6,272
6,928
29
1
2
6,962
6,994
–
1
–
277
278
8
–
–
1,235
1,243
20
–
12
129
161
18
–
2
149
169
–
–
31
85
116
–
33
11
178
222
10
22
66
98
196
16
31
77
354
478
Total
£m
683
26
109
6,861
7,679
71
65
92
8,878
9,106
Loans and advances past due but not impaired decreased by £1.4bn to £7.7bn, mainly due to fewer large corporate loans past due 1-2 months.
Analysis of loans and advances assessed as impaired
The following table presents an analysis of gross loans and advances into those collectively or individually assessed as impaired. The table includes
an age analysis for loans and advances collectively assessed as impaired.
Loans that are collectively assessed as impaired consist predominantly of retail loans that are one day or more past due for which a collective
allowance is raised. Wholesale loans that are past due, individually assessed as unimpaired, but which carry an unidentified impairment provision,
are excluded from this category.
Loans that are individually assessed as impaired consist predominantly of wholesale loans that are past due and for which an individual allowance
has been raised.
Home loans, unsecured loans and credit card receivables that are subject to forbearance in the retail portfolios are included within the collectively
assessed for impairment category. Where wholesale loans under forbearance have been impaired, these form part of individually assessed
impaired loans.
Loans and advances assessed as impaired (audited)
As at 31 December 2017
Home loans
Credit cards, unsecured and other retail
lending
Corporate loans
Total
As at 31 December 2016
Home loans
Credit cards, unsecured and other retail
lending
Corporate loans
Total
Past due
up to
1 month
£m
2,622
989
546
4,157
2,866
1,135
288
4,289
Past due
1-2 months
£m
Past due
2-3 months
£m
Past due
3-6 months
£m
Past due
6 months
and over
£m
Total
collectively
assessed
£m
Individually
assessed for
impairment
£m
Total
£m
465
344
34
843
795
354
53
1,202
200
245
20
465
201
250
35
486
304
511
28
843
298
516
72
886
477
4,068
922
4,990
1,808
85
2,370
3,897
713
8,678
302
1,384
2,608
4,199
2,097
11,286
452
4,612
820
5,432
1,702
131
2,285
3,957
579
9,148
492
1,580
2,892
4,449
2,159
12,040
Loans and advances assessed as impaired decreased by £0.8bn to £11.3bn, reflecting a stable or generally improving trend in the ageing of
impaired loans across the Group.
home.barclays/annualreport
Barclays PLC Annual Report 2017 151
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Potential credit risk loans (PCRLs) and coverage ratios
The Group reports potentially and actually impaired loans as PCRLs. PCRLs comprise two categories of loans: credit risk loans (CRLs) and
potential problem loans (PPLs).
CRLs comprise three classes of loans:
■■ impaired loans: comprises loans where an individually identified impairment allowance has been raised. This category also includes all
Retail loans that have been transferred to a recovery book. See page 153 for further analysis of impaired loans
■■ accruing past due 90 days or more: comprises loans that are 90 days or more past due with respect to principal or interest
■■ restructured loans: comprises loans not included above where, for economic or legal reasons related to the debtor’s financial difficulties, a
concession has been granted to the debtor that would not otherwise be considered. For information on restructured loans refer to disclosures
on forbearance on pages 153 to 156.
PPLs are loans that are currently complying with repayment terms but where serious doubt exists as to the ability of the borrower to continue to
comply with such terms in the near future. If the credit quality of a wholesale loan on a watch list deteriorates to the highest category, or a retail
loan deteriorates to delinquency cycle 2 (typically when past due 60 to 90 days), consideration is given to including it within the PPL category.
Potential credit risk loans and coverage ratios by business
As at 31 December
Barclays UK
Barclays International
Head Office
Barclays Non-Core
Total retail
Barclays UK
Barclays International
Head Office
Barclays Non-Core
Total wholesale
Group total
As at 31 December
Barclays UK
Barclays International
Head Office
Barclays Non-Core
Total retail
Barclays UK
Barclays International
Head Office
Barclays Non-Core
Total wholesale
Group total
CRLs
PPLs
PCRLs
2017
£m
1,950
1,275
710
–
3,935
432
1,421
206
–
2,059
5,994
2016
£m
2,044
1,249
–
838
4,131
591
1,470
–
299
2,360
6,491
2017
£m
266
198
9
–
473
168
763
22
–
953
1,426
2016
£m
310
192
–
11
513
94
1,530
–
59
1,683
2,196
2017
£m
2,216
1,473
719
–
4,408
600
2,184
228
–
3,012
7,420
2016
£m
2,354
1,441
–
849
4,644
685
3,000
–
358
4,043
8,687
Impairment allowance
2017
£m
1,649
1,542
296
–
3,487
190
862
113
–
1,165
4,652
2016
£m
1,519
1,492
–
385
3,396
282
748
–
194
1,224
4,620
CRL coverage
2017
%
84.6
120.9
41.7
–
88.6
2016
%
74.3
119.5
–
45.9
82.2
PCRL coverage
2017
%
74.4
104.7
41.2
–
79.1
2016
%
64.5
103.5
–
45.3
73.1
44.0
60.7
54.9
–
56.6
77.6
47.7
50.9
–
64.9
51.9
71.2
31.7
39.5
49.6
–
38.7
62.7
41.2
24.9
–
54.2
30.3
53.2
CRLs decreased to £6.0bn (2016: £6.5bn) with the Group’s CRL coverage ratio increasing to 77.6% (2016: 71.2%) mainly within retail portfolios.
The CRL coverage ratio for retail portfolios increased to 88.6% (2016: 82.2%) primarily due to movements in Barclays UK.
PPLs decreased to £1.4bn (2016: £2.2bn) primarily within Barclays International. The decrease was driven by Corporate and Investment Bank
where the volume of PPL cases has decreased significantly.
152 Barclays PLC Annual Report 2017
home.barclays/annualreport
Risk performanceCredit riskRisk review Impaired loans
The following table represents an analysis of impaired loans in line with the disclosure recommended by the Enhanced Disclosure Taskforce.
Impaired loans are a subcomponent of CRLs and comprise loans where an individually identified impairment allowance has been raised.
This category also includes all retail loans that have been transferred to a recovery book. For the majority of products, transfer to a recovery
unit occurs for loans that are past due over six months unless a forbearance agreement is agreed. Earlier transfer points may occur depending
on specific circumstances. Impaired loans may include loans that are still performing, fully collateralised loans or where indebtedness has
already been written down to the expected realisable value.
Movement in impaired loans
Classified
as impaired
during
the year
£m
Transferred
to not
impaired
during
the year
£m
At beginning
of year
£m
Repayments
£m
Amounts
written off
£m
Acquisitions
and
disposals
£m
Exchange
and other
adjustments
£m
Balance
at
31 December
£m
2017
Home loans
Credit cards, unsecured and other retail lending
Corporate loans
Total impaired loans
2016
Home loans
Credit cards, unsecured and other retail lending
Corporate loans
Total impaired loans
1,140
1,704
1,770
4,614
1,337
2,200
2,098
5,635
247
1,878
1,065
3,190
308
1,761
984
3,053
(203)
(66)
(271)
(540)
(150)
(17)
(427)
(594)
(149)
(214)
(664)
(1,027)
(26)
(1,467)
(202)
(1,695)
–
–
–
–
(171)
(136)
(220)
(527)
(19)
(1,605)
(331)
(1,955)
–
(92)
(15)
(107)
16
27
(181)
(138)
(165)
(407)
(319)
(891)
1,025
1,862
1,517
4,404
1,140
1,704
1,770
4,614
Forbearance
Forbearance measures consist of concessions towards a debtor that is experiencing or about to experience difficulties in meeting their financial
commitments (‘financial difficulties’).
Analysis of forbearance programmes
As at 31 December
Barclays UK
Barclays International
Head Office
Barclays Non-Core
Total retail
Barclays UKa
Barclays Internationala
Barclays Non-Core
Total wholesale
Group totalb
Balances
Impairment allowance
Impairment coverage
2017
£m
847
210
186
–
1,243
606
2,347
–
2,953
4,196
2016
£m
926
243
–
211
1,380
589
2,044
269
2,902
4,282
2017
£m
226
86
11
–
323
31
519
–
550
873
2016
£m
237
57
–
9
303
62
257
50
369
672
2017
%
26.7
41.0
5.9
–
26.0
5.1
22.1
–
18.6
20.8
2016
%
25.6
23.5
–
4.3
22.0
10.5
12.6
18.5
12.7
15.7
Notes
a In 2017, certain ESHLA balances were reclassified from Barclays International to Barclays UK reflecting the management of the portfolio.
b Barclays Non-Core retail balances of £186m were reclassified into Head Office and £158m wholesale balances were reclassified into Barclays International.
Balances on forbearance programmes decreased 2% driven by better portfolio performance.
Retail balances on forbearance reduced 10% to £1.2bn, reflecting an overall decrease in both Barclays UK and Barclays International portfolios.
■■ Barclays UK: Reduction was driven by UK cards portfolio, where balances on forbearance plans were lower due to an asset sale and application
of tighter entry criteria. For the UK home loans portfolio the reduction was due to stable economic conditions and reduced forbearance entries.
■■ Barclays International: US cards forbearance balances decreased due to an asset sale of high risk accounts. The increase in impairment
allowance was driven by updated modelling methodology.
Wholesale balances on forbearance remained broadly stable at £3.0bn (2016: £2.9bn). Across the principal portfolios, the flow of new cases
into forbearance during 2017 was offset by a range of repayments and credit improvements where clients returned to the performing book
and a modest level of write-offs.
home.barclays/annualreport
Barclays PLC Annual Report 2017 153
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance
Retail forbearance programmes
Forbearance on the Group’s principal retail portfolios in the US and UK is presented below. The principal portfolios account for 71% (2016: 73%) of
total retail forbearance balances.
Analysis of key portfolios in forbearance programmes
Balances on forbearance programmes
Of which:
% of gross
retail
loans and
advances
%
Past due of which:
Up-to-date
£m
1-90 days
past due
£m
91 or
more days
past due
£m
Marked
to market
LTV of
forbearance
balances:
balance
weighted
%
Marked
to market
LTV of
forbearance
balances:
valuation
weighted
%
Impairment
allowances
marked
against
balances on
forbearance
programmes
£m
Total
balances on
forbearance
programmes
coverage
ratio
%
0.3
1.7
1.2
0.7
0.3
1.9
1.5
0.8
237
153
48
107
188
255
58
139
79
98
21
30
149
59
26
35
39
51
8
11
53
23
10
12
43.2
n/a
n/a
n/a
44.7
n/a
n/a
n/a
31.0
n/a
n/a
n/a
31.3
n/a
n/a
n/a
4
179
30
58
3
185
38
38
1.1
59.3
39.0
39.2
0.8
54.9
40.4
20.4
Total
£m
355
302
77
148
390
337
94
186
As at 31 December 2017
Barclays UK
UK home loans
UK cards
UK personal loans
Barclays International
US cards
As at 31 December 2016
Barclays UK
UK home loans
UK cards
UK personal loans
Barclays International
US cards
■■ UK home loans: Improvement driven by stable economic conditions and a reduction in forbearance entries.
■■ UK cards: Balances on forbearance plans reduced due to an asset sale and tighter entry criteria. The forbearance impairment coverage ratio
increased due to the inclusion of additional forbearance populations in 2017 which carry higher impairment provision rates.
■■ UK personal loans: Impairment allowance held against forbearance stock decreased in line with the overall forbearance balance and the
coverage ratio remained relatively stable.
■■ US cards: Balances were lower due to asset sale of high risk accounts while impairment allowance increased due to a change in methodology.
Forbearance by type
As at 31 December
Payment concession
Interest-only conversion
Term extension
Fully amortising
Repayment plana
Interest rate concession
Total
UK home loans
Barclays UK
UK cards
UK personal loans
Barclays International
US cards
2017
£m
94
75
184
–
–
2
355
2016
£m
96
84
210
–
–
–
390
2017
£m
84
–
–
–
96
122
302
2016
£m
45
–
–
–
218
74
337
2017
£m
–
–
8
54
15
–
77
2016
£m
–
–
16
65
13
–
94
2017
£m
–
–
–
135
13
–
148
2016
£m
–
–
–
97
89
–
186
Note
a Repayment plan represents a reduction to the minimum payment due requirements and interest rate.
■■ UK cards: The reduction in the Repayment Plan book was driven by a one-time accelerated charge-off of legacy accounts in addition to reduced
inflow as a result of tighter entry criteria. This reduction was partially offset by the inclusion of new segments following a review of the
forbearance population to better align with policy.
154 Barclays PLC Annual Report 2017
home.barclays/annualreport
Risk performanceCredit riskRisk review Wholesale forbearance programmes
The tables below detail balance information for wholesale forbearance cases.
Analysis of wholesale balances in forbearance programmesa
Balances on forbearance programmes
Of which:
% of gross
wholesale
loans and
advances
%
Total
balances
£m
Performing
balances
£m
Impaired
up-to-date
balances
£m
Balances
between
1 and 90 days
past due
£m
Balances
91 days
or more
past due
£m
Impairment
allowances
marked
against
balances on
forbearance
programmes
£m
Total
balances on
forbearance
programmes
coverage
ratio
%
As at 31 December 2017
Barclays UK
Barclays International
Total
As at 31 December 2016
Barclays UK
Barclays International
Barclays Non-Core
Total
606
2,347
2,953
589
2,044
269
2,902
2.1
1.4
1.4
3.9
1.1
0.6
1.2
378
1,587
1,965
187
1,285
57
1,529
8
300
308
93
567
44
704
89
57
146
78
33
25
136
131
403
534
231
159
143
533
31
519
550
62
257
50
369
Note
a In 2017, certain ESHLA balances were reclassified from Barclays International to Barclays UK reflecting the management of the portfolio.
Wholesale forbearance reporting split by exposure class
As at 31 December 2017
Restructure: reduced contractual cash flows
Restructure: maturity date extension
Restructure: changed cash flow profile (other than extension)
Restructure: payment other than cash
Change in security
Adjustments or non-enforcement of covenants
Other (e.g. capital repayment holiday; restructure pending)
Total
As at 31 December 2016
Restructure: reduced contractual cash flows
Restructure: maturity date extension
Restructure: changed cash flow profile (other than extension)
Restructure: payment other than cash
Change in security
Adjustments or non-enforcement of covenants
Other (e.g. capital repayment holiday; restructure pending)
Total
Wholesale forbearance reporting split by business unit
As at 31 December 2017
Restructure: reduced contractual cash flows
Restructure: maturity date extension
Restructure: changed cash flow profile (other than extension)
Restructure: payment other than cash
Change in security
Adjustments or non-enforcements of covenants
Other (e.g. capital repayment holiday; restructure pending)
Total
As at 31 December 2016
Restructure: reduced contractual cash flows
Restructure: maturity date extension
Restructure: changed cash flow profile (other than extension)
Restructure: payment other than cash
Change in security
Adjustments or non-enforcements of covenants
Other (e.g. capital repayment holiday; restructure pending)
Total
Corporate
£m
Personal and
trusts
£m
Other
£m
5
373
297
16
9
1,477
474
2,651
32
411
346
10
7
1,242
438
2,486
–
26
–
–
–
101
174
301
–
107
1
–
–
155
153
416
–
–
–
–
–
1
–
1
–
–
–
–
–
–
–
–
Barclays UK
£m
Barclays
International
£m
Barclays
Non-Core
£m
3
90
199
–
–
223
91
606
3
114
180
–
1
132
159
589
2
309
98
16
9
1,356
557
2,347
29
316
164
10
6
1,212
307
2,044
–
–
–
–
–
–
–
–
–
88
3
–
–
53
125
269
5.1
22.1
18.6
10.5
12.6
18.6
12.7
Total
£m
5
399
297
16
9
1,579
648
2,953
32
518
347
10
7
1,397
591
2,902
Total
£m
5
399
297
16
9
1,579
648
2,953
32
518
347
10
7
1,397
591
2,902
home.barclays/annualreport
Barclays PLC Annual Report 2017 155
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Wholesale forbearance flows in 2017
As at 1 January 2017
Added to forbearance
Removed from forbearance (credit improvement)
Fully or partially repaid and other movements
Written off/moved to recovery book
As at 31 December 2017
£m
2,902
2,157
(632)
(1,277)
(197)
2,953
Impairment
Impairment allowances
Impairment allowances remained stable at £4,652m (2016: £4,620m) during the year.
Movements in allowance for impairment by asset class (audited)
2017
Home loans
Credit cards, unsecured and other retail
lending
Corporate loans
Total impairment allowance
2016
Home loans
Credit cards, unsecured and other retail
lending
Corporate loans
Total impairment allowance
At beginning
of year
£m
Acquisitions
and
disposals
£m
Unwind of
discount
£m
Exchange
and other
adjustments
£m
Amounts
written off
£m
Recoveries
£m
Amounts
charged to
income
statement
£m
Balance at
31 December
£m
467
3,060
1,093
4,620
518
3,394
1,009
4,921
–
–
(5)
(5)
(3)
(2)
–
(5)
(5)
(43)
–
(48)
(4)
(29)
(223)
(13)
(240)
(2,042)
(258)
(2,329)
(5)
(108)
(23)
(70)
–
(75)
(709)
81
(736)
(1,806)
(364)
(2,193)
–
252
82
334
–
296
69
365
29
458
2,051
240
2,320
3,055
1,139
4,652
88
467
1,957
298
2,343
3,060
1,093
4,620
Management adjustments to models for impairment
Management adjustments to models for impairment are applied in order to factor in certain conditions or changes in policy that are not
incorporated into the relevant impairment models, or to reflect additionally known facts and circumstances at the period end. Adjustments
typically increase the model derived impairment allowance. Where applicable, management adjustments are reviewed and incorporated into
future model development.
Management adjustments to models of more than £10m with respect to impairment allowance in our principal portfolios are presented below.
Principal portfolios that have management adjustments greater than £10m
As at 31 December
Barclays UK
UK cards
UK home loans
UK business lending
Barclays International
Corporate Banking
Barclays Partner Finance
2017
2016
Total
management
adjustments
to
impairment
allowances,
including
forbearance
£m
Total
management
adjustments
to
impairment
allowances,
including
forbearance
£m
Proportion
of total
impairment
allowances
%
Proportion
of total
impairment
allowances
%
49
71
70
68
37
5
72
31
11
24
312
70
69
71
59
34
69
33
14
37
UK cards: Adoption of new probability of default models resulted in a year on year release of post model adjustments.
UK home loans: To capture the potential impact from an increase in the house price to earnings ratio, change in the impairment methodology and
increased coverage on interest-only loans maturing in the next five years.
UK business lending: To align to impairment policy requirements, potential impact from commercial property price deterioration and the
susceptibility of minimum debt service customers to interest rate rises.
Corporate Banking: Most material adjustment related to the risk associated with the potential of rate rises impacting low interest cover clients.
Barclays Partner Finance: Adoption of new probability of default models resulted in a year on year release of post model adjustments.
156 Barclays PLC Annual Report 2017
home.barclays/annualreport
Risk performanceCredit riskRisk review Analysis of debt securities
Debt securities include government securities held as part of the Group’s treasury management portfolio for liquidity and regulatory purposes,
and are for use on a continuing basis in the activities of the Group.
The following tables provide an analysis of debt securities held by the Group for trading and investment purposes by issuer type, and where the
Group held government securities exceeding 10% of shareholders’ equity.
Further information on the credit quality of debt securities is presented on pages 142 to 143.
Debt securities
As at 31 December
Of which issued by:
Governments and other public bodies
Corporate and other issuers
US agency
Mortgage and asset backed securities
Bank and building society certificates of deposit
Total
Government securities
As at 31 December
United States
United Kingdom
2017
£m
69,981
27,955
7,868
2,520
21
108,345
%
64.5
25.8
7.3
2.3
0.1
100.0
2016
£m
64,852
28,284
6,208
2,372
23
101,739
2017
Fair value
£m
21,570
19,475
%
63.7
27.8
6.1
2.3
0.1
100.0
2016
Fair value
£m
16,284
20,145
Analysis of derivatives
The tables below set out the fair values of the derivative assets together with the value of those assets subject to enforceable counterparty netting
arrangements for which the Group holds offsetting liabilities and eligible collateral.
Derivative assets (audited)
As at 31 December
Foreign exchange
Interest rate
Credit derivatives
Equity and stock index
Commodity derivatives
Total derivative assets
Cash collateral held
Net exposure less collateral
2017
Balance
sheet
assets
£m
54,943
153,043
12,549
14,698
2,436
237,669
Counterparty
netting
£m
42,117
117,559
9,952
12,702
1,935
184,265
2016
Balance
sheet
assets
£m
79,744
228,652
16,273
17,089
4,868
346,626
Counterparty
netting
£m
59,040
185,723
12,891
12,603
3,345
273,602
Net
exposure
£m
12,826
35,484
2,597
1,996
501
53,404
33,092
20,312
Net
exposure
£m
20,704
42,929
3,382
4,486
1,523
73,024
41,641
31,383
Derivative asset exposures would be £217bn (2016: £315bn) lower than reported under IFRS if netting were permitted for assets and liabilities
with the same counterparty or for which the Group holds cash collateral. Similarly, derivative liabilities would be £217bn (2016: £317bn) lower
reflecting counterparty netting and collateral placed. In addition, non-cash collateral of £6bn (2016: £8bn) was held in respect of derivative assets.
The Group received collateral from clients in support of over the counter derivative transactions. These transactions are generally undertaken
under International Swaps and Derivative Association (ISDA) agreements governed by either UK or New York law.
home.barclays/annualreport
Barclays PLC Annual Report 2017 157
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance The table below sets out the fair value and notional amounts of OTC derivative instruments by type of collateral arrangement.
Derivatives by collateral arrangement
Unilateral in favour of Barclays
Foreign exchange
Interest rate
Credit derivatives
Equity and stock index
Commodity derivatives
Total unilateral in favour of Barclays
Unilateral in favour of counterparty
Foreign exchange
Interest rate
Credit derivatives
Equity and stock index
Commodity derivatives
Total unilateral in favour of counterparty
Bilateral arrangement
Foreign exchange
Interest rate
Credit derivatives
Equity and stock index
Commodity derivatives
Total bilateral arrangement
Uncollateralised derivatives
Foreign exchange
Interest rate
Credit derivatives
Equity and stock index
Commodity derivatives
Total uncollateralised derivatives
Total OTC derivative assets/(liabilities)
Notional
contract
amount
£m
18,280
5,495
–
6
243
24,024
21,052
74,412
283
1,030
515
97,292
2017
Fair value
Assets
£m
Liabilities
£m
484
868
–
3
–
1,355
720
8,458
6
432
4
9,620
(345)
(26)
–
–
(9)
(380)
(1,851)
(9,934)
(3)
(53)
(6)
(11,847)
Notional
contract
amount
£m
17,713
6,666
174
390
753
25,696
20,837
108,915
152
1,121
1,231
132,256
4,318,754
8,060,574
404,069
144,255
11,801
12,939,453
380,823
202,053
6,808
16,448
4,661
610,793
13,671,562
48,660
135,465
7,337
6,178
630
198,270
4,442
4,215
252
884
60
9,853
219,098
(46,403) 3,772,477
(131,334) 7,335,641
608,859
192,448
11,766
(193,314) 11,921,191
(5,903)
(9,099)
(575)
(4,256)
(1,715)
(327)
(5,917)
(266)
(12,481)
363,921
184,362
5,872
13,706
16,389
584,250
(218,022) 12,663,393
2016
Fair value
Assets
£m
Liabilities
£m
607
1,017
3
3
33
1,663
786
3,795
3
312
67
4,963
70,464
187,155
11,422
6,146
1,318
276,505
7,490
5,723
383
2,558
504
16,658
299,789
(274)
(60)
(2)
(147)
(26)
(509)
(2,549)
(5,979)
(7)
(49)
(66)
(8,650)
(68,788)
(179,650)
(9,994)
(9,692)
(1,442)
(269,566)
(6,287)
(2,459)
(510)
(3,385)
(748)
(13,389)
(292,114)
158 Barclays PLC Annual Report 2017
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Risk performanceCredit riskRisk review Risk review
Risk performance
Market risk
Summary of contents
Outlines key measures used to summarise
the market risk profile of the bank such as
value at risk (VaR). A distinction is made
between management and regulatory
measures.
Provides a Group-wide overview of where
assets and liabilities on the Group’s balance
sheet are managed within regulatory traded
and non-traded books.
The Group discloses details on management
measures of market risk. Total management
VaR includes all trading positions and is
presented on a diversified basis by risk factor.
This section also outlines the macroeconomic
conditions modelled as part of the Group’s
risk management framework.
The Group’s regulatory measures of market
risk under the approved internal models
approach are also disclosed.
■■ Market risk overview and summary of performance
■■ Balance sheet view of trading and banking books
■■ Traded market risk
■■ Review of management measures
– The daily average, maximum and minimum values of management VaR
– Business scenario stresses
■■ Review of regulatory measures
– Analysis of regulatory VaR, SVaR, IRC and Comprehensive Risk Measure
– Breakdown of the major regulatory risk measures by portfolio
Page
160
161
162
162
162
162
163
163
163
home.barclays/annualreport
Barclays PLC Annual Report 2017 159
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Market risk
The risk of loss arising from potential adverse changes in the value of the firm’s assets and
liabilities from fluctuation in market variables including, but not limited to, interest rates,
foreign exchange, equity prices, commodity prices, credit spreads, implied volatilities and
asset correlations.
All disclosures in this section (pages 160 to 163) are unaudited unless otherwise stated.
Key metrics
Average Management value at risk
in 2017 at £19m (2016: £21m) remained relatively stable.
This small reduction was driven by a 25% decrease in average credit risk
VaR, primarily due to tighter credit spreads.
-10%
Overview of market risk
This section contains key statistics describing
the market risk profile of the bank. A
distinction is made between regulatory and
management measures within the section.
The market risk management section on
pages 150 to 157 of the Barclays PLC Pillar 3
Report 2017 provides descriptions of these
metrics:
■■ page 161 provides a view of market risk in
the context of the Group’s balance sheet
■■ page 129 covers the management of market
risk. Management measures are shown on
page 162 and regulatory equivalent
measures are shown on page 163.
Measures of market risk in the
Group and accounting
measures
Traded market risk measures such as VaR and
balance sheet exposure measures have
fundamental differences:
■■ balance sheet measures show accruals-
based balances or marked to market values
as at the reporting date
■■ VaR measures also take account of current
marked to market values, but in addition
hedging effects between positions are
considered
■■ market risk measures are expressed in
terms of changes in value or volatilities as
opposed to static values.
For these reasons, it is not possible to present
direct reconciliations of traded market risk and
accounting measures. The table ‘Balance
sheet split by trading and banking books’, on
page 161, helps the reader understand the
main categories of assets and liabilities
subject to regulatory market risk measures.
Summary of performance in
the period
Overall, the Group has maintained a steady
risk profile:
■■ measures of traded market risk have been
relatively stable over 2017, characterised by
a low volatility environment.
160 Barclays PLC Annual Report 2017
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Risk performanceMarket riskRisk review Balance sheet view of trading and banking books
As defined by regulatory rules, a trading book consists of positions held for trading intent or to hedge elements of the trading book. Trading
intent must be evidenced in the basis of the strategies, policies and procedures set up by the firm to manage the position or portfolio. The table
below provides a Group-wide overview of where assets and liabilities on the Group’s balance sheet are managed within regulatory traded and
non-traded books.
The balance sheet split by trading book and banking books is shown on an IFRS accounting scope of consolidation. The reconciliation between
the accounting and regulatory scope of consolidation is shown in table 1 of the Barclays PLC Pillar 3 Report 2017.
Balance sheet split by trading and banking books
As at 31 December 2017
Cash and balances at central banks
Items in course of collection from other banks
Trading portfolio assets
Financial assets designated at fair value
Derivative financial instruments
Financial investments
Loans and advances to banks
Loans and advances to customers
Reverse repurchase agreements and other similar secured lending
Prepayments, accrued income and other assets
Investments in associates and joint ventures
Property, plant and equipment
Goodwill and intangible assets
Current tax assets
Deferred tax assets
Retirement benefit assets
Assets included in disposal groups classified as held for sale
Total assets
Deposits from banks
Items in course of collection due to other banks
Customer accounts
Repurchase agreements and other similar secured borrowing
Trading portfolio liabilities
Financial liabilities designated at fair value
Derivative financial instruments
Debt securities in issue
Subordinated liabilities
Accruals, deferred income and other liabilities
Provisions
Current tax liabilities
Deferred tax liabilities
Retirement benefit liabilities
Liabilities included in disposal groups classified as held for sale
Total liabilities
Banking
booka
£m
171,082
2,153
1,555
7,874
924
58,916
32,464
343,771
12,546
2,389
718
2,572
7,849
482
3,457
966
1,193
650,911
35,337
446
415,783
40,338
–
4,368
389
73,314
23,826
8,565
3,543
586
44
312
–
606,851
Trading
book
£m
–
–
112,205
108,407
236,745
–
3,199
21,781
–
–
–
–
–
–
–
–
–
Total
£m
171,082
2,153
113,760
116,281
237,669
58,916
35,663
365,552
12,546
2,389
718
2,572
7,849
482
3,457
966
1,193
482,337 1,133,248
2,386
–
13,338
–
37,351
169,350
237,956
–
–
–
–
–
–
–
–
37,723
446
429,121
40,338
37,351
173,718
238,345
73,314
23,826
8,565
3,543
586
44
312
–
460,381 1,067,232
Note
a The primary risk factors for banking book assets and liabilities are interest rates and to a lesser extent, foreign exchange rates. Credit spreads and equity prices will also be factors
where the Group holds debt and equity securities respectively, either as financial assets designated at fair value (see Note 14) or as available for sale (see Note 16) of the financial
statements.
Included within the trading book are assets and liabilities which are included in the market risk regulatory measures. For more information on
these measures (VaR, SVaR, IRC and CRM) see the risk management section on page 154 of the Barclays PLC Pillar 3 Report 2017.
home.barclays/annualreport
Barclays PLC Annual Report 2017 161
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Traded market risk review
Review of management measures
The following disclosures provide details on management measures of market risk. See the risk management section on pages 152 to 153 of
the Barclays PLC Pillar 3 Report 2017 for more detail on management measures and the differences when compared to regulatory measures.
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 Head Office.
Limits are applied against each risk factor VaR as well as total Management VaR, which are then cascaded further by risk managers to
each business.
The daily average, maximum and minimum values of management VaRa
Management VaR (95%, one day) (audited)
For the year ended 31 Decembera
Credit risk
Interest rate risk
Equity risk
Basis risk
Spread risk
Foreign exchange risk
Commodity risk
Inflation risk
Diversification effectb
Total management VaR
2017
2016
Average
£m
12
8
8
5
5
3
2
2
(26)
19
Highb
£m
18
15
14
6
8
7
3
4
n/a
26
Lowb
£m
8
4
4
3
3
2
1
1
n/a
14
Average
£m
16
7
7
5
3
3
2
2
(24)
21
Highb
£m
24
13
11
9
5
5
4
3
n/a
29
Lowb
£m
9
4
4
3
2
2
1
2
n/a
13
Notes
a Includes BAGL.
b Diversification effects recognise that forecast losses from different assets or businesses are unlikely to occur concurrently, hence the expected aggregate loss is lower than the
sum of the expected losses from each area. Historic correlations between losses are taken into account in making these assessments. The high and low VaR figures reported for
each category did not necessarily occur on the same day as the high and low VaR reported as a whole. Consequently a diversification effect balance for the high and low VaR
figures would not be meaningful and is therefore omitted from the above table.
Management VaR remained relatively stable year on year characterised by a low volatility environment. The year on year reduction in credit risk
VaR was driven primarily by tighter credit spreads.
Group Management VaRa (£m)
40
Jan 2016
Jan 2017
Dec 2017
Note
a Includes BAGL.
Business scenario stresses
As part of the Group’s risk management framework, on a regular basis the performance of the trading business in hypothetical scenarios
characterised by severe macroeconomic conditions is modelled. Up to 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 2017, the scenario analyses showed that the largest market risk related impacts would be due to a severe deterioration in financial liquidity
and global recession.
162 Barclays PLC Annual Report 2017
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Risk performanceMarket riskRisk review Review of regulatory measures
The following disclosures provide details on regulatory measures of market risk. See page 154 of the Barclays PLC Pillar 3 Report 2017 for more
detail on regulatory measures and the differences when compared to management measures.
The Group’s market risk capital requirement comprises of two elements:
■■ the market risk of trading book positions booked to legal entities are measured under a PRA approved internal models approach, including
Regulatory VaR, Stressed Value at Risk (SVaR), Incremental Risk Charge (IRC) and Comprehensive Risk Measure (CRM) as required
■■ the trading book positions that do not meet the conditions for inclusion within the approved internal models approach are calculated using
standardised rules.
The table below summarises the regulatory market risk measures, under the internal models approach. See Table 76: Market risk own fund
requirements, on page 97 of the Barclays PLC Pillar 3 Report 2017 for a breakdown of capital requirements by approach.
Analysis of Regulatory VaR, SVaR, IRC and Comprehensive Risk Measurea
As at 31 December 2017
Regulatory VaR (1-day)
Regulatory VaR (10-day)b
SVaR (1-day)
SVaR (10-day)b
IRC
CRM
As at 31 December 2016
Regulatory VaR (1-day)
Regulatory VaR (10-day)b
SVaR (1-day)
SVaR (10-day)b
IRC
CRM
Year-end
£m
28
90
59
186
188
–
33
105
65
205
154
2
Avg.
£m
27
85
63
200
202
1
26
84
56
178
155
5
Max
£m
39
123
105
331
326
2
34
108
75
236
238
12
Min
£m
19
60
41
130
142
–
18
57
34
109
112
2
Notes
a Includes BAGL.
b The 10 day VaR is based on scaling of 1 day VaR model output since VaR is currently not modelled for a 10 day holding period. More information about Regulatory and Stressed
VaR methodology is available on page 154 of the Barclays PLC Pillar 3 Report 2017.
Overall, there was an increase in IRC in 2017, with no significant movements in other internal model components:
■■ Regulatory VaR/SVaR: Average VaR/SVaR was broadly unchanged compared to the previous year.
■■ IRC: Increase was mainly driven by positional increases.
■■ CRM: Reduced to zero as the final positions matured in a specific legacy portfolio.
Breakdown of the major regulatory risk measures by portfolioa
As at 31 December 2017
Regulatory VaR (1-day)
Regulatory VaR (10-day)
SVaR (1-day)
SVaR (10-day)
IRC
CRM
Macro
£m
13
42
23
72
203
–
Equities
£m
6
20
11
35
5
–
Breakdown of the major regulatory risk measures by portfolioa
As at 31 December 2016
Regulatory VaR (1-day)
Regulatory VaR (10-day)
SVaR (1-day)
SVaR (10-day)
IRC
CRM
Macro
£m
14
44
22
69
220
–
Equities
£m
12
38
43
137
8
–
Barclays
International
Treasury
£m
–
–
–
1
–
–
Credit
£m
19
59
41
130
270
–
Barclays
International
Treasury
£m
14
45
30
95
196
–
Credit
£m
6
20
7
24
146
–
Group
Treasury
£m
6
18
11
35
10
–
Group
Treasury
£m
5
15
9
30
10
–
Barclays
Non-Core
£m
–
–
–
–
–
–
Financial
Resource
Managementb
£m
8
25
20
64
65
–
Barclays
Non-Core
£m
6
21
22
69
18
2
Financial
Resource
Managementb
£m
–
–
–
–
–
–
Banking
£m
5
16
10
30
1
–
Banking
£m
12
40
18
58
25
–
Note
a Excludes BAGL.
b The movement from Barclays International Treasury to Financial Resource Management was due to changes in the hierarchy.
The table above shows the primary portfolios which are driving the trading businesses’ modelled capital requirement as at 2017 year end.
The standalone portfolio results diversify at the total level and are not additive. Regulatory VaR, SVaR, IRC and CRM in the prior table show
the diversified results at a group level.
home.barclays/annualreport
Barclays PLC Annual Report 2017 163
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Risk review
Risk performance
Treasury and capital risk
Summary of contents
Liquidity risk performance
The risk that the firm, although solvent, either
does not have sufficient financial resources
available to enable it to meet its obligations
as they fall due, or can secure such resources
only at excessive cost.
This section provides an overview of the
Group’s liquidity risk.
The liquidity pool is held unencumbered and
is not used to support payment or clearing
requirements. The liquidity pool is intended
to offset stress outflows, and comprises cash
and unencumbered assets.
The basis for sound liquidity risk
management is a solid funding structure that
reduces the probability of a liquidity stress
leading to an inability to meet funding
obligations as they fall due.
Asset encumbrance arises from collateral
pledged against secured funding and other
collateralised obligations. Barclays funds a
portion of trading portfolio assets and other
securities via repurchase agreements and
other similar borrowing, and pledges a
portion of customer loans and advances as
collateral in securitisation, covered bond and
other similar secured structures.
In addition to monitoring and managing
key metrics related to the financial strength
of the Group, Barclays solicits independent
credit ratings.
These ratings assess the creditworthiness of
the Group, its subsidiaries and branches and
are based on reviews of a broad range of
business and financial attributes including
risk management processes and procedures,
capital strength, earnings, funding, asset
quality, liquidity, accounting and governance.
Provides details on the contractual maturity
of all financial instruments and other assets
and liabilities.
■■ Liquidity overview and summary of performance
■■ Liquidity risk stress testing
– Liquidity Risk Appetite
– Liquidity regulation
– Internal and regulatory stress tests
■■ Liquidity pool
– Composition of the liquidity pool
– Liquidity pool by currency
– Management of the Group liquidity pool
– Contingent liquidity
■■ Funding structure and funding relationships
– Deposit funding
– Behavioural maturity profile
– Wholesale funding
■■ Encumbrance
– On-balance sheet
– Off-balance sheet
– Repurchase agreements and reverse repurchase agreements
■■ Credit ratings
Page
166
166
167
167
167
168
168
168
168
169
169
169
170
170
171
172
172
173
174
■■ Contractual maturity of financial assets and liabilities
175
164 Barclays PLC Annual Report 2017
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Risk review Capital risk performance
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’ capital position
providing information on both capital
resources and capital requirements.
It also provides details of the leverage
ratios and exposures.
This section outlines the Group’s capital
ratios, capital composition, and provides
information on significant movements in
CET1 capital during the year.
This section outlines risk weighted assets by
risk type, business and macro drivers.
This section outlines the Group’s leverage
ratios, leverage exposure composition,
and provides information on significant
movements in the IFRS and leverage
balance sheet.
The Group discloses the two sources of
foreign exchange risk that it is exposed to.
■■ Capital risk overview and summary of performance
■■ Regulatory minimum capital and leverage requirements
– Capital
– Leverage
■■ Analysis of capital resources
– Capital ratios
– Capital resources
– Movement in CET1 capital
■■ Analysis of risk weighted assets
– Risk weighted assets by risk type and business
– Movement analysis of risk weighted assets
■■ Analysis of leverage ratios and exposures
– Leverage ratios and exposures
■■ Foreign exchange risk
– Transactional foreign currency exposure
– Translational foreign exchange exposure
– Functional currency of operations
A review focusing on the UK retirement fund,
which represents the majority of the Group’s
total retirement benefit obligation.
■■ Pension risk review
– Assets and liabilities
– IAS19 position
– Risk measurement
This section outlines the Group’s Minimum
Requirement for own funds and Eligible
Liabilities (MREL) position and ratios.
■■ Minimum Requirement for own funds and Eligible Liabilities
Interest rate risk in the banking book performance
A description of the non-traded market risk
framework is provided.
■■ Interest rate risk in the banking book overview and summary of performance
■■ Net interest income sensitivity
– by business unit
– by currency
■■ Economic capital by business unit
■■ Analysis of equity sensitivity
■■ Volatility of the available for sale portfolio in the liquidity pool
The Group discloses a sensitivity analysis on
pre-tax net interest income for non-trading
financial assets and liabilities. The analysis is
carried out by business unit and currency.
The Group measures some non-traded market
risks, in particular prepayment, recruitment,
and residual risk using an economic capital
methodology.
Page
179
180
180
180
181
181
181
182
183
183
183
184
184
185
185
185
185
186
186
186
187
187
188
189
189
189
189
190
190
The Group discloses the overall impact of a
parallel shift in interest rates on available for sale
and cash flow hedges.
The Group measures the volatility of the value of
the available for sale instruments in the liquidity
pool through non-traded market risk VaR.
home.barclays/annualreport
Barclays PLC Annual Report 2017 165
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Liquidity risk
The risk that the firm is unable to meet its contractual or contingent obligations or that it
does not have the appropriate amount, tenor and composition of funding and liquidity to
support its assets.
All disclosures in this section (pages 166 to 178) are unaudited and exclude BAGL unless
otherwise stated.
Key metrics
LCR
The Group strengthened its liquidity position during the year, increasing
its surplus to internal and regulatory requirements.
Term issuance
The Group maintains access to stable and diverse sources of funding
across customer deposits and wholesale debt.
154%
£12bn
Overview
The Group has a comprehensive key risk
control framework for managing the Group’s
liquidity risk. The Liquidity Framework meets
the PRA’s standards and is designed to
maintain that the Group’s liquidity resources
are sufficient in amount and quality, and a
funding profile that is appropriate to meet
the liquidity risk appetite. The Liquidity
Framework is delivered via a combination of
policy formation, review and governance,
analysis, stress testing, limit setting and
monitoring.
This section provides an analysis of the
Group’s: (i) summary of performance, (ii)
liquidity risk stress testing, (iii) liquidity pool,
(iv) funding structure and funding
relationships, (v) encumbrance, (vi) credit
ratings, and (vii) contractual maturity of
financial assets and liabilities.
For further detail on liquidity risk governance
and framework see page 163 to 165 of the
Barclays PLC Pillar 3 Report 2017.
Summary of performance in
the period
The Group continued to maintain surpluses to
its internal and regulatory requirements. The
liquidity pool increased to £220bn (December
2016: £165bn) reflecting the approach of
holding a conservative liquidity position and
through net deposit growth, the unwind of
legacy Non-Core portfolios, money market
borrowing and drawdown from the Bank of
England Term Funding Scheme. The Liquidity
Coverage Ratio (LCR) increased to 154%
(December 2016: 131%), equivalent to a
surplus of £75bn (December 2016: £39bn)
to 100%.
Wholesale funding outstanding excluding
repurchase agreements was £157bn
(December 2016: £158bn). The Group issued
£11.5bn equivalent of capital and senior
unsecured debt from Barclays PLC (the Parent
company) of which £6.1bn was in public
senior unsecured debt, and £5.4bn in capital
instruments. In the same period £6.1bn of
Barclays Bank PLC capital and senior public
term instruments either matured or were
redeemed, including the $1.375bn 7.1%
Series 3 USD Preference Shares.
Liquidity risk stress testing
Under the Liquidity Framework, the Group has
established a Liquidity Risk Appetite (LRA)
together with the appropriate limits for the
management of the liquidity risk. This is the
level of liquidity risk the Group chooses to
take in pursuit of its business objectives and
in meeting its regulatory obligations. The key
expression of the liquidity risk is through
internal stress tests. It is measured with
reference to the liquidity pool compared
to anticipated net stressed outflows for
specific scenarios.
166 Barclays PLC Annual Report 2017
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Risk performanceTreasury and capital risk – LiquidityRisk review Liquidity risk appetite
As part of the LRA, the Group runs three short-term liquidity stress scenarios, aligned to the PRA’s prescribed stresses:
■■ 90-day market-wide stress event
■■ 30-day Barclays specific stress event
■■ combined 30-day market-wide and Barclays specific stress event.
Under normal market conditions, the liquidity pool is managed to be at a target of at least 100% of anticipated outflows under each of these
stress scenarios. The 30-day combined stress scenario, results in the greatest net outflows of each of the liquidity stress tests. The combined LRA
scenario has been enhanced and improved to capture a Barclays specific stress coinciding with a market stress over the full stress horizon. As part
of the LRA, Barclays also establishes the minimum LCR limit. Barclays also evaluates its long-term LRA, one year stress test based on prolonged
closure of capital markets.
Key LRA assumptions include:
For the year ended 31 December 2017
Drivers of
Liquidity Risk
Wholesale Secured
and Unsecured
Funding Risk
Retail and Corporate
Funding Risk
LRA Combined stress – key assumptions
■■ Zero rollover of maturing wholesale unsecured funding
■■ Loss of repo capacity on non-extremely liquid repos at contractual maturity date
■■ Roll of repo for extremely liquid repo at wider haircut at contractual maturity date
■■ Withdrawal of contractual buyback obligations, excess client futures margin, Prime Brokerage client
cash and overlifts
■■ Haircuts applied to the market value of marketable assets held in the liquidity buffer
■■ Retail and Corporate deposit outflows as counterparties seek to diversify their deposit balances
Intra-day Liquidity Risk
■■ Liquidity held against intraday requirements for the settlement of cash and securities under a stress
Intra-Group Liquidity
Risk
Cross-Currency
Liquidity Risk
Off-balance Sheet
Liquidity Risk
Franchise-Viability
Risk
Funding
Concentration Risk
■■ Liquidity support for material subsidiaries. Surplus liquidity held within certain subsidiaries is not taken as a benefit
to the wider Group
■■ Currency liquidity cash flows at contractual maturity for physically settled FX forwards and cross currency swaps
■■ Drawdown on committed facilities based on facility and counterparty type
■■ Collateral outflows due to a 2 notch credit rating downgrade
■■ Increase in the Group’s initial margin requirement across all major exchanges
■■ Variation margin outflows from collateralised risk positions
■■ Outflow of collateral owing but not called
■■ Loss of internal sources of funding within the PB synthetics business
■■ Liquidity held in order to meet outflows that are non-contractual in nature, but are necessary in order to support
the firm’s ongoing franchise (e.g. debt buybacks)
■■ Liquidity held against largest wholesale funding counterparty refusing to roll
Liquidity regulation
The Group monitors its position against the CRD IV Delegated Act Liquidity Coverage Ratio (LCR) and the Basel III Net Stable Funding Ratio (NSFR).
The LCR is designed to promote short-term resilience of a bank’s liquidity risk profile by holding sufficient High Quality Liquid Assets to survive an
acute stress scenario lasting for 30 days. The NSFR has a time horizon of 12 months and has been developed to promote a sustainable maturity
structure of assets and liabilities.
The CRD IV LCR became effective on 1 October 2015, with a minimum ratio requirement in the UK of 80% as at 31 December 2016; this
increased to 90% on 1 January 2017 and then to 100% on 1 January 2018. As of 31 December 2017, the Group reported a CRD IV LCR of 154%
(2016: 131%).
In October 2014, the BCBS published a standard for the NSFR with the minimum requirement. On 23 November 2016, the European Commission
published draft amendments to the CRR including its proposed implementation of NSFR in the EU. This proposal made a number of changes from
the Basel NSFR, particularly in the treatment of derivative and secured financing transactions. In October 2017, the BCBS agreed to allow national
discretion for the NSFR’s treatment of derivative liabilities. Barclays continues to assess the impact of these changes on its NSFR ratio, and notes
that NSFR is not proposed to be a binding regulation in the EU until two years after the European legislation is finalised. We remain above 100%
well ahead of implementation timelines, based on a conservative interpretation of the Basel rules.
Internal and regulatory liquidity stress tests
The LRA short-term stress scenarios and the CRD IV LCR are comparable, in the sense that adequacy of defined liquidity resources is assessed
against net stressed outflows over a short-term stress horizon. The CRD IV LCR stress tests provide an independent assessment of the Group’s
liquidity risk profile.
Stress test
Time Horizon
Calculation
Barclays short term LRA
30 – 90 days
Liquid assets to net cash outflows
CRD IV LCR
30 days
Liquid assets to net cash outflows
As at December 2017, the Group held eligible liquid assets well in excess of 100% of net stress outflows for both the 30-day combined market-
wide and Barclays specific LRA scenario and the LCR.
home.barclays/annualreport
Barclays PLC Annual Report 2017 167
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Compliance with internal and regulatory stress tests
As at 31 December 2017
Eligible liquidity buffer
Net stress outflows
Surplus
Liquidity pool as a percentage of anticipated net outflows as at 31 December 2017
Liquidity pool as a percentage of anticipated net outflows as at 31 December 2016
Barclays’
Short Term
LRA (30 day
combined stress
requirement)a, b
£bn
220
(175)
45
126%
120%
CRD IV LCRb
£bn
215
(140)
75
154%
131%
Notes
a Of the three stress scenarios monitored as part of the short-term LRA, the 30-day combined stress scenario results in the lowest ratio at 126% (2016: 144%). This compares to
139% (2016: 134%) under the 90-day market-wide scenario and 131% (2016: 120%) under the 30-day Barclays specific scenario.
b 31 December 2016 reflects the Barclays specific scenario results of 120% being the lowest ratio of the three scenarios. LCR and LRA includes BAGL in 2016.
The Group plans to maintain its surplus to the internal and regulatory stress requirements at an efficient level, while considering risks to market
funding conditions and its liquidity position. The continuous reassessment of these risks may lead to appropriate actions being taken with respect
to sizing of the liquidity pool.
Liquidity pool
The Group liquidity pool as at 31 December 2017 was £220bn (2016: £165bn). During 2017, the month-end liquidity pool ranged from £165bn to
£232bn (2016: £132bn to £175bn), and the month-end average balance was £202bn (2016: £153bn). The liquidity pool is held unencumbered
and is not used to support payment or clearing requirements. Such requirements are treated as part of our regular business funding. The liquidity
pool is intended to offset stress outflows, and comprises the following cash and unencumbered assets.
Composition of the Group liquidity pool as at 31 December 2017
Cash and deposits with central banksa
Government bondsb
AAA to AA-
BBB+ to BBB-
Other LCR Ineligible Government bonds
Total government bonds
Other
Government Guaranteed Issuers, PSEs and GSEs
International Organisations and MDBs
Covered bonds
Other
Total other
Total as at 31 December 2017
Total as at 31 December 2016
Liquidity pool of which CRD IV LCR eligible
Liquidity
pool
£bn
173
Cash
£bn
169
Level 1
£bn
–
Level 2A
£bn
–
2016
Liquidity
pool
£bn
103
31
2
1
34
6
4
2
1
13
220
165
–
–
–
–
–
–
–
–
–
169
101
29
2
–
31
5
4
2
1
12
43
55
–
–
–
–
2
–
–
–
2
2
3
39
23
Notes
a Of which over 99% (2016: over 98%) was placed with the Bank of England, US Federal Reserve, European Central Bank, Bank of Japan and Swiss National Bank.
b Of which over 84% (2016: over 90%) are comprised of UK, US, Japanese, French, German, Danish, Swiss and Dutch securities.
The Group liquidity pool is well diversified by major currency and the Group monitors LRA stress scenarios for major currencies.
Liquidity pool by currency
Liquidity pool as at 31 December 2017
Liquidity pool as at 31 December 2016
USD
£bn
70
44
EUR
£bn
55
36
GBP
£bn
71
49
Other
£bn
24
36
Total
£bn
220
165
Management of the Group liquidity pool
The composition of the liquidity pool is subject to limits set by the Board and the independent liquidity risk, credit risk and market risk functions.
In addition, the investment of the liquidity pool is monitored for concentration risk by issuer, currency and asset type. Given the incremental
returns generated by these highly liquid assets, the risk and reward profile is continuously managed.
As at 31 December 2017, 93% (2016: 91%) of the liquidity pool was located in Barclays Bank PLC and was available to meet liquidity needs across
the Group. The residual liquidity pool is held predominantly within Barclays Capital Inc. (BCI), a subsidiary of Barclays Bank PLC. The portion of the
liquidity pool outside of Barclays Bank PLC is held against entity-specific stressed outflows and regulatory requirements. To the extent the use of
this portion of the liquidity pool is restricted due to regulatory requirements, it is assumed to be unavailable to the rest of the Group.
168 Barclays PLC Annual Report 2017
home.barclays/annualreport
Risk performanceTreasury and capital risk – LiquidityRisk review Contingent liquidity
In addition to the Group liquidity pool, the Group has access to other unencumbered assets which provide a source of contingent liquidity. While
these are not relied on in the Group’s LRA, a portion of these assets may be monetised in a stress to generate liquidity through use as collateral for
secured funding or through outright sale.
In a Barclays specific, market-wide or combined liquidity stress, liquidity available via market sources could be severely disrupted. In circumstances
where market liquidity is unavailable or available only at heavily discounted prices, the Group could generate liquidity via central bank facilities.
The Group maintains a significant amount of collateral pre-positioned at central banks and available to raise funding.
For more detail on the Group’s other unencumbered assets see pages 171 to 173.
Funding structure and funding relationships
The basis for sound liquidity risk management is a solid funding structure that reduces the probability of a liquidity stress leading to an inability to
meet funding obligations as they fall due. The Group’s overall funding strategy is to develop a diversified funding base (geographically, by type and
by counterparty) and maintain access to a variety of alternative funding sources, to provide protection against unexpected fluctuations, while
minimising the cost of funding.
Within this, the Group aims to align the sources and uses of funding. As such, retail and corporate loans and advances are largely funded by
customer deposits, with the surplus primarily funding the liquidity pool. Other assets, together with other loans and advances to customers and
unencumbered assets are funded by wholesale debt and equity. The majority of reverse repurchase agreements are matched by repurchase
agreements. Derivative liabilities and assets are largely matched. A substantial proportion of balance sheet derivative positions qualify for
counterparty netting and the remaining portions are largely offset once netted against cash collateral received and paid.
These funding relationships are summarised below:
Assets
Loans and advances to customersa
Group liquidity pool
Other assetsb
Reverse repurchase agreements, trading
portfolio assets, cash collateral and
settlement balancesc
Derivative financial instruments
Total assets
Deposit funding (audited)
Funding of loans and advances to customers
As at 31 December 2017
Barclays UK
Barclays International
Total retail and corporate fundingd
Barclays International and Head Office
Total Barclays Group
2017
£bn
313
220
89
2016
£bn
326
165
185
273
238
1,133
190
347
1,213
Liabilities
Customer accountsa
< 1 Year wholesale funding
> 1 Year wholesale funding
Equity and other liabilities
Repurchase agreements, trading portfolio
liabilities, cash collateral and settlement
balances
Derivative financial instruments
Total liabilities
2017
£bn
387
57
100
78
2016
£bn
374
70
88
151
273
238
1,133
190
340
1,213
Loans and
advances to
customers
£bn
184
101
285
2017
Customer
deposits
£bn
193
162
355
2016
Loan to
deposit ratio
%
Loan to
deposit ratio
%
80%
89%
81
366
74
429
85%
93%
Notes
a Excludes cash collateral and settlement balances.
b Other assets include trading portfolio assets that are not part of repurchase agreements, loans and advances to banks and other asset categories.
c Includes reverse repurchase agreements and other similar secured lending and trading portfolio assets that are part of repurchase agreements.
d Excludes investment banking balances other than interest earning lending. Comparatives have been restated to include interest earning lending balances within the investment
banking business.
As at 31 December 2017, £153bn (2016: £139bn) of total customer deposits were insured through the UK Financial Services Compensation Scheme
(FSCS) and other similar schemes. In addition to these customer deposits £4bn (2016: £4bn) of other liabilities are insured by governments.
home.barclays/annualreport
Barclays PLC Annual Report 2017 169
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Although contractually current accounts are repayable on demand and savings accounts at short notice, the Group’s broad base of customers,
numerically and by depositor type, helps protect against unexpected fluctuations in balances. Such accounts form a stable funding base for the
Group’s operations and liquidity needs. The Group assesses the behavioural maturity of both customer assets and liabilities to identify structural
balance sheet funding gaps. Customer behaviour is determined by quantitative modelling combined with qualitative assessment taking into
account historical experience, current customer composition, and macroeconomic projections. These behavioural profiles represent our forward
looking expectation of the run-off profile.
Behavioural maturity profile
As at 31 December 2017
Barclays UK
Barclays Internationala
Total
As at 31 December 2016
Barclays UK
Barclays Internationala
Barclays Non-Core
Total
Behavioural maturity profile
cash outflow/(inflow)
Loans and
advances to
customers
£bn
Customer
deposits
£bn
Customer
funding
surplus/
(deficit)
£bn
Not more
than one
year
£bn
Over one
year but
not more
than five
years
£bn
More than
five years
£bn
184
101
285
166
118
19
303
193
162
355
189
152
–
341
9
61
70
23
34
(19)
38
1
6
7
(2)
(6)
(1)
(9)
(19)
19
–
(19)
7
(6)
(18)
27
36
63
44
33
(12)
65
Note
a Excludes investment banking balances other than interest earning lending. Comparatives have been restated to include interest earning lending balances within the investment
banking business.
Wholesale fundingb
The Group maintains access to a variety of sources of wholesale funds in major currencies, including those available from term investors across a
variety of distribution channels and geographies, money markets, and repo markets. The Group has direct access to US, European and Asian
capital markets through its global investment banking operations and long-term investors through its clients worldwide, and is an active
participant in money markets. As a result, wholesale funding is well diversified by product, maturity, geography and major currency.
As at 31 December 2017, the Group’s total wholesale funding outstanding (excluding repurchase agreements) was £157.4bn (2016: £157.8bn),
of which £20.4bn (2016: £25.8bn) was secured funding and £137.0bn (2016: £132.0bn) unsecured funding. Unsecured funding includes
£44.8bn (2016: £37.6bn) of privately placed senior unsecured notes issued through a variety of distribution channels including intermediaries
and private banks.
During the year, the Group issued £11.5bn equivalent of capital and senior unsecured debt from Barclays PLC (the Parent company), of which
£6.1bn was in public senior unsecured debt and £5.4bn in capital instruments. In the same period, £6.1bn of Barclays Bank PLC capital and senior
public term instruments either matured or were redeemed, including the $1.375bn 7.1% Series 3 USD preference shares.
As at 31 December 2017, wholesale funding of £57.2bn (2016: £70.3bn) matures in less than one year, of which £13.8bnc (2016: £21.5bn)
relates to term funding. Although not a requirement, the liquidity pool exceeded the wholesale funding maturing in less than one year by
£163bn (2016: £95bn).
The Group expects to continue issuing public wholesale debt in 2018 from Barclays PLC (the Parent company), in order to maintain compliance
with indicative MREL requirements and maintain a stable and diverse funding base by type, currency and market.
Notes
b The composition of wholesale funds comprises the balance sheet reported deposits from banks, financial liabilities at fair value, debt securities in issue and subordinated
liabilities, excluding cash collateral and settlement balances and collateral swaps. It does not include participation in central bank facilities reported within repurchase agreements
and other similar secured borrowing.
c Term funding comprises public benchmark and privately placed senior unsecured notes, covered bonds, asset backed securities (ABS) and subordinated debt where the original
maturity of the instrument was more than one year.
170 Barclays PLC Annual Report 2017
home.barclays/annualreport
Risk performanceTreasury and capital risk – LiquidityRisk review Maturity profile of wholesale fundinga
Barclays PLC (the Parent company)
Senior unsecured
(Public benchmark)
Senior unsecured (Privately placed)
Subordinated liabilities
Barclays Bank PLC
(including subsidiaries)
Deposits from banks
Certificates of deposit and
commercial paper
Asset backed commercial paper
Senior unsecured (Public
benchmark)
Senior unsecured (Privately placed)b
Covered bonds
Asset backed securities
Subordinated liabilities
Otherc
Total as at 31 December 2017
Of which secured
Of which unsecured
Total as at 31 December 2016
Of which secured
Of which unsecured
<1
month
£bn
1-3
months
£bn
3-6
months
£bn
6-12
months
£bn
<1
year
£bn
1-2
years
£bn
2-3
years
£bn
3-4
years
£bn
4-5
years
£bn
>5
years
£bn
–
–
–
5.4
2.4
1.9
–
0.5
–
–
2.3
0.5
13.0
1.9
11.1
16.6
3.7
12.9
0.7
–
–
4.7
8.1
4.1
–
0.9
1.0
–
0.1
–
19.6
5.1
14.5
17.3
5.6
11.7
–
–
–
0.7
7.1
0.4
–
3.6
–
0.6
0.8
0.1
13.3
1.1
12.2
16.4
3.4
13.0
0.1
0.1
–
0.6
7.0
–
–
2.9
–
0.2
–
0.4
11.3
0.2
11.1
20.0
2.3
17.7
0.8
0.1
–
11.4
24.6
6.4
–
7.9
1.0
0.8
3.2
1.0
57.2
8.3
48.9
70.3
15.0
55.3
1.5
–
–
0.1
1.2
–
2.5
9.9
1.8
1.7
0.1
0.2
19.0
3.5
15.5
14.3
1.8
12.5
1.0
–
1.1
0.1
0.8
–
0.6
6.7
1.0
1.0
0.8
0.2
13.3
2.0
11.3
14.4
3.2
11.2
4.2
0.2
–
0.3
0.6
–
0.6
1.8
1.0
–
5.2
0.3
14.2
1.0
13.2
8.6
0.4
8.2
4.0
–
–
–
0.4
–
–
3.1
2.4
0.1
3.5
–
13.5
2.5
11.0
14.1
1.0
13.1
Total
£bn
21.1
0.8
6.5
9.6
0.5
5.4
–
11.9
0.1
–
1.1
14.6
1.3
1.8
4.5
1.3
40.2
3.1
37.1
36.1
4.4
31.7
27.7
6.4
4.8
44.0
8.5
5.4
17.3
3.0
157.4
20.4
137.0
157.8
25.8
132.0
Notes
a Term funding comprises public benchmark and privately placed senior unsecured notes, covered bonds, asset backed securities (ABS) and subordinated debt where the original
maturity of the instrument was more than one year.
b Includes structured notes of £33.4bn, £7.2bn of which matures within one year.
c Primarily comprised of fair value deposits of £1.7bn.
Currency composition of wholesale debt
As at 31 December 2017, the proportion of wholesale funding by major currencies was as follows:
Currency composition of wholesale funding
Deposits from banks
Certificates of deposits and commercial paper
Asset backed commercial paper
Senior unsecured (public benchmark)
Senior unsecured (Privately placed)
Covered bonds/ABS
Subordinated liabilities
Total as at 31 December 2017
Total as at 31 December 2016
USD
%
48
50
85
59
46
30
40
50
48
EUR
%
21
40
10
23
28
42
30
28
32
GBP
%
27
9
5
12
10
28
29
10
16
Other
%
4
1
–
6
16
–
1
12
4
To manage cross-currency refinancing risk, the Group manages to foreign exchange cash flow limits, which limit risk at specific maturities.
Encumbrance
Asset encumbrance arises from collateral pledged against secured funding and other collateralised obligations. Barclays funds a portion of trading
portfolio assets and other securities via repurchase agreements and other similar borrowing, and pledges a portion of customer loans and
advances as collateral in securitisation, covered bond and other similar secured structures. Barclays monitors the mix of secured and unsecured
funding sources within the Group’s funding plan and seeks to efficiently utilise available collateral to raise secured funding and meet other
collateral requirements.
Encumbered assets have been defined consistently with the Group’s reporting requirements under Article 100 of the CRR. Securities and
commodities assets are considered encumbered when they have been pledged or used to secure, collateralise or credit enhance a transaction
which impacts their transferability and free use. This includes external repurchase or other similar agreements with market counterparts.
Excluding assets positioned at central banks, as at 31 December 2017, £193bn (2016: £168bn) of the Group’s assets were encumbered,
primarily due to cash collateral posted, firm financing of trading portfolio assets and other securities and funding secured against loans
and advances to customers.
home.barclays/annualreport
Barclays PLC Annual Report 2017 171
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance
Assets may also be encumbered under secured funding arrangements with central banks. In advance of such encumbrance, assets are often
positioned with central banks to facilitate efficient future draw down. £70bn (2016: £63bn) of on-balance sheet assets were positioned at the
central banks, consisting of encumbered assets and collateral pre-positioned and available for use in secured financing transactions.
£342bn (2016: £277bn) of on- and off-balance sheet assets not positioned at the central bank were identified as readily available for use in
secured financing transactions. Additionally, they include cash and securities held in the Group liquidity pool as well as unencumbered assets
which provide a source of contingent liquidity. While these additional assets are not relied upon in the Group’s LRA, a portion of these assets may
be monetised to generate liquidity through use as collateral for secured funding or through outright sale. Loans and advances to customers are
only classified as readily available if they are already in a form, such that, they can be used to raise funding without further management actions.
This includes excess collateral already in secured funding vehicles.
£198bn (2016: £231bn) of assets not positioned at the central bank were identified as available as collateral. These assets are not subject to any
restrictions on their ability to secure funding, to be offered as collateral, or to be sold to reduce potential future funding requirements, but are
not immediately available in the normal course of business in their current form. They primarily consist of loans and advances which would be
suitable for use in secured funding structures but are conservatively classified as not readily available because they are not in transferable form.
Not available as collateral consists of assets that cannot be pledged or used as security for funding due to restrictions that prevent their pledge or
use as security for funding in the normal course of business.
Derivatives and reverse repo assets relate specifically to derivatives, reverse repurchase agreements and other similar secured lending. These are
shown separately as these on-balance sheet assets cannot be pledged. However, these assets can give rise to the receipt of non-cash assets which
are held off-balance sheet, and can be used to raise secured funding or meet additional funding requirements.
In addition, £548bn (2016: £406bn) of the total £608bn (2016: £466bn) securities accepted as collateral, and held off-balance sheet, were
on-pledged, the significant majority of which related to matched-book activity where reverse repurchase agreements are matched by repurchase
agreements entered into to facilitate client activity. The remainder relates primarily to reverse repurchase agreements used to settle trading
portfolio liabilities as well as collateral posted against derivatives margin requirements.
Asset encumbrance
On-balance sheet
As at 31 December 2017
Cash and balances at central banks
Trading portfolio assets
Financial assets at fair value
Derivative financial instruments
Loans and advances – banksa
Loans and advances – customersa
Cash collateral
Settlement balances
Financial investments
Reverse repurchase agreements
Non-current assets held for sale
Other financial assets
Total on-balance sheet
Assets
£bn
171.1
113.8
116.3
237.7
11.1
312.9
58.6
18.6
58.9
12.5
1.2
20.5
1,133.2
Off-balance sheet
Fair value of securities accepted as collateral
Total unencumbered collateral
Assets encumbered as a result of transactions
with counterparties other than central banks
As a result
of covered
bonds
£bn
–
–
–
–
–
11.2
–
–
–
–
–
–
11.2
As a
result of
securiti-
sations
£bn
–
–
–
–
–
18.4
–
–
–
–
–
–
18.4
Other
£bn
–
73.9
4.8
–
–
13.0
56.4
–
15.5
–
–
–
163.6
Total
£bn
–
73.9
4.8
–
–
42.6
56.4
–
15.5
–
–
–
193.2
Other assets (comprising assets encumbered at the central bank
and unencumbered assets)
Assets not positioned at the central bank
Assets
positioned
at the
central
banksb
£bn
–
–
–
–
–
70.0
–
–
–
–
–
–
Readily
available
assets
£bn
171.1
39.9
1.5
–
3.2
20.9
2.2
–
43.0
–
–
–
Available
as
collateral
£bn
–
–
10.0
–
7.0
179.4
–
–
0.4
–
1.2
–
70.0
281.8
198.0
Not
available
as
collateral
£bn
–
–
–
–
0.9
–
–
18.6
–
–
–
20.5
40.0
Derivatives
and
Reverse
repos
£bn
–
–
100.0
237.7
–
–
–
–
–
12.5
–
–
350.2
Total
£bn
171.1
39.9
111.5
237.7
11.1
270.3
2.2
18.6
43.4
12.5
1.2
20.5
940.0
Collateral
received
of which
on-
pledged
£bn
547.6
–
Readily
available
assets
£bn
60.1
341.9
Available
as
collateral
£bn
–
198.0
Not
available
as
collateral
£bn
0.7
40.7
Collateral
received
£bn
608.4
–
Notes
a Excluding cash collateral and settlement balances.
b Includes both encumbered and unencumbered assets. Assets within this category that have been encumbered are disclosed as assets pledged in Note 40 to the financial
statements page 312.
172 Barclays PLC Annual Report 2017
home.barclays/annualreport
Risk performanceTreasury and capital risk – LiquidityRisk review Asset encumbrance
On-balance sheet
As at 31 December 2016
Cash and balances at central banks
Trading portfolio assets
Financial assets at fair value
Derivative financial instruments
Loans and advances – banksa
Loans and advances – customersa
Cash collateral
Settlement balances
Financial investments
Reverse repurchase agreements
Non current assets held for sale
Other financial assets
Total on-balance sheet
Assets
£bn
102.4
80.2
78.6
346.6
20.2
325.7
68.8
21.3
63.3
13.5
6.4
21.0
1,148.0
Off-balance sheet
Fair value of securities accepted as collateral
Total unencumbered collateral
Assets encumbered as a result of transactions
with counterparties other than central banks
As a result
of covered
bonds
£bn
–
–
–
–
–
16.5
–
–
–
–
–
–
16.5
As a
result of
securitis-
ations
£bn
–
–
–
–
–
6.2
–
–
–
–
–
–
6.2
Other
£bn
–
51.2
3.2
–
–
8.0
68.8
–
13.6
–
–
–
144.8
Total
£bn
–
51.2
3.2
–
–
30.7
68.8
–
13.6
–
–
–
167.5
Assets
positioned
at the
central
banksb
£bn
–
–
–
–
–
63.0
–
–
–
–
–
–
63.0
Other assets (comprising assets encumbered at the central bank
and unencumbered assets)
Assets not positioned at the central bank
Readily
available
assets
£bn
102.4
29.0
1.5
–
10.1
23.8
–
–
49.3
–
1.2
–
217.3
Available
as
collateral
£bn
–
–
10.7
–
9.0
208.2
–
–
0.4
–
3.1
–
231.4
Not
available
as
collateral
£bn
–
–
–
–
1.1
–
–
21.3
–
–
2.1
21.0
45.5
Derivatives
and
Reverse
repos
£bn
–
–
63.2
346.6
–
–
–
–
–
13.5
–
–
423.3
Total
£bn
102.4
29.0
75.4
346.6
20.2
295.0
–
21.3
49.7
13.5
6.4
21.0
980.5
Collateral
received
of which
on-
pledged
£bn
405.5
–
Readily
available
assets
£bn
59.7
277.0
Available
as
collateral
£bn
–
231.4
Not
available
as
collateral
£bn
1.0
46.5
Collateral
received
£bn
466.2
–
Notes
a Excluding cash collateral and settlement balances.
b Includes both encumbered and unencumbered assets. Assets within this category that have been encumbered are disclosed as assets pledged in Note 40 to the financial
statements page 312.
Repurchase agreements and reverse repurchase agreements
Barclays enters into repurchase and other similar secured borrowing agreements to finance its trading portfolio assets. The majority of reverse
repurchase agreements are matched by offsetting repurchase agreements entered into to facilitate client activity. The remainder are used to settle
trading portfolio liabilities.
Due to the high quality of collateral provided against secured financing transactions, the liquidity risk associated with this activity is significantly
lower than unsecured financing transactions. Nonetheless, Barclays manages to gross and net secured mismatch limits to limit refinancing risk
under a severe stress scenario and a portion of the Group’s liquidity pool is held against stress outflows on these positions. The Group secured
mismatch limits are calibrated based on market capacity, liquidity characteristics of the collateral and risk appetite of the Group.
The cash value of repurchase and reverse repurchase transactions will typically differ from the market value of the collateral against which these
transactions are secured by an amount referred to as a haircut (or over-collateralisation). Typical haircut levels vary depending on the quality of
the collateral that underlies these transactions. For transactions secured against extremely liquid fixed income collateral, lenders demand relatively
small haircuts (typically ranging from 0-2%). For transactions secured against less liquid collateral, haircuts vary by asset class (typically ranging
from 5-10% for corporate bonds and other less liquid collateral).
As at 31 December 2017, the significant majority of repurchase activity related to matched-book activity. The Group may face refinancing risk on
the net maturity mismatch for matched-book activity.
Net matched-book activitya,b,c
Negative number represents net repurchase agreement (net liability)
As at 31 December 2017
Extremely liquid fixed incomed
Liquid fixed income
Equities
Less liquid fixed income
Total
As at 31 December 2016
Extremely liquid fixed income
Liquid fixed income
Equities
Less liquid fixed income
Total
Less than
one month
£bn
One month
to three
months
£bn
Over three
months
£bn
(36.4)
(0.9)
9.7
1.7
(25.9)
(21.8)
(0.4)
6.1
0.6
(15.5)
18.1
1.5
(5.6)
(0.7)
13.3
11.6
0.8
(0.5)
(0.2)
11.7
16.1
(1.4)
(8.8)
(2.2)
3.7
10.7
(0.7)
(9.6)
(1.3)
(0.9)
Notes
a Includes collateral swaps.
b Includes financing positions for prime brokerage clients which are reported as customer payables or receivables on balance sheet.
c Values are reported on a cash value basis.
d Extremely liquid fixed income is defined as very highly rated sovereigns and agencies, typically rated AA+ or better. It excludes liquid fixed income, equities and other less liquid collateral.
home.barclays/annualreport
Barclays PLC Annual Report 2017 173
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance The residual repurchase agreement activity is the firm-financing component and reflects Barclays funding of a portion of its trading portfolio
assets. The primary risk related to firm-financing activity is the inability to roll-over transactions as they mature.
Firm financing repurchase agreementsa,b,c
As at 31 December 2017
Extremely liquid fixed incomed
Liquid fixed income
Equities
Less liquid fixed income
Total
As at 31 December 2016
Extremely liquid fixed income
Liquid fixed income
Equities
Less liquid fixed income
Total
Less than
one month
£bn
One month
to three
months
£bn
Over three
months
£bn
37.2
4.1
17.4
2.1
60.8
28.3
2.8
13.2
1.9
46.2
10.3
1.5
21.4
1.9
35.1
7.1
0.8
8.9
0.8
17.6
1.4
2.5
15.7
12.6
32.2
1.1
1.2
14.0
2.6
18.9
Total
£bn
48.9
8.1
54.5
16.6
128.1
36.5
4.8
36.1
5.3
82.7
Notes
a Includes collateral swaps.
b Includes financing positions for prime brokerage clients which are reported as customer payables or receivables on-balance sheet.
c Values are reported on a cash value basis.
d Extremely liquid fixed income is defined as very highly rated sovereigns and agencies, typically rated AA+ or better. It excludes liquid fixed income, equities and other less liquid
collateral.
Credit ratings
In addition to monitoring and managing key metrics related to the financial strength of the Group, Barclays also solicits independent credit ratings
from Standard & Poor’s Global (S&P), Moody’s, Fitch and Rating and Investment Information (R&I). These ratings assess the creditworthiness of
the Group, its subsidiaries and branches and are based on reviews of a broad range of business and financial attributes including capital strength,
profitability, funding, liquidity, asset quality, strategy and governance.
Credit ratings
As at 31 December 2017
Barclays Bank PLC
Long-term
Short-term
Outlook
Barclays Bank UK PLC
Long-term
Short-term
Outlook
Barclays PLC
Long-term
Short-term
Outlook
Standard & Poor’s
A
A-1
Stable
A (prelim)
A-1 (prelim)
Stable
BBB
A-2
Stable
Moody’s
A1
P-1
Negative
(P) A1
(P) P-1
Unassigned
Baa2
P-3
Negative
Fitch
A
F1
Rating Watch Positive
A+ (EXP)
F1 (EXP)
Stable
A
F1
Stable
All credit rating agencies took rating actions this year to assign initial ratings to Barclays Bank UK PLC in anticipation of the establishment of this
entity as the UK ring-fenced bank in April 2018. There were also rating actions on the existing entities of Barclays Bank PLC and Barclays PLC by
some of the credit rating agencies as detailed below.
In September 2017, Fitch assigned an expected rating to Barclays Bank UK PLC of A+, reflecting a one notch uplift from the expected standalone
rating of A. This is due to the sufficient amount of junior debt they expect to be outstanding in Barclays Bank UK PLC, referred to as qualifying
junior debt (QJD). In the same rating action, Fitch revised the outlook of Barclays Bank PLC from stable to rating watch positive in anticipation
of assigning QJD uplift of one notch during 2018.
In October 2017, S&P upgraded long- and short-term ratings of Barclays Bank PLC by one notch to A/A-1 from A-/A-2 as S&P finalised their view
of the status of Barclays Bank PLC. They determined that Barclays Bank PLC would remain core to the Group revising their previous expectation of
a highly strategic status. Simultaneously, Barclays Bank UK PLC was assigned a preliminary rating of A in anticipation that it too would be core to
the Group. In November 2017, S&P also revised their view of UK economic risk for the UK banking sector, which led to outlooks for Barclays PLC,
Barclays Bank PLC and Barclays Bank UK PLC being revised from negative to stable.
Moody’s assigned a provisional rating to Barclays Bank UK PLC in October 2017 of (P)A1. The negative outlooks for Barclays PLC and Barclays
Bank PLC have remained in place since the outcome of the EU referendum in June 2016. Since October 2017, the implementation of ring-fencing
has been included in the rationale for the maintenance Barclays Bank PLC’s negative outlook.
Barclays also solicits issuer ratings from R&I and the ratings of A- for Barclays PLC and A for Barclays Bank PLC were affirmed in July 2017 with
stable outlooks.
A credit rating downgrade could result in outflows to meet collateral requirements on existing contracts. Outflows related to credit rating
downgrades are included in the LRA stress scenarios and a portion of the liquidity pool is held against this risk. Credit ratings downgrades
could also result in reduced funding capacity and increased funding costs.
174 Barclays PLC Annual Report 2017
home.barclays/annualreport
Risk performanceTreasury and capital risk – LiquidityRisk review The contractual collateral requirement following one- and two-notch long-term and associated short-term downgrades across all credit rating
agencies, would result in outflows of £4bn and £6bn respectively, and are fully reserved for in the liquidity pool. These numbers do not assume any
management or restructuring actions that could be taken to reduce posting requirements. These outflows do not include the potential liquidity
impact from loss of unsecured funding, such as from money market funds, or loss of secured funding capacity. However, unsecured and secured
funding stresses are included in the LRA stress scenarios and a portion of the liquidity pool is held against these risks.
Contractual maturity of financial assets and liabilities
The table below provides detail on the contractual maturity of all financial instruments and other assets and liabilities. Derivatives (other than
those designated in a hedging relationship) and trading portfolio assets and liabilities are included in the ‘on demand’ column at their fair value.
Liquidity risk on these items is not managed on the basis of contractual maturity since they are not held for settlement according to such maturity
and will frequently be settled before contractual maturity at fair value. Derivatives designated in a hedging relationship are included according to
their contractual maturity.
Financial assets designated at fair value in respect of linked liabilities to customers under investment contracts have been included in other
assets and other liabilities as the Group is not exposed to liquidity risk arising from them; any request for funds from creditors would be met
by simultaneously liquidating or transferring the related investment.
Contractual maturity of financial assets and liabilities (audited)
Over three
months
but not
more
than six
months
£m
Over six
months
but not
more
than nine
months
£m
Over nine
months
but not
more than
one year
£m
Over one
year
but not
more than
two years
£m
Over two
years but
not more
than three
years
£m
Over three
years but
not more
than five
years
£m
Over five
years but
not more
than ten
years
£m
On
demand
£m
Not more
than three
months
£m
Over ten
years
£m
Total
£m
170,236
846
2,153
113,760
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
171,082
2,153
113,760
14,800
77,288
8,828
4,570
1,252
2,095
160
196
557
6,535
116,281
237,504
30
3,439
41
2,378
30,227
–
2,717
1,256
–
97
77
–
504
125
71
5,675
247
22
15
15
3,928 16,162 17,059 10,366
188
93
11
1
–
237,669
58,916
35,663
12,022
70,816
8,511
5,519
7,622
35,969
26,151 39,435 48,382 111,125
365,552
7,522
–
4,446
759
561,466 186,801
578
–
21,890
–
–
10,263
–
–
9,503
–
110
44,167
–
–
–
–
–
–
12,546
869
30,354 55,819 65,999 128,229 1,114,491
18,757
1,133,248
–
–
4,967
30,826
718
438
214
74
446
334,961
–
74,812
–
7,381
–
3,386
–
3,628
–
2,684
135
–
500
316
–
882
3,550
37,351
17,841
–
4,516
–
2,136
–
1,396
–
310
–
93 10,006
–
–
35
–
231
490
–
–
37,723
–
656
446
429,121
–
–
40,338
37,351
13,298 102,860
10,570
5,918
3,139
10,515
7,281
5,879
4,923
9,335
173,718
237,235
907
–
–
10
17,120
2,402
3,793
632,715 249,664
3
8,395
791
–
32,374
–
5,107
7
–
16,992
–
1,562
23
–
9,962
10
8,136
57
781
22,567
4
5
1,037
4,402
4,370
–
41
3,883 12,819 10,983
5,466
8,751
1,959
–
–
–
238,345
73,314
23,826
4,574
13,856 38,657 22,169 19,800 1,058,756
8,476
1,067,232
66,016
As at 31 December 2017
Assets
Cash and balances
at central banks
Items in the course of
collection from other banks
Trading portfolio assets
Financial assets designated
at fair value
Derivative financial
instruments
Financial investments
Loans and advances to banks
Loans and advances to
customers
Reverse repurchase
agreements and other
similar secured lending
Other financial assets
Total financial assets
Other assetsa
Total assets
Liabilities
Deposits from banks
Items in the course of
collection due to other banks
Customer accounts
Repurchase agreements
and other similar secured
borrowing
Trading portfolio liabilities
Financial liabilities
designated at fair value
Derivative financial
instruments
Debt securities in issue
Subordinated liabilities
Other financial liabilities
Total financial liabilities
Other liabilitiesa
Total liabilities
Cumulative liquidity gap
(71,249) (134,112) (144,596) (151,325) (151,784) (130,184) (113,686) (96,524) (52,694) 55,735
Note
a As at 31 December 2017, other assets includes balances of £1,193m (2016: £71,454m) and other liabilities includes balances of £nil (2016: £65,292m) relating to amounts held for
sale. Please refer to Note 43 for details.
home.barclays/annualreport
Barclays PLC Annual Report 2017 175
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Contractual maturity of financial assets and liabilities (audited)
On
demand
£m
Not more
than three
months
£m
Over three
months
but not
more
than six
months
£m
Over six
months
but not
more
than nine
months
£m
Over nine
months
but not
more than
one year
£m
Over one
year
but not
more than
two years
£m
Over two
years but
not more
than three
years
£m
Over three
years but
not more
than five
years
£m
Over five
years but
not more
than ten
years
£m
Over ten
years
£m
Total
£m
102,031
322
1,467
80,240
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
102,353
–
–
1,467
80,240
15,558
43,270
5,518
2,376
2,081
686
90
129
771
8,129
78,608
345,625
40
4,858
5
1,015
34,346
400
3,064
2,753
5
741
480
2
2,666
133
14
10,127
412
168
9,031
236
175
15,148
20
123
12,768
13
109
8,717
–
346,626
63,317
43,251
26,929
85,993
7,522
6,310
8,245
29,326
25,602
44,776
48,233 109,848
392,784
7,043
–
3,678
1,128
583,791 169,757
892
–
20,149
144
–
10,056
905
–
14,032
792
77
41,434
–
–
35,127
–
–
60,248
–
–
–
–
13,454
1,205
61,908 126,803 1,123,305
89,821
1,213,126
5,906
39,610
1,120
672
351
193
13
328
21
–
48,214
636
317,963
–
86,081
–
5,305
–
3,023
–
4,528
–
2,836
–
1,262
–
1,043
5,480
34,687
9,235
–
1,934
–
917
–
1,326
–
311
–
–
–
83
–
–
441
474
–
–
696
636
423,178
–
–
19,760
34,687
15,285
41,583
3,970
4,112
1,827
7,540
5,762
5,773
3,588
6,591
96,031
339,646
27
–
–
4
16,731
8
3,198
719,630 196,450
–
11,713
–
–
24,042
–
5,902
–
–
14,626
2
6,867
1,317
–
16,218
10
3,166
3,230
1,189
18,475
34
8,069
56
–
15,196
46
9,186
7,487
–
23,946
75
10,152
6,575
–
21,326
670
4,119
4,710
–
340,487
75,932
23,383
4,387
16,786 1,066,695
75,066
1,141,761
71,365
As at 31 December 2016
Assets
Cash and balances
at central banks
Items in the course of
collection from other banks
Trading portfolio assets
Financial assets designated
at fair value
Derivative financial
instruments
Financial investments
Loans and advances to banks
Loans and advances to
customers
Reverse repurchase
agreements and other similar
secured lending
Other financial assets
Total financial assets
Other assetsa
Total assets
Liabilities
Deposits from banks
Items in the course of
collection due to other banks
Customer accounts
Repurchase agreements and
other similar secured
borrowing
Trading portfolio liabilities
Financial liabilities
designated at fair value
Derivative financial
instruments
Debt securities in issue
Subordinated liabilities
Other financial liabilities
Total financial liabilities
Other liabilitiesa
Total liabilities
Cumulative liquidity gap
(135,839) (162,532) (166,425) (170,995) (173,181) (150,222) (130,291) (93,989) (53,407) 56,610
Note
a As at 31 December 2017, other assets includes balances of £1,193m (2016: £71,454m) and other liabilities includes balances of £nil (2016: £65,292m) relating to amounts held for
sale. Please refer to Note 43 for details.
Expected maturity dates do not differ significantly from the contract dates, except for:
■■ trading portfolio assets and liabilities and derivative financial instruments, which may not be held to maturity as part of the Group’s trading
strategies
■■ retail deposits, which are included within customer accounts, are repayable on demand or at short notice on a contractual basis. In practice,
these instruments form a stable base for the Group’s operations and liquidity needs because of the broad base of customers – both numerically
and by depositor type (see Behavioural maturity profile on page 170)
■■ financial assets designated at fair value held in respect of linked liabilities, which are managed with the associated liabilities.
176 Barclays PLC Annual Report 2017
home.barclays/annualreport
Risk performanceTreasury and capital risk – LiquidityRisk review Contractual maturity of financial liabilities on an undiscounted basis
The table below presents the cash flows payable by the Group under financial liabilities by remaining contractual maturities at the balance sheet
date. The amounts disclosed in the table are the contractual undiscounted cash flows of all financial liabilities (i.e. nominal values).
The balances in the below table do not agree directly to the balances in the consolidated balance sheet as the table incorporates all cash flows,
on an undiscounted basis, related to both principal as well as those associated with all future coupon payments.
Derivative financial instruments held for trading and trading portfolio liabilities are included in the on demand column at their fair value.
Financial liabilities designated at fair value in respect of linked liabilities under investment contracts have been excluded from this analysis as the
Group is not exposed to liquidity risk arising from them.
Contractual maturity of financial liabilities – undiscounted (audited)
Over three
months
but not
more
than six
months
£m
Not more
than three
months
£m
On
demand
£m
Over six
months
but not
more than
one year
£m
Over one
year
but not
more than
three years
£m
Over three
years but
not more
than five
years
£m
Over five
years but
not more
than ten
years
£m
As at 31 December 2017
Deposits from banks
Items in the course of collection
due to other banks
Customer accounts
Repurchase agreements and
other similar secured lending
Trading portfolio liabilities
Financial liabilities designated
at fair value
Derivative financial instruments
Debt securities in issue
Subordinated liabilities
Other financial liabilities
Total financial liabilities
As at 31 December 2016
Deposits from banks
Items in the course of collection
due to other banks
Customer accounts
Repurchase agreements and
other similar secured lending
Trading portfolio liabilities
Financial liabilities designated
at fair value
Derivative financial instruments
Debt securities in issue
Subordinated liabilities
Other financial liabilities
Total financial liabilities
4,967
30,831
720
654
213
446
334,961
3,550
37,351
13,298
237,235
907
–
–
632,715
–
74,830
17,847
–
102,983
9
17,614
2,822
3,793
250,729
–
7,383
4,526
–
10,609
3
8,565
1,816
–
33,622
–
7,020
3,557
–
9,118
–
7,025
685
–
28,059
–
3,197
410
–
18,142
15
13,786
5,501
781
42,045
316
–
884
10,259
–
6,177
5
13,928
10,232
–
41,801
Over ten
years
£m
Total
£m
–
37,737
–
725
446
429,231
–
–
40,639
37,351
36
–
231
490
–
5,490
48
12,687
6,243
–
25,225
12,834
1,755
6,734
6,231
–
178,651
239,070
81,246
33,530
4,574
28,279 1,082,475
5,906
39,617
1,122
1,025
207
328
21
–
48,226
636
317,963
–
86,101
5,480
34,687
9,249
–
15,285
339,646
27
–
–
719,630
41,599
4
17,126
398
3,198
197,292
–
5,325
1,939
–
3,986
–
11,894
680
–
24,946
–
7,565
2,253
–
5,979
2
13,285
3,117
–
33,226
–
4,266
312
–
13,445
44
12,915
7,089
1,189
39,467
–
1,120
83
–
5,899
48
10,505
9,324
–
27,307
–
1,403
474
–
3,900
84
12,282
7,842
–
26,006
–
1,013
636
424,756
–
–
19,790
34,687
8,443
1,086
6,054
4,866
–
98,536
340,914
84,088
33,316
4,387
21,462 1,089,336
home.barclays/annualreport
Barclays PLC Annual Report 2017 177
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Maturity of off-balance sheet commitments received and given
The table below presents the maturity split of the Group’s off-balance sheet commitments received and given at the balance sheet date.
The amounts disclosed in the table are the undiscounted cash flows (i.e. nominal values) on the basis of earliest opportunity at which
they are available.
Maturity analysis of off-balance sheet commitments received (audited)
Over three
months
but not
more
than six
months
£m
Over six
months
but not
more
than nine
months
£m
Over nine
months
but not
more than
one year
£m
Over one
year but
not more
than two
years
£m
Over two
years but
not more
than three
years
£m
Over three
years but
not more
than five
years
£m
Over five
years but
not more
than ten
years
£m
On
demand
£m
Not more
than three
months
£m
Over ten
years
£m
Total
£m
6,373
–
6,373
6,044
102
6,146
5
29
34
18
246
264
2
–
2
1
–
1
3
–
3
410
1
411
1
–
1
2
–
2
8
–
8
23
–
23
7
–
7
1
18
19
5
–
5
3
–
3
3
–
3
–
–
–
4
–
4
–
–
–
6,411
29
6,440
6,502
367
6,869
As at 31 December 2017
Guarantees, letters of credit and
credit insurance
Forward starting repurchase
agreements
Total off-balance sheet
commitments received
As at 31 December 2016
Guarantees, letters of credit and
credit insurance
Forward starting repurchase
agreements
Total off-balance sheet
commitments received
Maturity analysis of off-balance sheet commitments given (audited)
Over three
months
but not
more
than six
months
£m
Over six
months
but not
more
than nine
months
£m
Over nine
months
but not
more than
one year
£m
Over one
year but
not more
than two
years
£m
Over two
years but
not more
than three
years
£m
Over three
years but
not more
than five
years
£m
Over five
years but
not more
than ten
years
£m
Over ten
years
£m
Total
£m
On
demand
£m
Not more
than three
months
£m
16,047
1,085
34
593
311,481
1,144
As at 31 December 2017
Contingent liabilities
Documentary credits and other
short-term trade related transactions
Standby facilities, credit lines and
other commitments
Total off-balance sheet
commitments given
As at 31 December 2016
Contingent liabilities
Documentary credits and other
short-term trade related transactions
Standby facilities, credit lines and
other commitments
Total off-balance sheet
commitments given
560
147
883
92
26
77
242
346
6
778
5
44
80
1
47
327,562
2,822
1,590
195
1,026
395
128
17,111
425
845
233
285
355
187
987
10
8
–
–
300,043
479
415
604
818
–
55
–
47
318,141
914
1,268
837
1,103
410
234
59
–
259
318
88
–
150
238
245
256 19,012
–
2
–
812
46 314,761
247
302 334,585
259
151
19,939
–
–
–
1,005
70 302,681
259
221 323,625
178 Barclays PLC Annual Report 2017
home.barclays/annualreport
Risk performanceTreasury and capital risk – LiquidityRisk review Risk review
Risk performance
Treasury and capital risk – Capital
Capital risk
The risk that the firm has an insufficient level or composition of capital to support its normal
business activities and to meet its regulatory capital requirements under normal operating
environments or stressed conditions (both actual and as defined for internal planning or
regulatory testing purposes). This includes the risk from the firm’s pension plans.
All disclosures in this section (pages 179 to 187) are unaudited unless otherwise stated.
Key metrics
Fully loaded Common Equity Tier 1 ratio
Average UK leverage ratio
13.3%
4.9%
Overview
The fully loaded CRD IV CET1 ratio,
among other metrics, is a measure of the
capital strength and resilience of Barclays.
Maintenance of our capital is vital in order to
meet the minimum capital requirements, and
to cover the Group’s current and forecast
business needs, and associated risks in
order to provide a viable and sustainable
business offering.
This section provides an overview of the
Group’s: (i) regulatory minimum capital and
leverage requirements; (ii) capital resources;
(iii) risk weighted assets (RWAs); and (iv)
leverage ratios and exposures.
More details on monitoring and managing
capital risk may be found in the Risk
Management sections on pages 166 to 167
of the Barclays PLC Pillar 3 Report 2017.
Summary of performance in
the period
Barclays continues to be in excess of
minimum transitional and end point capital
requirements, and regulatory minimum
leverage requirements.
The fully loaded CET1 ratio increased to
13.3% (December 2016: 12.4%) principally
due to a reduction in risk weighted assets
(RWAs) of £52.6bn to £313.0bn. CET1 capital
decreased £3.6bn to £41.6bn.
The sell down of Barclays’ holding in BAGL to
14.9%, resulting in regulatory proportional
consolidation, increased the CET1 ratio by
c60bps with a £31.1bn reduction in RWAs
offset by £1.8bn reduction due to BAGL
minority interests no longer being included
in CET1 capital.
Losses in respect of the discontinued
operation due to the impairment of Barclays’
holding in BAGL allocated to goodwill, and the
recycling of the BAGL currency translation
reserve losses to the income statement, had
no impact on CET1.
The CET1 ratio increased by a further c50bps
as a result of other RWA reductions, excluding
the impact of foreign currency movements,
including reductions in Non-Core.
Excluding the impacts of BAGL and foreign
currency movements, CET1 capital decreased
further as profits relating to continuing
operations, after absorbing the impact of the
US DTA remeasurement, were offset by the
redemption of US Dollar preference shares
and the payment of pension deficit reduction
contributions in the year.
The average UK leverage ratio increased to
4.9% (December 2016: 4.5%) primarily driven
by the issuance of Additional Tier 1 capital
(AT1) securities, the reduction in Non-Core
related exposures and due to BAGL’s
regulatory proportional consolidation.
home.barclays/annualreport
Barclays PLC Annual Report 2017 179
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Regulatory minimum capital and leverage requirements
Capital
Barclays’ end point CET1 regulatory requirement is expected to be 11.4% comprising of a 4.5% Pillar 1 minimum, a 2.5% Capital Conservation
Buffer (CCB), a 1.5% Global Systemically Important Institution (G-SII) buffer, a 2.4% Pillar 2A requirement, and an expected 0.5% Countercyclical
Capital Buffer (CCyB).
The CCB and the G-SII buffer, determined by the PRA in line with guidance from the Financial Stability Board (FSB), are subject to phased
implementation at 25% per annum from 2016 with full effect from 2019. The CCB has been set at 2.5% with 1.25% applicable for 2017.
The G-SII buffer for 2017 was set at 2% with 1% applicable for 2017. On 21 November 2016, the FSB confirmed that the G-SII buffer for 2018
has been set at 1.5% with 1.1% applicable for 2018. On 21 November 2017, the FSB confirmed that the G-SII buffer will remain at 1.5%
applicable for 2019.
On 25 September 2017, the Financial Policy Committee (FPC) reaffirmed that it expects to increase the UK CCyB rate from 0% to 0.5% applicable
from 27 June 2018 and to 1% applicable from 28 November 2018. Based on current UK exposures, Barclays’ CCyB is expected to be approximately
0.5% from November 2018. Other national authorities also determine the appropriate CCyBs that should be applied to exposures in their
jurisdiction, however, based on current exposures, these are not material.
Barclays’ Pillar 2A requirement as per the PRA’s Individual Capital Guidance (ICG) for Q417 and 2018 is 4.3% of which at least 56.25% needs to be
met in CET1 form, equating to approximately 2.4% of RWAs. Certain elements of the Pillar 2A requirement are a fixed quantum while others are a
proportion of RWAs and are based on a point in time assessment. The Pillar 2A requirement is subject to at least annual review.
For regulatory reporting purposes, BAGL is treated on a proportional consolidation basis based on Barclays’ holding in BAGL of 14.9%.
The CRD IV CET1 transitional minimum capital requirement for 2017 is 9.2% which comprised of a 4.5% Pillar 1 minimum, a 2.4% Pillar 2A
requirement, a 1.25% CCB, a 1% G-SII buffer and a 0% CCyB.
Leverage
In October 2017, following the FPC recommendation, the PRA increased the minimum requirement for the UK leverage ratio from 3% to 3.25%.
Barclays is subject to a leverage ratio requirement that is implemented on a phased basis, with a transitional requirement of 3.6% as at
31 December 2017; this comprises the 3.25% minimum requirement, a transitional G-SII additional leverage ratio buffer (G-SII ALRB) of 0.35% and
a countercyclical leverage ratio buffer (CCLB) which is currently nil. Although the leverage ratio is expressed in terms of tier 1 capital, 75% of the
minimum requirement, equating to 2.4375%, needs to be met with CET1 capital. In addition, the G-SII ALRB and CCLB must be covered solely
with CET1 capital. The CET1 capital held against the 0.35% transitional G-SII ALRB was £3.4bn. The fully loaded expected end point UK leverage
requirement is 4.0%.
180 Barclays PLC Annual Report 2017
home.barclays/annualreport
Risk performanceTreasury and capital risk – CapitalRisk review Capital resources
The CRR and Capital Requirements Directive (CRD) implemented Basel III within the EU (collectively known as CRD IV) on 1 January 2014.
The rules are supplemented by Regulatory Technical Standards and the PRA’s rulebook, including the implementation of transitional rules.
However, rules and guidance are still subject to change as certain aspects of CRD IV are dependent on final technical standards and
clarifications to be issued by the EBA and adopted by the European Commission and the PRA.
Capital ratios
As at 31 December
Fully loaded CET1a,b
PRA transitional Tier 1c,d
PRA transitional total capitalc,d
Capital resources (audited)
As at 31 December
Total equity (excluding non-controlling interests) per the balance sheet
Less: other equity instruments (recognised as AT1 capital)
Adjustment to retained earnings for foreseeable dividends
Minority interests (amount allowed in consolidated CET1)
Other regulatory adjustments and deductions
Additional value adjustments (PVA)
Goodwill and intangible assets
Deferred tax assets that rely on future profitability excluding temporary differences
Fair value reserves related to gains or losses on cash flow hedges
Excess of expected losses over impairment
Gains or losses on liabilities at fair value resulting from own credit
Defined-benefit pension fund assets
Direct and indirect holdings by an institution of own CET1 instruments
Deferred tax assets arising from temporary differences (amount above 10% threshold)
Other regulatory adjustments
Fully loaded CET1 capital
Additional Tier 1 (AT1) capital
Capital instruments and the related share premium accounts
Qualifying AT1 capital (including minority interests) issued by subsidiaries
Other regulatory adjustments and deductions
Transitional AT1 capitale
PRA transitional Tier 1 capital
Tier 2 (T2) capital
Capital instruments and the related share premium accounts
Qualifying T2 capital (including minority interests) issued by subsidiaries
Other regulatory adjustments and deductions
PRA transitional total regulatory capital
2017
13.3%
17.2%
21.5%
2016
12.4%
15.6%
19.6%
2017
£m
63,905
(8,941)
(392)
2016
£m
64,873
(6,449)
(388)
–
1,825
(1,385)
(7,908)
(593)
(1,161)
(1,239)
83
(732)
(50)
–
(22)
41,565
8,941
3,538
(130)
12,349
53,914
(1,571)
(9,054)
(494)
(2,104)
(1,294)
86
(38)
(50)
(183)
45
45,204
6,449
5,445
(130)
11,764
56,968
6,472
7,040
(251)
67,175
3,769
11,366
(257)
71,846
Notes
a The transitional regulatory adjustments to CET1 capital are no longer applicable resulting in CET1 capital on a fully loaded basis being equal to that on a transitional basis.
b The CRD IV CET1 ratio (FSA October 2012 transitional statement) as applicable to Barclays’ Tier 2 Contingent Capital Notes was 13.9% based on £43.5bn of transitional CRD IV
CET1 capital and £313bn RWAs.
c The PRA transitional capital is based on the PRA Rulebook and accompanying supervisory statements.
d As at 31 December 2017, Barclays’ fully loaded Tier 1 capital was £50,376m, and the fully loaded Tier 1 ratio was 16.1%. Fully loaded total regulatory capital was £64,646m and
the fully loaded total capital ratio was 20.7%. The fully loaded Tier 1 capital and total capital measures are calculated without applying the transitional provisions set out in CRD
IV and assessing compliance of AT1 and T2 instruments against the relevant criteria in CRD IV.
e Of the £12.3bn transitional AT1 capital, fully loaded AT1 capital comprises the £8.9bn of contingent convertible instruments issued by Barclays PLC (the holding company) and
related share premium accounts, and £0.1bn capital deductions. It excludes £3.5bn legacy Tier 1 capital instruments issued by subsidiaries that are subject to grandfathering. For
the leverage ratio, only the AT1 capital on a fully loaded basis is applicable.
home.barclays/annualreport
Barclays PLC Annual Report 2017 181
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Movement in CET1 capital
Opening balance as at 1 January
Loss for the period attributable to equity holders
Own credit relating to derivative liabilities
Dividends paid and foreseen
Decrease in retained regulatory capital generated from earnings
Net impact of share schemes
Available for sale reserve
Currency translation reserve
Other reserves
Decrease in other qualifying reserves
Pensions remeasurements within reserves
Defined-benefit pension fund asset deduction
Net impact of pensions
Minority interests
Additional value adjustments (PVA)
Goodwill and intangible assets
Deferred tax assets that rely on future profitability excluding those arising from temporary differences
Excess of expected loss over impairment
Deferred tax assets arising from temporary differences (amount above 10% threshold)
Other regulatory adjustments
Decrease in regulatory capital due to adjustments and deductions
Closing balance as at 31 December
2017
£m
45,204
(1,283)
78
(978)
(2,183)
86
438
3
(920)
(393)
53
(694)
(641)
(1,825)
186
1,146
(99)
55
183
(68)
(422)
41,565
CET1 capital decreased to £41.6bn (December 2016: £45.2bn) due to the following:
■■ a £1.3bn loss for the period attributable to equity holders reflecting profit after tax of £1.1bn, including the net tax charge of £0.9bn due to the
remeasurement of US DTAs in Q417 offset by £2.3bn of losses in respect of the discontinued operation. The discontinued operation losses,
resulting from the impairment of Barclays’ holding in BAGL allocated to goodwill and the recycling of BAGL currency translation reserve losses
to the income statement, had no impact on CET1 capital with offsetting movements in the goodwill and intangible assets deduction and other
qualifying reserves
■■ a £1.0bn decrease for dividends paid and foreseen
■■ a £0.4bn increase in the available for sale reserve primarily due to gains from changes in fair value on BAGL’s remaining shares held as available
for sale
■■ The currency translation reserve remained flat in the year largely due to the £1.4bn recycling of BAGL losses to the income statement which
were offset by a £1.3bn decrease driven by the depreciation of period end USD against GBP
■■ a £0.9bn decrease in other reserves which included a £0.5bn decrease as a result of USD preference share redemptions and £0.4bn of
separation payments in relation to the sale of Barclays’ holding in BAGL
■■ a £0.6bn decrease net of tax as a result of movements relating to pensions. The pension asset capital deduction increase relates to the UK
Retirement Fund, which is the Group’s main pension scheme, moving from a small deficit in December 2016 to a £1.0bn surplus largely due to
payment deficit contributions
■■ a £1.8bn decrease due to BAGL minority interests which are no longer eligible as a result of proportional consolidation of BAGL
■■ a £1.1bn increase due to a reduced goodwill and intangible assets deduction largely as a result of the impairment of Barclays’ holding in BAGL
allocated to goodwill.
182 Barclays PLC Annual Report 2017
home.barclays/annualreport
Risk performanceTreasury and capital risk – CapitalRisk review Risk weighted assets
Risk weighted assets (RWAs) by risk type and business
As at
31 December 2017
Barclays UK
Barclays International
Head Officeb
Barclays Group
As at
31 December 2016
Barclays UK
Barclays International
Head Officeb
Barclays Non-Core
Barclays Group
Credit risk
Std
£m
3,811
49,058
2,907
55,776
IRB
£m
54,955
69,520
9,766
134,241
5,592
53,201
9,048
4,714
72,555
49,591
82,327
27,122
9,945
168,985
Counterparty credit riska
Settlement
Risk
£m
–
101
–
101
IRB
£m
–
17,243
633
17,876
–
13,706
1,157
6,081
20,944
–
30
–
37
67
Std
£m
–
17,000
65
17,065
47
13,515
77
1,043
14,682
Movement analysis of risk weighted assets
Risk weighted assets
As at 31 December 2016
Book size
Acquisitions and disposals
Book quality
Model updates
Methodology and policy
Foreign exchange movementc
As at 31 December 2017
Market risk
Operational
risk
Total
RWAs
CVA
£m
–
2,776
225
3,001
–
3,581
927
2,235
6,743
Std
£m
–
13,313
88
13,401
–
9,343
482
477
10,302
IMA
£m
–
13,547
1,365
14,912
–
9,460
2,323
2,928
14,711
£m
12,167
27,708
16,785
56,660
£m
70,933
210,266
31,834
313,033
12,293
27,538
12,156
4,673
56,660
67,523
212,701
53,292
32,133
365,649
Credit risk
£bn
241.5
(11.0)
(31.7)
(3.5)
(1.4)
0.6
(4.5)
190.0
Counterparty
credit riska
£bn
42.4
(1.2)
(1.5)
0.5
–
(2.2)
–
38.0
Market risk
£bn
25.0
5.4
(1.6)
0.1
–
(0.6)
–
28.3
Operational
risk
£bn
56.7
–
–
–
–
–
–
56.7
Total
RWAs
£bn
365.6
(6.8)
(34.8)
(2.9)
(1.4)
(2.2)
(4.5)
313.0
Notes
a RWAs in relation to default fund contributions are included in counterparty credit risk.
b Includes Africa Banking RWAs.
c Foreign exchange movement does not include FX for modelled counterparty risk or modelled market risk.
RWAs decreased £52.6bn to £313.0bn:
■■ book size decreased RWAs by £6.8bn primarily due to portfolio rundowns related to Barclays Non-Core, the remeasurement of US DTAs as a
result of the US Tax Cuts and Jobs Act and securitisation transactions, partially offset by increased trading activity in investment bank businesses
■■ acquisitions and disposals decreased RWAs £34.8bn primarily as a result of the proportional consolidation of BAGL
■■ book quality decreased RWAs £2.9bn primarily due to changes in risk profile in CIB
■■ model updates decreased RWAs £1.4bn primarily due to model changes in Africa Banking prior to the sell down of Barclays holding in BAGL
■■ methodology and policy decreased RWAs £2.2bn primarily due to a revised calculation basis for modelled derivative exposures
■■ foreign exchange movements decreased RWAs £4.5bn primarily due to the depreciation of period end USD against GBP.
home.barclays/annualreport
Barclays PLC Annual Report 2017 183
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Leverage ratios and exposures
Barclays is required to disclose an average UK leverage ratio which is based on capital and exposure measures on the last day of each month in the
quarter; as well as a UK leverage ratio which is based on the last day of the quarter. Both approaches exclude qualifying claims on central banks
from the leverage exposures. Barclays is also required to disclose a Capital Requirements Regulation (CRR) leverage ratio, which is based on the
end point CRR definition of Tier 1 capital and the CRR definition of leverage exposure.
Leverage exposure
Leverage ratios
Average UK leverage exposure
Average fully loaded Tier 1 capital
Average UK leverage ratio
UK leverage ratio
CRR leverage ratio
UK leverage exposure
Accounting assets
Derivative financial instruments
Cash collateral
Reverse repurchase agreements and other similar secured lending
Financial assets designated at fair valuea
Loans and advances and other assets
Total IFRS assets
Regulatory consolidation adjustments
Derivatives adjustments
Derivatives netting
Adjustments to cash collateral
Net written credit protection
Potential Future Exposure (PFE) on derivatives
Total derivatives adjustments
Securities financing transactions (SFTs) adjustments
Regulatory deductions and other adjustments
Weighted off-balance sheet commitments
CRR leverage exposure
Qualifying central bank claims
UK leverage exposure
Fully loaded CET1 capital
Fully loaded AT1 capital
Fully loaded tier 1 capital
As at
31.12.17
£bn
1,045
51.2
4.9%
5.1%
4.5%
238
53
12
116
714
1,133
As at
31.12.16
£bn
1,137
51.6
4.5%
5.0%
4.6%
347
67
13
79
707
1,213
8
(6)
(217)
(42)
14
120
(125)
(313)
(50)
12
136
(215)
19
29
(13)
103
1,125
(140)
985
41.6
8.8
50.4
(15)
119
1,125
(75)
1,050
45.2
6.8
52.0
Note
a Included within financial assets designated at fair value are reverse repurchase agreements designated at fair value of £100bn (December 2016: £63bn).
The average UK leverage ratio increased to 4.9% (December 2016: 4.5%) primarily driven by the issuance of AT1 securities, the reduction in
Non-Core related exposures and due to BAGL’s regulatory proportional consolidation.
The CRR leverage ratio decreased to 4.5% (December 2016: 4.6%). The difference between the average UK leverage ratio and the CRR leverage
ratio movement is primarily driven by an increase in cash at central banks, which are excluded from the UK leverage ratio calculation. Additionally,
the year end fully loaded Tier 1 capital is lower than the average due to the remeasurement of US DTAs as a result of the US Tax Cuts and Jobs Act
in December:
■■ loans and advances and other assets increased by £7bn to £714bn. This was primarily due to a £69bn increase in cash and balances at central
banks largely driven by an increase in the cash contribution to the Group liquidity pool mainly exempt under UK leverage rules, and a £70bn
decrease in assets held for sale driven by the sell down of Barclays’ holding in BAGL
■■ reverse repurchase agreements increased £36bn to £112bn, primarily due to an increase in matched book trading
■■ net derivative leverage exposures decreased £33bn to £166bn due to a reduction in interest rate and foreign exchange derivatives, the rundown
of Non-Core related assets, a decrease in cash collateral and the depreciation of period end USD and JPY against GBP
■■ regulatory consolidation adjustments increased £14bn to £8bn primarily due to the proportional consolidation of BAGL following the sell down
of Barclays’ holding
■■ weighted off-balance sheet commitments decreased £16bn to £103bn primarily due to the proportional consolidation of BAGL following the sell
down of Barclays’ holding.
Additional Barclays regulatory disclosures are prepared in accordance with the EBA Guidelines on disclosure requirements under Part Eight of
Regulation (EU) No 575/2013 (see Barclays PLC Pillar 3 Report 2017) and will be disclosed on 22 February 2018, available at home.barclays/results.
184 Barclays PLC Annual Report 2017
home.barclays/annualreport
Risk performanceTreasury and capital risk – CapitalRisk review Foreign exchange risk (audited)
The 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 Group’s risk management policies prohibit 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 Group’s investments in overseas subsidiaries and branches create capital resources denominated in foreign currencies, principally USD and
EUR. Changes in the GBP value of the net investments due to foreign currency movements are captured in the currency translation reserve,
resulting in a movement in CET1 capital.
The Group’s strategy is to minimise the volatility of the capital ratios caused by foreign exchange movements, by matching the CET1 capital
movements to the revaluation of the Group’s foreign currency RWA exposures.
Functional currency of operations
Functional currency of operations (audited)
As at 31 December 2017
USD
EUR
ZAR
JPY
Other
Total
As at 31 December 2016
USD
EUR
ZAR
JPY
Other
Total
Foreign
currency
net
investments
£m
Borrowings
which hedge
the net
investments
£m
Derivatives
which hedge
the net
investments
£m
27,848
2,489
8
467
2,475
33,287
29,460
2,121
3,679
438
2,793
38,491
(12,404)
(3)
–
(152)
–
(12,559)
(12,769)
(363)
–
(209)
–
(13,341)
(540)
–
–
(301)
(1,299)
(2,140)
–
–
(2,571)
(224)
(1,318)
(4,113)
Structural
currency
exposures
pre-
economic
hedges
£m
14,904
2,486
8
14
1,176
18,588
16,691
1,758
1,108
5
1,475
21,037
Remaining
structural
currency
exposures
£m
8,751
359
8
14
1,176
10,308
8,793
(295)
1,108
5
1,475
11,086
Economic
hedges
£m
(6,153)
(2,127)
–
–
–
(8,280)
(7,898)
(2,053)
–
–
–
(9,951)
The economic hedges primarily represent the USD and EUR preference shares and Additional Tier 1 (AT1) instruments that are held as equity.
These are accounted for at historic cost under IFRS and do not qualify as hedges for accounting purposes.
During 2017, total structural currency exposure net of hedging instruments decreased by £0.8bn to £10.3bn (2016: £11.1bn). Foreign currency net
investments decreased by £5.2bn to £33.3bn (2016: £38.5bn) driven predominantly by the decrease in ZAR investments following the partial
disposal of the Group’s investment in BAGL and accounting deconsolidation of the remaining holding. The hedges associated with these
investments decreased by £2.8bn to £14.7bn (2016: £17.5bn).
home.barclays/annualreport
Barclays PLC Annual Report 2017 185
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Pension risk review
The UK Retirement Fund (UKRF) represents approximately 96% (2016: 96%) of the 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.
See page 167 of the Barclays PLC Pillar 3 Report 2017 for more information on how pension risk is managed.
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 main market risks within the asset portfolio are against interest rates and equities. The split of scheme assets is shown within Note 35.
The fair value of the UKRF assets was £30.1bn as at 31 December 2017 (2016: £31.8bn).
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 (AA corporate bond yield curve):
■■ an increase in long-term expected inflation corresponds to an increase in liabilities
■■ a decrease in the discount rate corresponds to an increase in liabilities.
Pension risk is generated through the 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 2017 that takes account
of the future inflation indexing of payments to beneficiaries. The majority of the cash flows (approximately 88%) fall between 0 and 40 years,
peaking between 11 and 20 years and reducing thereafter. The shape may vary depending on changes to inflation and longevity expectations and
any members who elect to transfer out. Transfers out will bring forward the liability cash flows.
For more detail on the UKRF’s financial and demographic assumptions see Note 35 to the financial statements.
Proportion of liability cash flows
IAS 19 pension position in 2017
2
UKRF surplus/deficit (£bn)
0-10 years
11-20 years
21-30 years
31-40 years
41-50 years
51 years +
9.1%
3.0%
19.4%
16.8%
26.4%
25.3%
-2
Q4 2015
Q4 2016
Q4 2017
The graph above shows the UKRF’s net IAS 19 pension position for each quarter-end for the past two years. The volatility shown by the fluctuation
in the net IAS 19 pension position is reflective of the movements observed in the market.
In Q2 2016, the UKRF IAS 19 position deteriorated as the AA discount rate moved lower, driven by both a decrease in long-dated government bond
yields as well as a tightening in credit spreads.
During H2 2016, this trend continued driven by the outcome of the EU Referendum in June as well as the Bank of England’s announcement on
quantitative easing in August. These events drove significant market moves adversely affecting the UKRF AA discount rate. For example the
market index IBOXX £-Corp AA yield was 53bps lower between June and September.
Gilt yields reverted higher in the months following September 2016 which was also reflected in a higher AA discount rate. As a result the
net IAS 19 position ended 2016 close to zero.
During 2017, the net improvement in the IAS 19 position was largely driven by bank contributions. Changes to market levels, in particular equity
prices and interest rates, largely offset each other over the year.
Please see Note 35 for the sensitivity of the UKRF to changes in key assumptions.
186 Barclays PLC Annual Report 2017
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Risk performanceTreasury and capital risk – CapitalRisk review Risk measurement
In line with Barclays’ risk management framework the assets and liabilities of the UKRF are modelled within a VaR framework to show the
volatility of the pension positions on a total portfolio level. This 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 Board Risk Committee, the Group Risk Committee, the Pensions Management Group and the Pension Executive
Board. The VaR model takes into account the valuation of the liabilities based on an IAS 19 basis (see Note 35). The Trustee receives quarterly VaR
measures on a funding basis.
The pension liability is also sensitive to post-retirement mortality assumptions which are reviewed regularly. See Note 35 for more details.
In addition the impact of pension risk to the Group is taken into account as part of the stress testing process. Stress testing is performed internally
on at least an annual basis. The UKRF exposure is also included as part of regulatory stress tests.
Barclays defined benefit pension schemes affects capital in two ways:
■■ An IAS 19 deficit is treated as a liability on the Group’s balance sheet. Movement in a deficit due to remeasurements, including actuarial losses,
are recognised immediately through Other Comprehensive Income and as such reduces shareholders’ equity and CET1 capital. An IAS 19
surplus is treated as an asset on the balance sheet and increases shareholders’ equity; however, it is deducted for the purposes of determining
CET1 capital.
■■ In the Group’s statutory balance sheet an IAS 19 surplus or deficit is partially offset by a deferred tax liability or asset respectively. These may
or may not be recognised for calculating CET1 capital depending on the overall deferred tax position of the Group at the particular time.
Pension risk is taken into account in the Pillar 2A capital assessment undertaken by the PRA at least annually. The Pillar 2A requirement forms
part of the Group’s overall regulatory minimum requirement for CET1 capital, Tier 1 capital and total capital. More detail on minimum regulatory
requirements can be found in the capital risk management section on page 166 of the Barclays PLC Pillar 3 Report 2017.
Minimum Requirement for own funds and Eligible Liabilities (MREL)
Under the Bank of England’s statement of policy on MREL, the BoE will set MREL for UK globally systemically important banks (G-SIBs) as
necessary to implement the total loss absorbing capacity (TLAC) standard and institution or group-specific MREL requirements will depend
on the preferred resolution strategy for that institution or group.
The MREL requirements will be phased in from 1 January 2019 and will be fully implemented by 1 January 2022, at which time G-SIBs with
resolution entities incorporated in the UK, including Barclays, will be required to meet an MREL equivalent to the higher of (i) two times the sum of
its Pillar 1 and Pillar 2A requirements or (ii) the higher of two times its leverage ratio or 6.75% of leverage exposures. However, the PRA will review
the MREL calibration by the end of 2020, including assessing the proposal for Pillar 2A recapitalisation which may drive a different 1 January 2022
MREL requirement than currently proposed. In addition, it is proposed that CET1 capital cannot be counted towards both MREL and the combined
buffer requirement (CBR), meaning that the CBR will effectively be applied above both the Pillar 1 and Pillar 2A requirements relating to own funds
and MREL.
Barclays’ indicative MREL requirement is currently expected to be 29.1% of RWAs from 1 January 2022 consisting of the following components:
■■ Loss absorption and recapitalisation amounts consisting of 8% Pillar 1 and 4.3% Pillar 2A buffers respectively.
■■ Regulatory buffers including a 1.5% G-SII buffer, 2.5% Capital Conservation Buffer and 0.5% from the planned introduction of a 1%
Countercyclical Capital Buffer for the UKa.
MREL position and ratios
MREL ratios
Fully loaded CET1 capital
Additional Tier 1 (AT1) capital instruments and related share premium accounts
Tier 2 (T2) capital instruments and related share premium accounts
Term senior unsecured funding
Total Barclays PLC (the Parent company) MREL ratio
Qualifying AT1 capital (including minority interests) issued by subsidiariesb
Qualifying T2 capital (including minority interests) issued by subsidiariesb
Total MREL ratio on a transitional basis, including eligible Barclays Bank PLC instruments
MREL position
Fully loaded CET1 capital
AT1 capital instruments and related share premium accounts
T2 capital instruments and related share premium accounts
Term senior unsecured funding
Total Barclays PLC (the Parent company) MREL position
Qualifying AT1 capital (including minority interests) issued by subsidiariesb
Qualifying T2 capital (including minority interests) issued by subsidiariesb
Total MREL position on a transitional basis, including eligible Barclays Bank PLC instruments
2017
13.3%
2.9%
2.1%
6.8%
25.0%
1.1%
2.2%
28.2%
£m
41,565
8,941
6,472
21,166
78,144
3,408
6,789
88,341
2016
12.4%
1.8%
1.0%
4.6%
19.8%
1.5%
3.0%
24.2%
£m
45,204
6,449
3,769
16,785
72,207
5,315
11,109
88,631
Total RWAs
313,033
365,649
Notes
a 2022 requirements subject to Bank of England review by the end of 2020.
b Includes other AT1 capital regulatory adjustments and deductions of £130m (December 2016: £130m) and other T2 capital regulatory adjustments and deductions of £251m
(December 2016: £257m).
home.barclays/annualreport
Barclays PLC Annual Report 2017 187
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Interest rate risk in the banking book
The risk that the firm is exposed to capital or income volatility because of a mismatch
between the interest rate exposures of its (non-traded) assets and liabilities.
All disclosures in this section (pages 188 to 190) are unaudited and exclude BAGL unless
otherwise stated.
Key metrics
AEaR
across the Group from a positive 100bps shock in interest rates.
The Group maintains access to stable and diverse sources of
funding across customer deposits and wholesale debt.
Overview
The non-traded market risk framework
covers exposures in the banking book, mostly
relating to accrual accounted and available
for sale 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 BRC as part of the limit
monitoring framework.
+£76m
For further detail on interest rate risk in the
banking book governance and framework
see pages 168 to 169 of the Barclays PLC
Pillar 3 Report 2017.
Summary of performance in
the period
Annual Earnings at Risk (AEaR), is a key
measure of interest rate risk in the banking
book (IRRBB). The additional sensitivity
measure of a positive 100bps shock was
added for 2017, driven by the rise in GBP
base rate in November 2017.
188 Barclays PLC Annual Report 2017
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Risk performanceTreasury and capital risk – Interest rate risk in the banking bookRisk review Interest rate risk in the banking book
Net interest income sensitivity
The table below shows a sensitivity analysis on pre-tax net interest income for non-trading financial assets and financial liabilities, including the
effect of any hedging. The sensitivity has been measured using the Annual Earnings at Risk (AEaR) methodology as described on page 168 of the
Barclays PLC Pillar 3 Report 2017. Note that this metric assumes an instantaneous parallel change to interest rate forward curves. The model floors
shocked market rates at zero; changes in Net Interest Income (NII) sensitivity are only observed where forward rates are greater than zero. The
main model assumptions are: (i) one year time horizon; (ii) balance sheet is held constant; (iii) balances are adjusted for assumed behavioural
profiles (e.g. considers that customers may remortgage before the contractual maturity); and (iv) behavioural assumptions are kept unchanged in
all rate scenarios.
Net interest income sensitivity (AEaR) by business unita,b,c (audited)
As at 31 December 2017
+100bps
+25bps
-25bps
As at 31 December 2016
+100bps
+25bps
-25bps
Barclays UK
£m
Barclays
International
£m
Barclays
Non-Core
£m
45
11
(61)
19
5
(130)
31
9
(22)
46
16
(90)
–
–
–
6
1
–
Total
£m
76
20
(83)
71
22
(220)
Notes
a Excludes investment banking business.
b Excludes Treasury operations, which are driven by the firm’s investments in the liquidity pool, which are risk managed using value-based risk measures described on page 163 to
165 of the Barclays PLC Pillar 3 Report 2017. Treasury’s NII (AEaR) sensitivity to a +25/-25bps move is £13m/£(2)m respectively.
c Expected fixed rate mortgage pipeline completions in Barclays UK assumed to be consistent with level and timing of pipeline hedging.
NII asymmetry arises due to the current low level of interest rates. Modelled NII sensitivity to a -25bp shock to rates has however reduced year on
year as a result of the change in UK base rate increasing from 0.25% to 0.5% in November 2017.
Both Barclays UK and Barclays International exposures to falling rates have reduced as a result of the higher base rate environment and the
movement of customer savings rates away from the implicit customer savings market 0% floor.
Net interest income sensitivity (AEaR) by currencya
As at 31 December 2017
GBP
USD
EUR
Other currencies
Total
As percentage of net interest income
2017
2016
+25 basis
points
£m
12
1
4
3
20
0.20%
-25 basis
points
£m
(76)
(1)
(1)
(5)
(83)
(0.84%)
+25 basis
points
£m
9
3
7
3
22
0.21%
-25 basis
points
£m
(215)
(5)
1
(1)
(220)
(2.09%)
Note
a Barclays UK and Barclays International sensitivity (excluding Investment Banking business and Treasury).
Economic Capital by business unit
Barclays measures some non-traded market risks using an Economic Capital (EC) methodology. EC is predominantly calculated using a VaR model
using a 99% confidence interval aligning to other regulatory submissions. For more information on definitions of prepayment, recruitment and residual
risk, and on how EC is used to manage non-traded market risk, see the treasury and capital risk management section on pages 168 to 169 of the
Barclays PLC Pillar 3 Report 2017.
Economic Capital by business unit
As at 31 December 2017
Prepayment risk
Recruitment risk
Residual risk
Total
As at 31 December 2016
Prepayment risk
Recruitment risk
Residual risk
Total
Barclays UK
£m
Barclays
Internationala
£m
20
64
3
87
27
18
1
46
13
1
3
17
8
2
35
45
Total
£m
33
65
6
104
35
20
36
91
Note
a Only retail exposures within Barclays International are captured in the measure.
Recruitment risk in Barclays UK has increased by £46m due to higher volumes of pipeline hedging, as a result of increased customer appetite for
fixed rate mortgages.
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Barclays PLC Annual Report 2017 189
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Analysis of equity sensitivity
Equity sensitivity table measures the overall impact of a +/- 25bps movement in interest rates on retained earnings, available for sale and cash flow
hedge reserves. This data is captured using DV01 metric which is an indicator of the shift in value for a 1 basis point in the yield curve.
Analysis of equity sensitivity (audited)
As at 31 December
Net interest income
Taxation effects on the above
Effect on profit for the year
As percentage of net profit after tax
Effect on profit for the year (per above)
Available for sale reserve
Cash flow hedge reserve
Taxation effects on the above
Effect on equity
As percentage of equity
2017
2016
+25 basis
points
£m
20
(6)
14
(1.57%)
14
(164)
(616)
195
(571)
(0.87%)
-25 basis
points
£m
(83)
25
(58)
6.52%
(58)
219
598
(204)
555
0.84%
+25 basis
points
£m
22
(7)
15
0.54%
15
(154)
(732)
222
(649)
(0.91%)
-25 basis
points
£m
(220)
66
(154)
(5.45%)
(154)
114
692
(202)
450
0.63%
As indicated in relation to the net interest income sensitivity table on page 189, the impact of a 25bps movement in rates is largely driven by
Barclays UK.
The year on year movement in cash flow hedge reserve sensitivities was driven by structural changes in business activities and related hedging.
Movements in the available for sale reserve would impact CRD IV fully loaded CET1 capital, however the movement in the cash flow hedge reserve
would not impact CET1 capital.
Volatility of the available for sale portfolio in the liquidity pool
Changes in value of available for sale exposures flow directly through capital via the available for sale reserve. The volatility of the value of
the available for sale investments in the liquidity pool is captured and managed through a value measure rather than an earning measure,
i.e. the Non-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 available for sale exposures. These exposures are
in the banking book and do not meet the criteria for trading book treatment.
Non-traded value at risk (£m)
60
Value of risk (£m)
Jan 2017
Dec 2017
Analysis of volatility of the available for sale portfolio in the liquidity pool
For the year ended 31 December
Non-Traded Market Value at Risk (daily, 95%)
Average
£m
36
2017
High
£m
50
Low
£m
27
Average
£m
40
2016
High
£m
46
Low
£m
32
Non-traded VaR shown was mainly driven by volatility of interest rates in developed markets. The increases in late Spring and early Autumn were
driven primarily by additional outright interest rate risk exposure taken in the liquidity pool at those times.
190 Barclays PLC Annual Report 2017
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Risk performanceTreasury and capital risk – Interest rate risk in the banking bookRisk review Risk review
Risk performance
Operational risk
Operational risk
The risk of loss to the firm from inadequate or failed processes or systems, human factors or
due to external events (for example, fraud) where the root cause is not due to credit or
market risks.
All disclosures in this section are unaudited unless otherwise stated.
Key metrics
of the Group’s net reportable operational risk events had a loss value of £50k or less.
87%
of events by number are due to external fraud.
75%
Overview
Operational risks are inherent in the Group’s
business activities and it is not always cost
effective or possible to attempt to eliminate all
operational risks. The operational risk
management framework is therefore focused
on identifying operational risks and
confirming that they are assessed and
managed within the Group’s approved risk
appetite. More material losses are less
frequent and the Group seeks to reduce the
likelihood and impact of these in accordance
with its risk appetite.
The Operational Principal Risk comprises the
following risks: data management and
information, financial reporting, fraud,
payments process, people, premises and
security, supplier, tax, technology and
transaction operations.
For definitions of these risks see pages 132
and 133. In order to provide complete
coverage of the potential adverse impacts on
the Group arising from operational risk, the
operational risk taxonomy extends beyond the
operational risks listed above to cover areas
included within conduct, legal and model
risks.
This section provides an analysis of the
Group’s operational risk profile, including
events above the Bank’s reportable threshold,
which have had a financial impact in 2017.
For information on conduct risk events
please see page 194.
Summary of performance in
the period
During 2017, total operational risk losses
increased to £309m (2016: £209m) while the
number of recorded events for 2017 decreased
to 2,949 from 3,414 events recorded during
the prior year. The loss for the year was
primarily driven by events falling within the
execution, delivery and process management
and external fraud categories, with a limited
number of high impact events.
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Barclays PLC Annual Report 2017 191
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance
Operational risk profile
Within operational risk, a high proportion
of risk events have a low financial cost while
a very small proportion of operational risk
events will have a material impact on the
financial results of the Group. In 2017, 87% of
the Group’s net reportable operational risk
events by volume had a value of less than
£50,000 (2016: 86%), although this type of
event accounted for only 16% (2016: 22%) of
the Group’s total net operational risk losses.
The analysis below presents the Group’s
operational risk events by Basel event
category:
■■ Execution, delivery and process
management impacts increased to
£222m (2016: £165m) and accounted for
72% (2016: 69%) of overall operational risk
losses. The events in this category are
typical of the banking industry as a whole
where high volumes of transactions are
processed on a daily basis. The increase in
impact was largely driven by a limited
number of events with higher loss values.
■■ External fraud is the category with the
highest frequency of events (75% of total
events in 2017, up from 71% in prior year)
where high volume, low value events are
driven by debit and credit card fraud. These
accounted for 20% of overall operational
risk losses in 2017, slightly down compared
to 25% for prior year.
■■ Business disruption impacts increased
to £24m, accounting for 8% of total
operational risk losses in 2017, mainly driven
by a few events with significant impacts.
Overall the volume of events in this
category remained low and decreased
from 2016.
The Group’s operational risk profile is
informed by bottom-up risk assessments
undertaken by each business unit and
top-down qualitative review from the
Operational Risk Management for each risk
type. External Fraud and Technology are
highlighted as key operational risk exposures.
The operational risk profile is also informed by
a number of risk themes: execution, resilience,
cyber and data. These represent threats to the
Group but have scope which extends across
multiple risk types, and therefore require a risk
management approach which is integrated
within relevant risk and control frameworks.
Investment continues to be made in new
and enhanced fraud prevention systems and
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
Group continues to work closely with external
partners on various prevention initiatives.
Technology, resilience and cyber security risks
evolve rapidly so the Group maintains
continued focus and investment in the control
environment to manage these risks, and
actively partners with peers and relevant
organisations to understand and disrupt
threats originating outside of the Group.
For further information, see operational
risk management section (pages 132
and 133).
Operational risk events by risk category
% of total risk events by count
Internal fraud
2017 0.5
2016 0.4
External fraud
75.2
71.2
Execution, delivery and process management
21.5
24.4
Employment practices and workplace safety
0.4
0.6
Damage to physical assets
0.2
1.2
Clients, products and business practices
0.0
0.1
Business disruption and system failures
2.2
2.0
Operational risk events by risk category
% of total risk events by value
Internal fraud
2017 0.3
2016 0.4
External fraud
19.5
24.8
Execution, delivery and process management
72.2
69.2
Employment practices and workplace safety
0.3
3.4
Damage to physical assets
0.1
0.7
Clients, products and business practices
0
0.1
Business disruption and system failures
7.6
1.4
Note
a The data disclosed includes operational risk losses for
reportable events (excluding BAGL) having an impact of
≥ £10,000 and excludes 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 continue to evolve,
prior year losses are updated.
192 Barclays PLC Annual Report 2017
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Risk performanceOperational riskRisk review Risk review
Risk performance
Model risk
Model risk
The risk of the potential adverse consequences from financial assessments or decisions
based on incorrect or misused model outputs and reports.
All disclosures in this section are unaudited unless otherwise stated.
■■ enhancement of model development and
model identification processes, with the
areas of model ownership throughout the
firm establishing their own model control
functions.
In addition to the governance outlined above,
which details how new models are validated
and existing models are internally controlled
and assessed, models have been classified
based on their materiality (the level of reliance
placed on the model output for decision
making or reporting), and their complexity.
A strengthened programme of review and
validation for such material models
commenced during 2017. In 2018, model risk
governance will be broadened beyond the
quantitative models of the firm to include
‘non-modelled methods’ covering certain
material decision making and capital planning
functions of the firm, such as the primary
stress testing programmes and impairment
estimations.
Overview
Model risk is a focal area of management
and the Board. It is an important component
of regulators’ assessment of Barclays’ risk
management capabilities. Models are used
to support a broad range of business and risk
management activities, including informing
business decisions and strategies, measuring
and limiting risks, valuing exposures,
conducting stress testing, assessing capital
adequacy, supporting new business
acceptance and risk/reward evaluation,
managing client assets, or meeting reporting
requirements.
Summary of performance in
the period
The Principal Risk framework for model
risk was established in 2016. In 2017, the
framework was enhanced and embedded
further in the organisation by:
■■ strengthening of the Group-wide Model
Risk Management (MRM) framework,
policy and associated standards, validation
templates and procedures
■■ enhancement of Board oversight of model
risk, through the establishment of a model
risk tolerance framework and periodic
updates to the Board on the progress of
the MRM implementation
■■ improved collection and attestation of
the Group’s global inventory of models
■■ reporting metrics on policy adherence
and breaches
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Barclays PLC Annual Report 2017 193
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Risk performance
Conduct risk
Conduct risk
The risk of detriment to customers, clients, market integrity, competition or Barclays from
the inappropriate supply of financial services, including instances of wilful or negligent
misconduct.
All disclosures in this section are unaudited unless otherwise stated.
Throughout 2017, conduct risks were raised
by businesses for consideration by the Board
Reputation Committee (RepCo). RepCo
reviewed the risks raised and whether
management’s proposed actions were
appropriate to mitigate the risks effectively.
RepCo received regular updates with regards
to key risks and issues including those relating
to structural reform and regulatory change.
The Group continued to incur significant costs
in relation to litigation and conduct matters,
please refer to Note 29 Legal, competition and
regulatory matters and Note 27 Provisions,
for further details. Costs include customer
redress and remediation, as well as fines
and settlements. Resolution of these matters
remains a necessary and important part
of delivering the Group’s strategy and an
ongoing commitment to improve oversight
of culture and conduct.
The Board and Senior Management received
Group Dashboards setting out key indicators
in relation to conduct, culture, citizenship and
complaints. These continue to be evolved and
enhanced to allow effective oversight and
decision-making. Barclays has operated at
the overall set tolerance for conduct risk
throughout 2017. The tolerance is assessed
by the business through Key Indicators which
are aggregated and provide an overall rating
which is reported to the RepCo as part of the
Conduct Dashboard.
Barclays remained 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.
For further details on the non-financial
performance measures, please refer to
page 15 of the Strategic Report.
Overview
Barclays strives to create and maintain
mutually beneficial long-term relationships
with its customers and clients. This means
taking personal accountability for
understanding their needs and providing them
with products and services that meet those
needs appropriately and help them manage
their financial affairs.
As a transatlantic consumer, corporate and
investment bank, Barclays also plays a critical
role in promoting fair, open and transparent
markets, as well as fostering shared growth
for all. This means abiding by standards that
in many cases are higher than those set by the
laws and regulations that apply to the Group.
In 2017, aligned with the revised Enterprise
Risk Management Framework (ERMF), the
oversight of financial crime was transferred to
conduct risk from operational risk.
Summary of performance in
the period
Barclays is committed to continuing to drive
the right culture throughout all levels of the
organisation. Barclays 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 the Group Dashboards are a
key component of this.
The Group continues to review the role and
impact of conduct issues in the remuneration
process at both the individual and business
level.
Businesses have continued to assess the
potential customer, client and market impacts
of strategic change and structural reform.
As part of the 2017 Medium-Term
Planning Process, material conduct risks
associated with strategic and financial
plans were assessed.
194 Barclays PLC Annual Report 2017
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Risk review Risk review
Risk performance
Reputation risk
Reputation risk
The risk that an action, transaction, investment or event will reduce trust in the firm’s
integrity and competence by clients, counterparties, investors, regulators, employees
or the public.
All disclosures in this section are unaudited unless otherwise stated.
Overview
Reputation risk was re-designated as a
Principal Risk under Barclays’ Enterprise Risk
Management Framework with effect from
January 2017.
Reputation risk may arise from any business
decision or activity. It may also arise as a
result of issues and incidents relevant to
other Principal Risks, in particular other
non-financial risks e.g. conduct or operational
risk. Reputation risks and issues are identified
via regular information gathering from within
the business and from external stakeholders.
Some risks and issues are specific to Barclays,
while others are also relevant to the banking
sector more generally.
Barclays has set tolerances for reputation risk,
which take into account the risks arising from
specific events or decisions and longer-term
strategic themes. The primary responsibility
for managing reputation risk lies with each
business and function, where there are
processes in place to identify, assess and
manage reputation risks and issues.
There are circumstances, however, where
it is necessary to escalate to Group level the
evaluation of the reputation risk associated
with particular decisions beyond an individual,
business or function. The GRC is the most
senior executive body responsible for
reviewing and monitoring the effectiveness
of Barclays’ management of reputation risk.
Summary of performance in
the period
Barclays is committed to identifying reputation
risks and issues as early as possible and
managing them appropriately. Throughout
2017, reputation risks and issues were
overseen by the Board Reputation Committee
(RepCo), which reviews the processes and
policies by which Barclays identifies and
manages reputation risk.
RepCo reviewed risks raised by the businesses
and considered whether management’s
proposed actions, for example attaching
conditions to proposed client transactions
or increased engagement with impacted
stakeholders, were appropriate to mitigate the
risks effectively. RepCo also received regular
updates with regard to key reputation risks
and issues, including: legacy conduct issues;
Barclays’ association with sensitive sectors;
cyber and data security; fraud and scams
that could impact Barclays customers
and the resilience of key Barclays systems
and processes.
In 2017, the central reputation management
team received 581 referrals from across
the businesses (625 referrals in 2016) for
consideration. These referrals covered a
variety of sectors including, but not limited
to, defence, fossil fuels and mining.
As part of Barclays 2017 Medium Term
Planning process, material reputation risks
associated with strategic and financial plans
were also assessed.
The effectiveness of the supporting
governance arrangements and management
information, including the impact of other
Principal Risks on Barclays’ reputation,
were reviewed by the Board and senior
management during 2017. Following this,
RepCo requested certain refinements to
reputation risk reporting and processes,
which are in progress.
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Barclays PLC Annual Report 2017 195
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Risk performance
Legal risk
Legal risk
The risk of loss or imposition of penalties, damages or fines from the failure of the
firm to meet its legal obligations including regulatory or contractual requirements.
All disclosures in this section are unaudited unless otherwise stated.
Business and functions have progressed
implementing the requirements outlined
in the LRMF within their areas, including
strengthening evaluation and monitoring of
their legal risk profile. Mandatory training in
relation to legal risk was rolled out across the
Group in Q4 2017.
The Legal Function organisation and coverage
model aligns expertise to businesses,
functions, products, activities and geographic
locations. It continues to provide legal
support, oversight and challenge across
the organisation, including advising on
appropriate identification, management and
escalation of legal risk and potential legal
outcomes aligned to other Principal Risks.
A legal risk oversight committee, as part
of the Legal Executive Committee, meets
on a quarterly basis to oversee, challenge
and monitor legal risk across the Group.
Overall, in 2017 significant progress has been
made to implement legal risk as a new
Principal Risk across the Group. As the LRMF
matures, Barclays will continue to strengthen
and embed consistent Group-wide processes
to support management and monitoring of
legal risk as well as drive continued education
to support proactive identification and
escalation of legal risk issues.
Overview
The Group conducts diverse activities in a
highly regulated global market and therefore
is exposed to the risk of loss or imposition of
penalties, damages, fines, sanctions and other
legal outcomes relating to a failure to meet
its legal obligations in the conduct of its
business. Legal risk encompasses the failure
of the Group to appropriately escalate or
manage contractual arrangements, litigation,
intellectual property, competition/anti-trust
issues, use of law firms and its contact
with regulators. The multitude of laws and
regulations pertaining to the Group’s activities
across the globe are by nature dynamic
resulting in a level of legal risk that cannot
be avoided. A Legal Risk Management
Framework (LRMF) prescribes the
requirements for identification, escalation,
measurement and management of legal
risk to support effective risk management
across the Group.
Summary of performance in
the period
In 2017, Barclays remained focused on
continuous improvements to manage
legal risk effectively, with an emphasis on
enhancing governance to help identify risks
at earlier stages and escalate as appropriate.
This is supported by the LRMF which includes
legal risk tolerances, key indicators and
governance. The LRMF is supported by legal
risk policies and associated standards
covering six areas of identified legal risk and
mandatory minimum control requirements.
For further information, see legal risk
management on page 137. Legal risk policies
and tolerances were reviewed and enhanced
during 2017 to reflect the LRMF.
196 Barclays PLC Annual Report 2017
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Risk review Risk review
Supervision and regulation
Supervision of the Group
The 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
authorisations to conduct banking and
financial services business in each of the
jurisdictions in which the 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.
These requirements are set in legislation and
by the relevant central banks and regulatory
authorities that authorise, regulate and
supervise the Group in the jurisdictions in
which it operates. Often, the requirements
may reflect global standards developed by
international bodies such as the G20, the
Basel Committee on Banking Supervision
(BCBS), the International Organisation of
Securities Commissions (lOSCO) and the
Financial Stability Board (FSB). Various bodies,
such as central banks and self-regulatory
organisations, also create voluntary Codes
of Conduct which affect the way the Group
does business.
Regulatory developments impact the Group
globally. We focus particularly on EU, UK and
US regulation due to the location of Barclays’
principal areas of business. Regulations
elsewhere may also have a significant impact
on Barclays due to the location of its branches,
subsidiaries and, in some cases, clients.
For more information on the risks related
to supervision and regulation of the Group,
including regulatory change, please see the
Risk Factor entitled ‘Regulatory Change
agenda and impact on Business Model’
on page 122.
Supervision in the EU
Financial regulation in the UK is to a
significant degree shaped and influenced by
EU legislation. This provides the structure of
the European Single Market, an important
feature of which is the framework for the
regulation of authorised firms in the EU. This
framework is designed to enable a credit
institution or investment firm authorised in
one EU member state to conduct banking or
investment business in another member state
through the establishment of branches or by
the provision of services on a cross-border
basis without the need for local authorisation.
Barclays’ operations in Europe are authorised
and regulated by a combination of both home
and host regulators. The impact of the UK’s
departure from the EU in this respect and,
more broadly, its impact on the UK domestic
regulatory framework, is yet to be determined.
In the UK, the Bank of England (BoE) has
responsibility for monitoring the UK financial
system as a whole, including by way of
conducting annual stress tests on UK banks.
The day-to-day regulation and supervision of
the Group is divided between the Prudential
Regulation Authority (PRA) (a division
of the 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 and Barclays Bank UK PLC
are authorised and subject to solo prudential
supervision by the PRA and subject to conduct
regulation and supervision by the FCA.
Barclays is also subject to prudential
supervision by the PRA on a Group
consolidated basis. Barclays Bank UK PLC’s
authorisation is subject to restrictions on
activities expected to be lifted prior to April
2018. Barclays Services Limited is an
appointed representative of Barclays Bank PLC
and Clydesdale Financial Services Limited (the
principals). This status enables Barclays
Services Limited to undertake activities which
would otherwise require authorisation, with
the principals assuming regulatory
responsibility for the conduct of Barclays
Services Limited as their appointed
representative. Barclays Bank PLC’s German,
French and Italian branches are also subject to
direct supervision by the European Central
Bank (ECB). Barclays Bank Ireland PLC, which
is licensed as a credit institution by the Central
Bank of Ireland, has submitted an application
for an extension of its current licence to
support the Group’s ability to provide services
to EU clients after Brexit.
In its role as supervisor, the PRA seeks to
maintain the safety and soundness of financial
institutions with the aim of strengthening, but
not guaranteeing, the protection of customers
and the financial system. The PRA’s continuing
supervision of financial institutions is
conducted through a variety of regulatory
tools, including the collection of information
by way of prudential returns, reports obtained
from skilled persons, visits to firms and regular
meetings with management to discuss issues
such as performance, risk management,
conduct, culture and strategy.
The regulation and supervision of market
conduct matters is the responsibility of the
FCA. The FCA’s regulation of the UK firms
in the Group is carried out through a
combination of continuous assessment,
regular thematic work and project work based
on the FCA’s sector assessments, which
analyse the different areas of the market and
the risks that may lie ahead.
Both the PRA and the FCA have continued to
develop and apply a more assertive approach
to supervision and the application of existing
standards. This may include application of
standards that either anticipate or go beyond
requirements established by global or EU
standards, whether in relation to capital,
leverage and liquidity, resolvability and
resolution or matters of conduct.
The FCA has retained an approach to
enforcement based on credible deterrence
that has seen significant growth in the size
of regulatory fines. The approach appears
to be trending towards a more US model of
enforcement including vigorous enforcement
of criminal and regulatory breaches,
heightened fines and proposed measures
related to increased corporate criminal liability.
The FCA has focused strongly on conduct risk
and on customer outcomes and will continue
to do so. This has included a focus on the
design and operation of products, the
behaviour of customers and the operation of
markets. This may affect both the incidence
of conduct costs and increase the cost of
remediation.
The FCA and the PRA have also increasingly
focused on individual accountability within
firms. This focus is reflected in the Senior
Managers and Certification Regime (the
SMCR) which came into force in 2016.
The SMCR, which implements the
recommendations in the final report of the
Parliamentary Commission on Banking
Standards relating to individual accountability
in banks, imposes a regulatory approval,
accountability and fitness and propriety
framework in respect of senior or key
individuals within relevant firms.
The UK Serious Fraud Office (SFO) has played
an active role in recent years in investigating
and prosecuting complex fraud, bribery and
corruption. If, as a result of an investigation,
the SFO determines that it has sufficient
evidence to support a realistic prospect of
conviction, and to prosecute would be in the
public interest, the SFO may bring forward
a prosecution. Alternatively, the SFO may
consider using a Deferred Prosecution
Agreement (DPA). DPAs, which were
introduced in February 2014, are judicially
supervised agreements between the SFO
and organisations that could be prosecuted
whereby the SFO suspends prosecution while
the organisation in question complies with
conditions imposed on it by the DPA, such
as the payment of fines.
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Barclays PLC Annual Report 2017 197
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance In addition to umbrella oversight by the FRB
(and applicable Federal Reserve Banks),
certain of Barclays’ branches and subsidiaries
are regulated by additional authorities based
on the location or activities of those entities.
The New York and Florida branches of
Barclays Bank PLC are subject to extensive
supervision and regulation by, as applicable,
the New York State Department of Financial
Services (NYSDFS) and the Florida Office of
Financial Regulation. Barclays Bank Delaware,
a Delaware chartered commercial bank, is
subject to supervision and regulation by
the Delaware Office of the State Bank
Commissioner. The deposits of Barclays Bank
Delaware are insured by the Federal Deposit
Insurance Corporation (FDIC) pursuant to the
Federal Deposit Insurance Act, which also
provides for FDIC supervisory authority over
Barclays Bank Delaware and requires that
Barclays PLC, Barclays Bank PLC and BUSL act
as a source of strength for the insured bank.
This could, among other things, require these
entities to inject capital into Barclays Bank
Delaware if it fails to meet applicable
regulatory capital requirements.
Barclays’ US securities broker/dealer and
investment banking operations, primarily
conducted through Barclays Capital Inc.,
are also subject to ongoing supervision and
regulation by the Securities and Exchange
Commission (SEC), the Financial Industry
Regulatory Authority (FINRA) and other
government agencies and self-regulatory
organisations (SROs) as part of a
comprehensive scheme of regulation of all
aspects of the securities and commodities
business under US federal and state
securities laws.
Similarly, Barclays’ US commodity futures,
commodity options and swaps-related and
client clearing operations are subject to
ongoing supervision and regulation by the
Commodity Futures Trading Commission
(CFTC), the National Futures Association
and other SROs. Barclays Bank PLC is also
prudentially regulated as a swaps dealer so
is subject to the FRB swaps rules with respect
to margin and capital requirements.
Barclays’ US retail and consumer activities,
including the US credit card operations of
Barclays Bank Delaware, are subject to direct
supervision and regulation by the Consumer
Financial Protection Bureau (CFPB). The CFPB
has the authority to examine and take
enforcement action related to compliance
with federal laws and regulations regarding
the provision of consumer financial services
and the prohibition of ‘unfair, deceptive or
abusive acts and practices’.
Supervision in the US
Barclays’ US activities and operations are
subject to umbrella supervision by the Board
of Governors of the Federal Reserve System
(FRB), as well as additional supervision,
requirements and restrictions imposed
by other federal and state regulators.
Barclays PLC, Barclays Bank PLC and their
US branches and subsidiaries are subject
to a comprehensive regulatory framework
involving numerous statutes, rules and
regulations, including the International
Banking Act of 1978, the Bank Holding
Company Act of 1956 (BHC Act), the USA
PATRIOT Act of 2001, the Commodity
Exchange Act, the federal securities laws,
and the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (DFA),
which comprehensively amended the
regulation of financial institutions in the US in
response to the financial crisis, including by
amending the other aforementioned statutes.
ln some cases, US requirements may impose
restrictions on Barclays’ global activities in
addition to its activities in the US.
Barclays PLC and Barclays Bank PLC, along with
Barclays US LLC (BUSL), Barclays’ top-tier US
holding company that holds substantially all of
Barclays’ US subsidiaries and assets (including
Barclays Capital Inc. and Barclays Bank
Delaware) are regulated as bank holding
companies (BHCs) by the FRB. BUSL is subject
to requirements that are similar to those
applicable to large US domestic bank holding
companies, including in respect of capital
adequacy, capital planning and stress testing
(including FRB non-objection to proposed
capital distributions), risk management and
governance, liquidity, leverage limits and
financial regulatory reporting. Barclays Bank
PLC’s US branches are also subject to enhanced
prudential supervision requirements relating to,
among others, liquidity and risk management.
Because the BHC Act generally restricts the
activities of BHCs to banking and activities
closely related to banking, Barclays PLC,
Barclays Bank PLC and BUSL have elected to
be treated as financial holding companies
under the BHC Act. Financial holding
company 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
financial holding company status could result
in increasingly stringent penalties and
ultimately, in the closure or cessation of
certain operations in the US. To qualify as
a financial holding company, Barclays PLC
and Barclays Bank PLC, as foreign banking
organisations and BHCs, and BUSL, as a BHC,
must maintain certain regulatory capital ratios
above minimum requirements and must be
deemed to be ‘well managed’ for US bank
regulatory purposes. In addition, any US
depository institution subsidiaries of the
foreign banking organisation or BHC must
also maintain certain regulatory capital ratios
above minimum requirements and be deemed
to be ‘well managed’ and must have at least a
‘satisfactory’ rating under the Community
Reinvestment Act of 1977.
Supervision in Asia Pacific
Barclays’ operations in Asia Pacific are
supervised and regulated by a broad range
of national regulators including: the Japan
Financial Services Agency, the Bank of Japan,
the Hong Kong Monetary Authority, the Hong
Kong Securities and Futures Commission, the
Monetary Authority of Singapore, the Reserve
Bank of India, the Securities and Exchange
Board of India and the People’s Bank of China,
China’s State Administration of Foreign
Exchange and the China Banking Regulatory
Commission. Such supervision and regulation
extends to activities conducted through
branches of Barclays Bank PLC in the
Asia Pacific region as well as subsidiaries
of the Group.
Global regulatory developments
Regulatory change continues to affect all large
financial institutions. Such change emanates
from global institutions such as the G20,
FSB, IOSCO and BCBS, the EU regionally, and
national regulators, especially in the UK and
US. The level of regulatory and supervisory
uncertainty faced by the Group and the
financial markets more broadly continues to
remain elevated in our primary markets. In the
EU, the legislative and regulatory bodies have
been implementing, and continue to propose,
multiple financial regulatory reforms, and the
conditions of the UK’s eventual exit from the
EU remain unclear. As a result, the extent to
which the UK will continue to follow EU
legislation after Brexit remains unclear. In the
US, the financial regulatory environment
continues to evolve due to political
developments and the ongoing
implementation of regulations arising from
the DFA. Furthermore, the application of
various regional rules on a cross-border basis
increases regulatory complexity for global
financial institutions. For more information,
please see the Risk Factor entitled ‘Regulatory
Change agenda and impact on Business
Model’ on page 122.
The programme of reform of the global
regulatory framework previously agreed by
G20 Heads of Government in April 2009 has
continued to be taken forward throughout
2017. The G20 continues to monitor emerging
risks and vulnerabilities in the financial system
and has stated that it will take action to
address them if necessary.
The FSB has been designated by the G20 as
the body responsible for co-ordinating the
delivery of the global reform programme in
relation to the financial services industry. It
has focused particularly on the risks posed by
systemically important financial institutions. In
2011, G20 Heads of Government adopted FSB
proposals to reform the regulation of global
systemically important financial institutions
(G-SIFls), including global systemically
important banks (G-SIBs), such as Barclays. In
December 2017, the BCBS finalised ‘Basel III’
(the BCBS international regulatory framework
for banks), with the majority of the December
2017 changes expected to be implemented by
1 January 2022, including by regulators in
many jurisdictions where Barclays operates.
198 Barclays PLC Annual Report 2017
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Supervision and regulationRisk review Financial regulatory framework
Financial services regulation can broadly
be categorised as follows: (a) prudential
regulation, which aims to promote safety and
soundness of financial institutions and reduce
risk in the financial system; (b) recovery and
resolution, a key aspect of which is to ensure
that G-SIFls are capable of being resolved
without recourse to taxpayer support and
minimising market disruption; (c) structural
reform and the Volcker rule; (d) market
infrastructure regulation, aimed at enhancing
client protection, financial stability and
market integrity; and (e) conduct, culture
and other regulation.
(a) Prudential regulation
Certain Basel III standards were implemented
in EU law through the Capital Requirements
Directive IV (CRD IV), which came into effect
in 2014 and included new or enhanced
requirements for the quality and quantity of
capital, liquidity and leverage. Beyond the
minimum standards required by CRD IV, the
PRA has expected Barclays, 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.
G-SIBs 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 G-SIB buffer is set by the FSB
according to a bank’s systemic importance
and can range from 1% to 3.5% of risk
weighted assets. The G-SIB buffer must
be met with common equity.
In November 2017, the FSB published an
update to its list of G-SIBs, maintaining the
1.5% G-SIB buffer that applies to Barclays.
The additional G-SIB buffer has been phased
in from January 2016, from when G-SIBs were
required to meet 25% of their designated
buffer. This increased to 50% in 2017, 75%
in 2018 and will increase to 100% in January
2019. Barclays is also subject to, among other
buffers, a countercyclical capital buffer (CCyB)
based on rates determined by the regulatory
authorities in each jurisdiction in which
Barclays maintains exposures. These rates
may vary in either direction. On 27 June 2017,
the FPC raised the UK CCyB rate from 0% to
0.5% with binding effect from 27 June 2018. In
November 2017, the FPC raised the UK CCyB
rate from 0.5% to 1% with binding effect from
28 November 2018. In May 2016, the FPC set
out a framework for determining a systemic
risk buffer (SRB) for ring-fenced bodies and
large building societies (SRB firms). The SRB is
a firm-specific buffer, that is designed to
increase the capacity of SRB firms to absorb
stress, and which must be met solely with
CET1. The framework set out by the PRA,
which sets SRB at rates between 0% and
3% of risk weighted assets, will apply from
1 January 2019.
In January 2016, the BCBS endorsed a new
market risk framework, including rules made
as a result of its ‘fundamental review of the
trading book’ (FRTB). The implementation of
this framework has now been delayed, with
the BCBS setting an expected implementation
date of 1 January 2022 to allow for a review of
the calibration of the framework.
The BCBS’s finalisation of Basel III, noted
above, among other things, eliminated
model-based approaches for certain
categories of risk weighted assets (RWAs),
(for example, operational risk RWAs, CVA
volatility and credit risk RWAs for equity
exposures), revised the standardised
approach’s risk weights for a variety of
exposure categories, replaced the four current
approaches for operational risk (including the
advanced measurement approach) with a
single standardised measurement approach,
established 72.5% of standardised approach
RWAs for exposure categories as a floor for
RWAs calculated under advanced approaches
(referred to as the ‘output floor’), and for
G-SIBs introduced a leverage ratio buffer in an
amount equal to 50% of the applicable G-SIB
buffer used for RWA purposes (meaning, for
Barclays, a leverage ratio buffer of 0.75%).
The majority of the final Basel III changes are
expected to be implemented commencing
1 January 2022, with a five-year phase-in
period for the output floor.
The BCBS has also published final standards
on the securitisation framework and interest
rate risk in the banking book and guidelines
on step-in risk. The final standards for
measuring and controlling large exposures
were published by the BCBS in April 2014 to
take effect in 2019. In November 2016, the
European Commission adopted a proposal
(commonly referred to as CRD V) to begin
the legislative process for introducing these
standards within the EU. These proposals,
if implemented in their current form, would,
among other things, implement FRTB by
overhauling existing rules relating to
standardised and advanced market risk and
the rules governing the inclusion of positions
in the regulatory trading book. The proposals
would also enhance rules for counterparty
credit risk, in line with BCBS proposals
finalised in 2014, strengthen requirements
relating to leverage and large exposures and
introduce a net stable funding ratio (NSFR),
requiring banks to fund their assets with
stable sources of funds. CRD V also proposes
to require that where (i) two or more credit
institutions or investment firms established in
the EU have a common parent undertaking
established outside the EU and (ii) the group
has been identified as a G-SIB or has entities
in the EU (whether subsidiaries or branches)
with total assets of at least €30 billion, the
group must establish an intermediate parent
undertaking, authorised and established in,
and subject to the supervision of, an EU
member state.
IFRS 9 (an accounting standard that covers
accounting for financial instruments), which
was adopted into EU law by the European
Commission in November 2016, came into
force on 1 January 2018. In October 2016, the
BCBS issued two documents on the treatment
of accounting provisions in the regulatory
framework, to take account of the future
move to expected credit loss provisioning
under IFRS and Financial Accounting
Standards Board (FASB) standards. One paper
considered transitional arrangements to phase
in the immediate capital impact of the new
provisioning standards, while the other
discussed more fundamental changes to the
recognition of provisions in regulatory capital
and changes to the risk weighting framework.
The BCBS then published an interim approach
(including transitional arrangements) on
29 March 2017, retaining the current
regulatory treatment of provisions under the
Basel framework for an interim period and
proposing to consider more thoroughly the
longer term regulatory treatment of
provisions. On 28 December 2017, an EU
Regulation came into force to provide
transitional arrangements for mitigating
the impact of the introduction of IFRS 9,
largely in relation to CET1 capital arising from
the expected credit loss accounting measures
set out in IFRS 9. The Regulation has applied
since 1 January 2018.
In the US, BUSL and Barclays Bank PLC’s US
branches are subject to enhanced prudential
supervision requirements as required by the
DFA and described above in ‘Supervision
in the US’.
In addition to prudential regulations already
promulgated under the DFA, the FRB has
issued proposed regulations for NSFR
implementation. The NSFR, as proposed by
the FRB, would apply to US bank holding
companies with more than $250bn in total
assets or $10bn or more in on-balance sheet
foreign exposures, including BUSL, and
consolidated depositary institution
subsidiaries of such banking organisations
with more than $10bn in assets, including
Barclays Bank Delaware. Under the proposed
rule, such entities would be required to
maintain a minimum level of available stable
funding that equals or exceeds the amount
of required stable funding over a one-year
period. Although the proposal provides for an
effective date of 1 January 2018, the FRB has
not finalised its NSFR proposal and the
schedule for finalisation is uncertain.
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Barclays PLC Annual Report 2017 199
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Stress testing
The Group and certain of its members are
subject to supervisory stress testing exercises
in a number of jurisdictions. These exercises
currently include the annual stress testing
programmes of the BoE, the FDIC and the FRB
and the biannual stress testing programme
of the EBA. These exercises are designed to
assess the resilience of banks to adverse
economic or financial developments and
ensure that they have robust, forward-looking
capital planning processes that account for
the risks associated with their business profile.
Assessment by regulators is on both a
quantitative and qualitative basis, the latter
focusing on the Group’s data provision, stress
testing capability and internal management
processes and controls. Failure to meet
requirements of regulatory stress tests, or the
failure by regulators to approve the stress test
results and capital plans of the Group or its
members subject to these exercises, could
result in the Group or certain of its members
being required to enhance its capital position
or limit capital distributions, to any external
holders of its equity or capital or within
the Group.
In the US, certain financial institution
intermediate holding companies formed in
2016, including BUSL, were not required to
participate in the FRB’s Comprehensive Capital
Analysis and Review (CCAR) process in 2017.
These firms, however, were required under the
FRB’s capital plan rule to submit a capital plan
to the FRB that was subject to a confidential
review process based on the assessment
criteria in the capital plan rule. These capital
plans were not subject to the FRB’s
quantitative assessment, which evaluates a
firm’s ability to meet its capital requirements
under stress, under CCAR or supervisory
stress testing in 2017.
(b) Recovery and Resolution
Stabilisation and resolution framework
An important component of the EU legislative
framework is the 2014 Bank Recovery and
Resolution Directive (BRRD) which establishes
a framework for the recovery and resolution of
EU credit institutions and investment firms.
The UK implemented the BRRD through the
Bank Recovery and Resolution Order 2014,
which amended the Banking Act 2009 (the
Banking Act) and the Financial Services and
Markets Act 2000 (FSMA), and the Banks
and Building Societies (Depositor Preference
and Priorities) Order 2014, which amended
the Insolvency Act 1986 (among other
insolvency legislation).
Under the Banking Act, UK resolution
authorities are empowered to intervene
in and resolve a UK financial institution that
is no longer viable. Pursuant to these laws,
the BoE (in consultation with the PRA and
HM Treasury as appropriate) has several
stabilisation options where a banking
institution is failing or likely to fail: (i) transfer
some or all of the securities or business of the
bank to a commercial purchaser; (ii) transfer
some or all of the property, rights and
liabilities of the bank to a ‘bridge bank’ wholly
owned by the BoE or to a commercial
purchaser; (iii) transfer the impaired or
problem assets to an asset management
vehicle to allow them to be managed over
time; (iv) cancel or reduce certain liabilities of
the institution or convert liabilities to equity to
absorb losses and recapitalise the institution
and (v) transfer the banking institution into
temporary public ownership. In addition, the
BoE may apply for a court insolvency order in
order to wind up or liquidate the institution
or to put the institution into special
administration. When exercising any of its
stabilisation powers, the BoE must generally
provide that shareholders bear first losses,
followed by creditors in accordance with the
priority of their claims under normal
insolvency proceedings.
In order to enable the exercise of its
stabilisation powers, the BoE may impose a
temporary stay on the rights of creditors to
terminate, accelerate or close out contracts,
and in some cases to override events of
default or termination rights that might
otherwise be invoked as a result of a
resolution action. In addition, the Banking Act
gives the BoE the power to override, vary, or
impose conditions or contractual obligations
between a UK bank, its holding company and
its group undertakings, in order to enable any
transferee or successor bank to operate
effectively after any of the resolution tools
have been applied. There is also power for
HM Treasury to amend the law (excluding
provisions made by or under the Banking
Act) for the purpose of enabling it to use
its powers under this regime effectively,
potentially with retrospective effect. The
Banking Act powers apply regardless of any
contractual restrictions and compensation
that may be payable.
In July 2016, the PRA issued final rules on
ensuring operational continuity in resolution.
The rules will apply from 1 January 2019
and will require banks to ensure that their
operational structures facilitate effective
recovery and resolution planning and the
continued provision of functions critical to
the economy in a resolution scenario.
In November 2016, the European Commission
proposed a package of amendments to the
BRRD, including the introduction of two new
moratorium tools. On 28 December 2017, an
EU directive came into force harmonising
the priority ranking of unsecured debt
instruments under national insolvency
laws. EU member states are required to
transpose the directive into national law
by 29 December 2018.
The BoE’s preferred approach for the
resolution of the Group is a bail-in strategy
with a single point of entry at Barclays PLC.
Under such a strategy, Barclays PLC’s
subsidiaries would remain operational while
Barclays PLC’s eligible liabilities would be
written down or converted to equity in order
to recapitalise the Group and allow for the
continued provision of services and operations
throughout the resolution.
While regulators in many jurisdictions have
indicated a preference for single point of entry
resolution, additional resolution or bankruptcy
provisions may apply to certain of Barclays
Bank PLC’s subsidiaries or branches. In the
US, Title II of the DFA established the Orderly
Liquidation Authority, a regime for orderly
liquidation of systemically important financial
institutions, which could apply to BUSL.
Specifically, when a systemically important
financial institution is in default or in danger of
default, the FDIC may be appointed as receiver
under the Orderly Liquidation Authority
instead of the institution being resolved
through a voluntary or involuntary proceeding
under the US Bankruptcy Code. In certain
circumstances, including insolvency, violations
of law and unsafe business practices, the
licensing authorities of each US branch of
Barclays Bank PLC and of Barclays Bank
Delaware have the authority to take
possession of the business and property of
the applicable Barclays entity they license or
to revoke or suspend such licence. Specific
resolution regimes may apply to certain
Barclays entities or branches in other
jurisdictions in which Barclays does business.
TLAC and MREL
The BRRD requires competent authorities to
impose a Minimum Requirement for own
funds and Eligible Liabilities (MREL) on
financial institutions to facilitate their orderly
resolution without broader financial disruption
or recourse to public funds. Following the
finalisation of the BRRD, in November 2015,
the FSB finalised its proposals to enhance the
loss absorbing capacity of G-SIBs to ensure
that there is sufficient loss absorbing and
recapitalisation capacity available in resolution
to implement an orderly resolution which
minimises the impact on financial stability,
ensures the continuity of critical functions and
avoids exposing taxpayers to losses. To this
end, the FSB has set a new minimum
requirement for ‘total loss absorbing capacity’
(TLAC). As the TLAC standard requires a
certain amount of those loss absorbing
resources to be committed to subsidiaries or
sub-groups that are located in host
jurisdictions and deemed material for the
resolution of the G-SIB as a whole, the FSB
published guiding principles on internal TLAC
on 6 July 2017. These provide guidance on the
size and composition of the internal TLAC
requirement, cooperation and co-ordination
between home and host authorities and the
trigger mechanism for internal TLAC.
200 Barclays PLC Annual Report 2017
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Supervision and regulationRisk review The EU has proposed to implement the
TLAC standard (including internal TLAC)
via the MREL requirement and the European
Commission has proposed amendments in
its CRD V proposal to achieve this. As the
proposals remain in draft, it is uncertain what
the final requirements and timing will be.
Under the BoE’s statement of policy on
MREL, the BoE will set MREL for UK G-SIBs as
necessary to implement the TLAC standard
and institution or group-specific MREL
requirements will depend on the preferred
resolution strategy for that institution or
group. The MREL requirements will be phased
in from 1 January 2019 and will be fully
implemented by 1 January 2022, at which time
G-SIBs with resolution entities incorporated in
the UK, including Barclays, will be required to
meet an MREL equivalent to the higher of (i)
two times the sum of its Pillar 1 and Pillar 2A
requirements or (ii) the higher of two times its
leverage ratio or 6.75% of leverage exposures.
However, the PRA will review the MREL
calibration by the end of 2020, including
assessing the proposal for Pillar 2A
recapitalisation which may drive a different
1 January 2022 MREL requirement than
currently proposed. In addition, it is proposed
that CET1 capital cannot be counted towards
both MREL and the combined buffer
requirement (CBR), meaning that the CBR will
effectively be applied above both the Pillar 1
and Pillar 2A requirements relating to own
funds and MREL.
In October 2016, the BCBS published its final
standard on the prudential treatment of banks’
investments in TLAC instruments issued by
other institutions, confirming that
internationally active banks (both G-SIBs and
non-G-SIBs) must deduct their holdings of
TLAC instruments that do not otherwise qualify
as regulatory capital from their own Tier 2
capital. Where the investing bank owns less
than 10% of the issuing bank’s common shares,
TLAC holdings are to be deducted from Tier 2
capital only to the extent that they exceed 10%
of the investing bank’s common equity (or 5%
for non-regulatory capital TLAC holdings);
below this threshold, holdings would instead be
subjected to risk-weighting. G-SIBs may only
apply risk-weighting to non-regulatory capital
TLAC holdings by the 5% threshold where
those holdings are in the trading book and are
sold within 30 business days.
In December 2016, the FRB issued final
regulations for TLAC, which apply to BUSL.
The FRB’s final TLAC rule, while generally
following the FSB term sheet, contains a
number of provisions that are more restrictive.
For example, the FRB’s TLAC rule includes
provisions that require BUSL (the Barclays IHC)
to have (i) a specified outstanding amount of
eligible long-term debt, (ii) a specified
outstanding amount of TLAC (consisting of
common and preferred equity regulatory
capital plus eligible long-term debt), and (iii) a
specified common equity buffer. In addition,
the FRB’s TLAC rule would prohibit BUSL, for
so long as the Group’s overall resolution plan
treats BUSL as a non-resolution entity, from
issuing TLAC to entities other than the Group
and its non-US subsidiaries.
Bank Levy
The BRRD requires EU member states to
establish a pre-funded resolution financing
arrangement with funding equal to 1% of
covered deposits by 31 December 2024 to
cover the costs of bank resolutions. Where
the amount of such pre-funding is insufficient,
the BRRD requires that EU member states
raise subsequent contributions. The UK
government raises both pre-funded and
subsequent contributions that would be
required were the pre-funded contributions
not to cover costs or other expenses incurred
by use of the resolution funds by way of a
tax on the balance sheets of banks known
as the ‘Bank Levy’.
Recovery and Resolution Planning
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. The resolution
pack contains detailed information on the
authorised firm in question which will be used
to develop resolution strategies for that firm,
assess its current level of resolvability against
the strategy, and to inform work on identifying
barriers to the implementation of operational
resolution plans. In the UK, recovery and
resolution planning (RRP) work is considered
part of continuing supervision. Removal of
potential impediments to an orderly resolution
of the Group or one or more of its subsidiaries
is considered as part of the BoE’s and PRA’s
supervisory strategy for each firm, and the
PRA can require firms to make significant
changes in order to enhance resolvability.
Barclays currently provides the PRA with a
recovery plan annually and with a resolution
pack every other year.
In the US, Title I of the DFA and the
implementing regulations issued by the FRB
and the FDIC require each bank holding
company with assets of $50 billion or more,
including Barclays, to prepare and submit
annually a plan for the orderly resolution of
subsidiaries and operations in the event of
future material financial distress or failure.
Barclays’ next submission will be due on
1 July 2018.
Similar requirements (which include powers
for competent authorities to adopt resolution
measures) are in force or expected to come
into force imminently in various other
jurisdictions which will affect the Group
to the extent it has operations in a relevant
jurisdiction.
(c) Structural reform and the Volcker rule
Recent developments in banking law and
regulation in the UK have included legislation
designed to ring-fence the retail and smaller
deposit-taking businesses of large banks. The
Financial Services (Banking Reform) Act 2013
put in place a framework for this ring-fencing
and secondary legislation passed in 2014
elaborated on the operation and application of
the ring-fence. Ring-fencing will require,
among other things, the separation of the
retail and smaller deposit-taking business
activities of UK banks in the UK and branches
of UK banks in the European Economic Area
(EEA) into a legally distinct, operationally
separate and economically independent entity,
which will not be permitted to undertake a
range of activities from 1 January 2019.
Ring-fencing rules have been published by
the PRA, further determining how ring-fenced
banks will be permitted to operate. Further
rules published by the FCA set out the
disclosures that non-ring-fenced banks are
required to make to prospective account
holders of non-ring-fenced banks who are
individuals. Barclays’ approach to compliance
with the terms of the UK ring-fencing regime
is described in the section titled ‘Structural
reform’ on page 204.
US regulation places further substantive limits
on the activities that may be conducted by
banks and holding companies, including
foreign banking organisations such as
Barclays. 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, Barclays has
developed and implemented an extensive
compliance and monitoring programme
addressing proprietary trading and covered
fund activities (both inside and outside
of the US).
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Barclays PLC Annual Report 2017 201
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance (d) Market infrastructure regulation
In recent years, regulators 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 information related to many
derivatives transactions. Some of the most
significant developments are described below.
The European Market Infrastructure
Regulation (EMIR) has introduced
requirements designed to improve
transparency and reduce the risks associated
with the derivatives market, some of which
are still to be fully implemented. EMIR requires
that certain entities that enter into derivative
contracts: report such transactions; clear
certain over the counter (OTC) transactions
where mandated to do so; and implement risk
mitigation standards in respect of uncleared
OTC trades. The obligation to clear derivatives
only applies to certain counterparties and
specified types of derivatives. In October 2016,
the European Commission adopted a
delegated regulation relating to the exchange
of collateral, one of the risk mitigation
techniques under EMIR. Provisions relating to
initial margin have entered into force, subject
to a phase-in until 1 September 2020.
Provisions relating to variation margin have
already entered into force. EMIR has potential
operational and financial impacts on the
Group, including by imposing collateral
requirements.
The European Commission has recently
proposed various technical changes to EMIR,
some of which could result in certain central
counterparties (CCPs) used by the Group
being forced to relocate to a Eurozone
jurisdiction. The changes proposed may have
additional operational and financial impacts
on the Group’s derivatives business.
CRD IV aims to complement EMIR by applying
higher capital requirements for bilateral,
uncleared OTC derivative trades. Lower capital
requirements for cleared derivative trades are
only available if the CCP through which the
trade is cleared is recognised as a ‘qualifying
central counterparty’ (QCCP) which has been
authorised or recognised under EMIR. Higher
capital requirements may apply to the Group
following the UK’s departure from the EU, if
UK CCPs are then no longer regarded as
QCCPs and vice versa.
The new Markets in Financial Instruments
Directive and Markets in Financial Instruments
Regulation (collectively referred to as
MiFID II) have largely been applicable since
3 January 2018. MiFID II affects many of the
investment markets in which the Group
operates, the instruments in which it trades
and the way it transacts with market
counterparties and other customers. Changes
introduced by MiFID II include: the
introduction of a new type of trading venue
(the organised trading facility), capturing
non-equity trading that falls outside the MiFID
I regime; the strengthening of conduct of
business requirements, including in relation to
conflicts of interest; the expansion of the
concept of, and requirements applicable to,
firms which systematically trade against
proprietary capital (systematic internalisers);
and increased obligations on firms to secure
best execution for their clients. Additionally,
MiFID II mandates a trading obligation for
certain types of cleared derivatives.
MiFID II strengthens investor protections,
imposes new curbs on high frequency and
commodity trading, increases pre- and
post-trade transparency and introduces a new
regime for third country (non-EU) firms. MiFID
II also includes new requirements relating to
non-discriminatory access to trading venues,
central counterparties and benchmarks,
research unbundling and harmonised
supervisory powers and sanctions
across the EU.
Some final rules and guidance on the
application of MiFID II are yet to be published,
therefore, we anticipate continuing
development of application of the rules within
the market into 2018.
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 addressed the
applicability of certain of their regulations to
cross-border transactions, and are continuing
to review and consider their rules with respect
to their application on a cross-border basis,
including with respect to their registration
requirements in relation to non-US swap
dealers and security-based swap dealers. The
regulators may adopt further rules, or provide
further guidance, regarding the cross-border
applicability of such rules. 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.
The EU Benchmarks Regulation came into
force in June 2016. Although some provisions
have applied since 2016, the majority of
provisions have applied since 3 January 2018
(subject to transitional provisions). This
regulation applies to the administration,
contribution of data to and use of benchmarks
within the EU. Financial institutions within the
EU will be prohibited from using benchmarks
unless their administrators are authorised,
registered or otherwise recognised in the EU.
This may impact the ability of Barclays to use
certain benchmarks in the future.
In 2015, the European Commission launched
work on establishing a Capital Markets Union
(CMU) within the EU. The CMU aims to
increase the availability of non-bank financing
in the EU, deepen the EU single market for
financial services and promote growth and
financial stability. The CMU work programme
is now being considered in light of Brexit.
Recent proposals have therefore included
considerably broadened central supervisory
powers for the European Supervisory
Authorities (ESAs) (including in relation to
outsourcing, and delegation and risk transfer
by entities authorised in the EU to entities or
branches in third countries) and an increased
focus by the ESAs on ongoing equivalence
assessments in the context of third
country regimes in various EU regulations
and directives.
Certain participants in US swap markets are
required to register with the CFTC as ‘swap
dealers’ or ‘major swap participants’ and/or,
following the compliance date for relevant
SEC rules, with the SEC as ‘security-based
swap dealers’ or ‘major security-based swap
participants’. Such registrants are subject to
CFTC, and would be subject to SEC regulation
and oversight. The SEC finalised the rules
governing security based swap dealer
registration in 2015 but clarified that
registration timing is contingent upon the
finalisation of certain additional rules under
Title VII of DFA, several of which are still
pending. Additional SEC rules governing
security-based swap transactions, including
security-based swap reporting, will become
effective after the security-based swap dealer
registration date. Entities required to register
are subject to business conduct, record-
keeping and reporting requirements and will
be subject to capital and margin requirements
in connection with transactions with certain
US and non-US counterparties. Barclays Bank
PLC has provisionally registered with the CFTC
as a swap dealer and is subject to CFTC rules
on business conduct, record-keeping and
reporting. With respect to margin and capital,
Barclays is subject to the rules of the FRB in
connection with its swap dealer business.
202 Barclays PLC Annual Report 2017
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Supervision and regulationRisk review The CFTC has approved certain comparability
determinations that permit substituted
compliance with non-US regulatory regimes
for certain swap regulations related to
business conduct and other requirements,
while other determinations remain pending.
Most recently, in October 2017, the CFTC
issued an order permitting substituted
compliance with EU margin rules for certain
uncleared derivatives. However, as Barclays 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 CFTC has
stated that its transaction-level rules (such as
margin and documentation requirements)
would apply to certain transactions entered
into between a non-US swap dealer and a
non-US counterparty, if the transactions are
arranged, negotiated or executed by personnel
in the US, but has delayed the compliance
date for this requirement until the effective
date of future CFTC action addressing the way
in which each transaction-level requirement
must be applied.
It is unclear whether further changes will be
made to the CFTC’s proposed rules or when
they will become effective. In addition, it is
uncertain whether and to what degree other
US regulators, such as the FRB, will take an
approach similar to the CFTC’s regarding
substituted compliance.
(e) Conduct, culture and other regulation
Conduct and culture
On 7 March 2016, the PRA and FCA
introduced measures to increase the
individual accountability of senior managers
and other covered individuals in the banking
sector. The new regime comprises the
‘Senior Managers Regime’, which applies to
a limited number of individuals with senior
management responsibilities within a firm, the
‘Certification Regime’, which is intended to
assess and monitor the fitness and propriety
of a wider range of employees who could pose
a risk of significant harm to the firm or its
customers, and conduct rules that individuals
subject to either regime must comply with.
From March 2017, the conduct rules have
applied more widely to other staff of firms
within the scope of the regime. The Financial
Services Act 2010, among other things,
requires the UK regulators to make rules about
remuneration and to require regulated firms to
have a remuneration policy that is consistent
with effective risk management.
The Banking Act also amended FSMA to allow
the FCA to make rules requiring firms to
operate a collective consumer redress scheme
to deal with cases of widespread failure by
regulated firms to meet regulatory
requirements that may have created
consumer detriment.
Our regulators have also 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
Barclays has to comply with national data
protection laws, governing the collection, use
and disclosure of personal data, in a majority
of the countries in which it operates. From
25 May 2018, data protection laws throughout
the EU will be replaced by a single General
Data Protection Regulation (GDPR) which
enhances the rights and protections available
to data subjects. The UK government has
confirmed the UK will adopt and apply the
GDPR from May 2018 and a bill has been
published to implement GDPR. The impact
across Barclays will be significant, affecting
not only Group entities operating and
processing personal data within the EU but
also those outside the EU offering goods or
services to, or monitoring, individuals within
the EU. The GDPR contains significant
financial penalties for data protection
breaches and non-compliance, of up to
4% of Group global turnover.
A number of recent developments have
indicated a clear political and regulatory desire
to make customer transactional account
information more easily accessible to
customers and parties providing services to
them, such as the revised Payment Services
Directive (PSD2) (which, in accordance with
the requirements under that Directive, must
have been implemented by 13 January 2018).
In addition to attempting to harmonise
conduct rules for all providers of electronic
payment services in the EU, PSD2 also creates
a new prudential authorisation regime for
non-bank payment services providers. PSD2
replaces the previous Payment Services
Directive, and has a wider scope, applying
transparency and information requirements to
payment transactions in all currencies where
the provider of at least one leg of the payment
service is located in the EU.
Cyber security
Regulators in the EU and US have been
increasingly focused on cyber security risk
management for banking organisations and
have proposed laws and regulations and other
requirements that necessitate implementation
of a variety of increased controls for regulated
Barclays entities. These include, among
others, the adoption of cyber security policies
and procedures meeting specified criteria,
minimum required security measures,
enhanced reporting, compliance certification
requirements and other cyber and information
risk governance measures. When
implemented, the proposals may increase
technology and compliance costs for Barclays.
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 legislation has broad
application and in certain circumstances may
have extra-territorial impact on entities,
persons or activities located outside the UK,
including Barclays PLC and its subsidiaries. In
practice, the legislation requires Barclays to
have adequate procedures to prevent bribery
which, due to the extra-territorial nature of
the status, makes this both complex and
costly.
On 30 September 2017, the Criminal Finances
Act 2017 introduced new corporate criminal
offences of failing to prevent the facilitation of
UK and overseas tax evasion. The legislation
has very broad extra-territorial application and
may impact entities, persons or activities
located outside the UK, including Barclays PLC
and its subsidiaries. It also requires Barclays
to have reasonable prevention procedures in
place to prevent the criminal facilitation
of tax evasion by persons acting for, or
on behalf of, Barclays.
In the US, the Bank Secrecy Act, the USA
PATRIOT Act 2001 and regulations thereunder
contain numerous anti-money laundering and
anti-terrorist financing requirements for
financial institutions. In addition, Barclays is
subject to the US Foreign Corrupt Practices
Act, which prohibits certain payments to
foreign officials, as well as rules and
regulations relating to economic sanctions
and embargo programs administered by
the US Office of Foreign Assets Control
which restrict certain business activities
with certain individuals, entities, groups,
countries and territories.
Two significant new regulatory rules will be
coming into force in the US in 2018: the New
York Department of Financial Services (DFS)
Rule 504 and the US Department of Treasury’s
Financial Crime Enforcement Network
(FinCEN) Customer Due Diligence (CDD) Rule.
Rule 504 enumerates detailed transaction
filtering and screening requirements for
potential Bank Secrecy Act and anti-money
laundering violations and transactions with
sanctioned entities, applicable to institutions
regulated by the DFS (including Barclays Bank
PLC, New York branch) and requires a senior
bank official to certify compliance. The CDD
Rule requires Barclays to identify natural
beneficial owners above a certain threshold
of clients that are legal entities within
the US market.
In some cases, US state and federal
regulations addressing sanctions, money
laundering and other financial crimes may
impact entities, persons or activities located
outside the US, including Barclays PLC and
its subsidiaries. The enforcement of these
regulations has been a major focus of US state
and federal government policy relating to
financial institutions in recent years, and
failure of a financial institution to ensure
compliance could have serious legal,
financial and reputational consequences
for the institution.
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Barclays PLC Annual Report 2017 203
Financial reviewFinancial statementsShareholder informationStrategic reportRisk reviewGovernance Barclays PLCa
Future State Legal Entity
Barclays Bank UK PLC
Barclays Services Limited
Barclays Bank PLC
Divisional Constructs
and ServCo
Barclays UK
UK consumers and business bank
differentiated by scale and digital
innovation
ServCo
Provides critical services to Barclays UK
and Barclays International to deliver
operational continuity
Enabling world-class services for our
customers and clients while driving
efficiency
Barclays International
Diversified wholesale and consumer bank
Note
a Illustration of Barclays business divisions in preparation for regulatory ring-fencing. Plans are subject to internal and regulatory approvals and may change.
Structural reform
Overview
Barclays intends to achieve ring-fencing
separation by transferring the Barclays UK
division of Barclays Bank PLC to Barclays Bank
UK PLC, the ring-fenced bank of the Group.
Immediately following the transfer, Barclays
Bank PLC’s shares in Barclays Bank UK PLC will
be distributed to the Parent company, Barclays
PLC, establishing Barclays Bank UK PLC as a
direct subsidiary of Barclays PLC. Barclays
Bank PLC will continue to house the Barclays
International division. The two banking
entities will operate alongside one another,
together with Barclays Services Limited
(ServCo), as subsidiaries of Barclays PLC
within the Barclays Group.
In order to achieve this target-state structure,
Barclays will need to undertake a number
of legal transfers, including the transfer of
customer and non-customer assets, liabilities
and contractual arrangements.
Barclays is using a court approved statutory
ring-fencing transfer scheme (RFTS) process
as set out in the Financial Services and
Markets Act 2000 to conduct the majority of
these transfers. In addition to the transfers
conducted through the RFTS, certain items
will be transferred via separate arrangements.
Barclays is on track to be compliant with
ring-fencing requirements well in advance of
the 1 January 2019 statutory deadline.
Timeline
Barclays’ structural reform timeline, including
progress to date and indicative future
milestones is as follows:
■■ 2015:
– Barclays Bank UK PLC, the legal entity
which will become the ring-fenced bank,
was incorporated.
■■ 2016:
– Barclays UK and Barclays International
business divisions were established
– Barclays’ US intermediate holding
company was established as an umbrella
holding company for Barclays’ US
subsidiaries, including Barclays Capital
Inc. (US broker-dealer) that operates key
investment banking businesses and
Barclays Bank Delaware that operates
Barclaycard US
– Barclays Bank UK PLC banking
authorisation application was submitted
to the regulators
– ServCo became a direct subsidiary of
Barclays PLC.
■■ 2017:
– Banking licence (with restrictions)
granted to Barclays Bank UK PLC in
April 2017
– The majority of assets, liabilities, and
other items connected with service
provision were transferred from Barclays
Bank PLC to ServCo, resulting in the
execution of the ServCo build being
substantially complete
– Transfers of employees to the target
structure employing entities took place in
September 2017 under the Transfer of
Undertakings (Protection of Employment)
Regulations 2006
– Sort codes have been split between
Barclays Bank UK PLC and Barclays Bank
PLC, with the last tranche completed in
January 2018, so that each of the Group’s
sort codes is aligned to a single bank
– RFTS court process has been initiated
with the Directions Hearing held at the
High Court of England and Wales on
10 November 2017, where the Barclays
Group’s communications programme
for notifying customers and other
stakeholders of the RFTS was approved.
■■ 2018:
– Sanction Hearing will be held on 26 and
27 February 2018 at which the Court will
be requested to sanction Barclays’ RFTS
– Subject to the Court sanctioning the
RFTS, Barclays UK businesses and related
items will be transferred to Barclays Bank
UK PLC at the RFTS effective date,
currently expected to be 1 April 2018.
Immediately following the RFTS transfers, the
shares in Barclays Bank UK PLC will be
transferred from Barclays Bank PLC to Barclays
PLC, establishing Barclays Bank UK PLC as a
direct subsidiary of Barclays PLC.
Illustrative unaudited pro forma financials for
Barclays Bank UK PLC and Barclays Bank PLC
are available at home.barclays/results.
204 Barclays PLC Annual Report 2017
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Supervision and regulationRisk review Financial review
A review of the performance of Barclays, including the key performance indicators, and the
contribution of each of our businesses to the overall performance of the Group.
Financial review
■■ Key performance indicators
■■ Consolidated summary income statement
■■ Income statement commentary
■■ Consolidated summary balance sheet
■■ Balance sheet commentary
■■ Analysis of results by business
■■ Non-IFRS performance measures
Page
206
208
209
210
211
212
223
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Barclays PLC Annual Report 2017 205
Risk reviewFinancial statementsShareholder informationStrategic reportFinancial reviewGovernance Key performance indicators
In assessing the financial performance of the Group, management uses a range of KPIs which focus on the Group’s financial strength, the delivery
of sustainable returns and cost management. Significant strategic progress was made in 2017 with the closure of Barclays Non-Core and sell down
of our stake in Barclays Africa, marking the completion of our restructuring and enabling us to set new targets for Group returns and costs.
The Non-Core segment was closed on 1 July 2017 with RWAs of £23bn, below guidance of approximately £25bn as set out in the 2016 KPIs. With
the closure of Non-Core we no longer have a Core and Non-Core distinction within the Group and hence the previous target of Group RoTE to
converge with Core RoTE has been updated. The Group is now targeting RoTE, excluding litigation and conduct, of greater than 9% in 2019 and
greater than 10% in 2020, based on a Group CET1 ratio of c.13%.
Guidance for Group operating expenses, excluding litigation and conduct, is £13.6-13.9bn in 2019 and to have a cost: income ratio of below 60%.
Non-IFRS performance measures
Barclays’ management believes that the
non-IFRS performance measures included in
this document provide valuable information to
the readers of the financial statements as they
enable the reader to identify a more consistent
basis for comparing the business’ performance
between financial periods, and provide more
detail concerning the elements of
performance which the managers of these
businesses are most directly able to influence
or are relevant for an assessment of the
Group. They also reflect an important aspect
of the way in which operating targets are
defined and performance is monitored by
Barclays’ management. However, any
non-IFRS performance measures in this
document are not a substitute for IFRS
measures and readers should consider the
IFRS measures as well. Refer to pages 223 to
225 for further information and calculations
of non-IFRS performance measures included
throughout this section, and the most directly
comparable IFRS measures.
Definition
Why is it important and how the Group performed
CRD IV fully loaded CET1 ratio
Capital requirements are part of the
regulatory framework governing how banks
and depository institutions are supervised.
Capital ratios express a bank’s capital as
a percentage of its RWAs as defined by
the PRA.
In the context of CRD IV, the fully loaded
CET1 ratio is a measure of capital that is
predominantly common equity as defined
by the CRR.
Average UK leverage ratio
The ratio is calculated as the average fully
loaded Tier 1 capital divided by average UK
leverage exposure. The average exposure
measure excludes qualifying central
bank claims.
The Group’s capital management objective is
to maximise shareholder value by prudently
managing the level and mix of its capital to:
ensure the Group and all of its subsidiaries
are appropriately capitalised relative to their
regulatory minimum and stressed capital
requirements, support the Group’s risk
appetite, growth and strategic options, while
seeking to maintain a robust credit proposition
for the Group and its subsidiaries.
The Group’s CRD IV fully loaded CET1 ratio
increased to 13.3% (2016: 12.4%), as RWAs
decreased £53bn to £313bn and CET1
capital reduced to £41.6bn (2016: £45.2bn).
The 90bps improvement was driven by
organic capital generation from continuing
operations, and the benefit of the proportional
consolidation of BAGL and rundown of
Non-Core, partially offset by adverse
movements in reserves and the net impact
of the remeasurement of US DTAs.
Group target: CET1 ratio target of 150-200bps
above the expected end point regulatory
minimum level, providing 450-500bps buffer
to the Bank of England stress test systemic
reference point.
The leverage ratio is non-risk based and is
intended to act as a supplementary measure
to the risk-based capital metrics such as the
CET1 ratio.
The average UK leverage ratio increased to 4.9%
(2016: 4.5%) driven by a decrease in average UK
leverage exposure to £1,045bn (2016: £1,137bn),
partially offset by a decrease in the average fully
loaded Tier 1 capital to £51.2bn (2016: £51.6bn).
Group target: maintaining the leverage
ratio above the expected end point
minimum requirement.
13.3%
CRD IV fully loaded CET1 ratio
2016: 12.4%
2015: 11.4%
4.9%
Average UK leverage ratio
2016: 4.5%
2015: n/a
206 Barclays PLC Annual Report 2017
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Financial review Definition
Why is it important and how the Group performed
Return on average tangible shareholders’
equity
RoTE is calculated as profit after tax
attributable to ordinary shareholders,
including an adjustment for the tax credit
recorded in reserves in respect of other equity
instruments, as a proportion of average
shareholders’ equity excluding non-
controlling interests and other equity
instruments adjusted for the deduction
of intangible assets and goodwill.
Operating expenses
Operating expenses excluding litigation
and conduct.
Cost: income ratio
Operating expenses divided by total income.
(3.6%)
Group RoTE
2016: 3.6%
2015: (0.7%)
5.6%
Group RoTE excluding
litigation and conduct,
losses related to Barclays’
sell down of BAGL and the
remeasurement of US DTAs
£14.2bn
Operating expenses excluding
litigation and conduct
2016: £15.0bn
2015: £14.1bn
73%
Cost: income ratio
2016: 76%
2015: 84%
This measure indicates the return generated
by the management of the business based on
shareholders’ tangible equity. Achieving a
target RoTE demonstrates the organisation’s
ability to execute its strategy and align
management’s interests with the
shareholders’. RoTE lies at the heart of the
Group’s capital allocation and performance
management process.
RoTE for the Group was negative 3.6%
(2016: positive 3.6%) reflecting an attributable
loss of £1,922m (2016: profit of £1,623m),
which included charges for litigation and
conduct of £1,207m, a £1,090m impairment
of Barclays’ holding in BAGL, a £1,435m loss
on the sale of 33.7% of BAGL’s issued share
capital and a one-off net charge of £901m due
to the remeasurement of US DTAs in Q417.
RoTE for the Group excluding litigation and
conduct, losses related to the sell down of
BAGL and the remeasurement of US DTAs
was 5.6%. Based on a CET1 ratio of 13% this
would have been 5.5%.
Group target: Group RoTE, excluding litigation
and conduct, of greater than 9% in 2019 and
greater than 10% in 2020, based on a CET1
ratio of c.13%.
Barclays views operating expenses as a key
strategic area for banks; those who actively
manage costs and control them effectively
will gain a strong competitive advantage.
Operating expenses for the Group were £15.5bn
(2016: £16.3bn). Excluding litigation and
conduct charges, Group operating expenses
were £14.2bn, in line with 2017 guidance.
Group target: operating expenses, excluding
litigation and conduct, of £13.6 to 13.9bn
in 2019.
This is a measure management uses to assess
the productivity of the business operations.
Restructuring the cost base is a key execution
priority for management and includes a
review of all categories of discretionary
spending and an analysis of how we can run
the business to ensure that costs increase at
a slower rate than income.
The Group cost: income ratio reduced to 73%
(2016: 76%) driven by a 5% reduction in
operating expenses, partially offset by a 2%
reduction in total income. The reduction in
operating expenses was primarily driven by
lower Non-Core related operating expenses.
Group target: a cost: income ratio of below 60%.
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Barclays PLC Annual Report 2017 207
Risk reviewFinancial statementsShareholder informationStrategic reportFinancial reviewGovernance Financial review
Consolidated summary income statement
For the year ended 31 December
Continuing operations
Net interest income
Net fee, commission and other income
Total income
2017
£m
2016
£m
2015
£m
2014
£m
2013
£m
9,845
11,231
21,076
10,537
10,914
21,451
10,608
11,432
22,040
10,086
11,677
21,763
9,457
14,587
24,044
Credit impairment charges and other provisions
(2,336)
(2,373)
(1,762)
(1,821)
(2,601)
Operating expenses excluding UK bank levy and litigation and conduct
UK bank levy
Litigation and conduct
Operating expenses
(13,884)
(365)
(1,207)
(15,456)
(14,565)
(410)
(1,363)
(16,338)
(13,723)
(426)
(4,387)
(18,536)
(14,959)
(418)
(2,807)
(18,184)
(16,628)
(462)
(2,442)
(19,532)
Other net income/(expenses)
257
490
(596)
(445)
(32)
Profit before tax
Tax charge
Profit/(loss) after tax in respect of continuing operations
(Loss)/profit after tax in respect of discontinued operation
Non-controlling interests in respect of continuing operations
Non-controlling interests in respect of discontinued operation
Other equity instrument holdersa
Attributable (loss)/profit
Selected financial statistics
Basic (loss)/earnings per sharea
Diluted (loss)/earnings per sharea
Return on average tangible shareholders’ equitya
3,541
(2,240)
1,301
(2,195)
(249)
(140)
(639)
(1,922)
3,230
(993)
2,237
591
(346)
(402)
(457)
1,623
1,146
(1,149)
(3)
626
(348)
(324)
(345)
(394)
1,313
(1,121)
192
653
(449)
(320)
(250)
(174)
1,879
(1,251)
628
669
(414)
(343)
–
540
(10.3p)
(10.1p)
(3.6%)
10.4p
10.3p
3.6%
(1.9p)
(1.9p)
(0.7%)
(0.7p)
(0.7p)
(0.3%)
3.8p
3.7p
1.2%
Note
a The profit after tax attributable to other equity instrument holders of £639m (2016: £457m) is offset by a tax credit recorded in reserves of £174m (2016: £128m). The net amount
of £465m (2016: £329m), along with non-controlling interests is deducted from profit after tax in order to calculate earnings per share and return on average tangible
shareholders’ equity.
The financial information above is extracted from the published accounts. This information should be read together with the information included
in the accompanying consolidated financial statements.
208 Barclays PLC Annual Report 2017
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Operating expenses reduced 12% to
£16,338m reflecting lower litigation and
conduct charges. This was partially offset by
the non-recurrence of the prior year gain of
£429m on the valuation of a component of
the defined retirement benefit liability and
increased structural reform implementation
costs. Operating expenses also included a
£395m additional charge in Q4 2016 relating
to 2016 compensation awards reflecting a
decision to more closely align income
statement recognition with performance
awards and to harmonise deferral structures
across the Group.
Operating expenses included provisions
for UK customer redress of £1,000m
(2015: £2,772m).
The cost: income ratio improved to 76%
(2015: 84%).
Other net income of £490m (2015: expense of
£596m) included gains on the sale of Barclays
Risk Analytics and Index Solutions, the Asia
wealth and investment management business
and the Southern European cards business,
partly offset by the loss on sale of the French
retail business of £455m.
The effective tax rate on profit before tax
decreased to 30.7% (2015: 100.3%)
principally as a result of a reduction in
non-deductible charges.
Profit after tax in respect of continuing
operations increased to £2,237m
(2015: loss of £3m). Profit after tax in relation
to the Africa Banking discontinued operation
decreased 6% to £591m as increased credit
impairment charges and operating expenses
were partially offset by income growth.
RoTE was positive 3.6% (2015: negative 0.7%)
and basic earnings per share was 10.4p
(2015: loss per share of 1.9p).
Financial review
Income statement commentary
2017 compared to 2016
Profit before tax increased 10% to £3,541m
driven by a 5% reduction in operating
expenses, partially offset by a 2% reduction in
income and lower other net income. Results
were impacted by the appreciation of average
USD and EUR against GBP of 5% and 7%
respectively, compared to 2016, which
positively impacted income and adversely
affected impairment and operating expenses.
Following the closure of Barclays Non-Core
on 1 July 2017, Group results for 2017 included
a Barclays Non-Core loss before tax for the
six months ended 30 June 2017 of £647m,
compared to a loss before tax of £2,786m for
the full year in 2016. From 1 July 2017, residual
Barclays Non-Core assets and liabilities were
reintegrated into, and associated financial
performance subsequently reported in,
Barclays UK, Barclays International and
Head Office.
Total income decreased to £21,076m
(2016: £21,451m) reflecting a £613m decrease
in Barclays International and a £262m
reduction in Head Office, partially offset by
a reduction in losses related to Non-Core.
Credit impairment charges were broadly stable
at £2,336m (2016: £2,373m) and reflected a
charge of £168m in 2017 relating to deferred
consideration from an asset sale in US Cards,
and the non-recurrence of a £320m charge
in 2016 following the management review of
the UK and US cards portfolio impairment
modelling. Impairment increased in Barclays
International driven by an increase in
underlying delinquency trends and business
growth in US Cards. The Group loan loss rate
increased 4bps to 57bps.
Operating expenses reduced 5% to £15,456m
driven primarily by lower Non-Core related
operating expenses. Excluding litigation and
conduct charges, Group operating expenses
were £14.2bn, in line with 2017 guidance.
Other net income of £257m (2016: £490m)
primarily reflected a gain of £109m on the sale
of Barclays’ share in VocaLink to MasterCard
and a gain of £76m on the sale of a joint
venture in Japan.
The effective tax rate on profit before tax
increased to 63.3% (2016: 30.7%) principally
due to a one-off tax charge of £1,177m due to
the remeasurement of US DTAs as a result of
the US Tax Cuts and Jobs Act, partially offset
by an unrelated £276m increase in US DTAs
due to a remeasurement of Barclays Bank
PLC’s US branch DTAs.
Loss after tax in respect of the Africa Banking
discontinued operation of £2,195m included a
£1,090m impairment of Barclays’ holding in
BAGL and a £1,435m loss on the sale of 33.7%
of BAGL’s issued share capital, primarily due
to recycling of currency translation reserve
losses to the income statement on accounting
deconsolidation.
RoTE was negative 3.6% (2016: positive 3.6%)
and basic loss per share was 10.3p
(2016: earnings per share of 10.4p). Excluding
litigation and conduct, losses related to the
sell down of BAGL and the one-off net charge
due to the remeasurement of US DTAs, RoTE
was 5.6% and earnings per share was 16.2p.
2016 compared to 2015
Profit before tax increased to £3,230m
(2015: £1,146m). The Group performance
reflected good operational performance in
Barclays UK and Barclays International while
being impacted by the Non-Core loss before
tax of £2,786m (2015: £2,603m) driven by
the accelerated rundown of Non-Core and
provisions for UK customer redress of
£1,000m (2015: £2,772m). The appreciation
of average USD and EUR against GBP
positively impacted income and adversely
affected impairment and operating expenses.
Total income decreased 3% to £21,451m as
Non-Core income reduced £1,776m to a net
expense of £1,164m due to the acceleration
of the Non-Core rundown, while Barclays
International income increased 9% to
£14,995m, with growth in both Corporate and
Investment Bank (CIB) and Consumer, Cards
and Payments, and Barclays UK income
increased 2% to £7,517m.
Total income included a £615m (2015: £nil)
gain on disposal of Barclays’ share of Visa
Europe Limited and an own credit loss of
£35m (2015: gain of £430m).
Credit impairment charges increased £611m
to £2,373m including a £320m charge in
Q3 2016 following the management review
of the UK and US cards portfolio impairment
modelling and balance growth primarily
within Consumer, Cards and Payments. This
was partially offset by a reduction in credit
impairment charges of 9% to £122m in
Non-Core due to lower impairment charges
in European businesses. This resulted in an
11bps increase in the loan loss rate to 53bps.
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Barclays PLC Annual Report 2017 209
Risk reviewFinancial statementsShareholder informationStrategic reportFinancial reviewGovernance Financial review
Consolidated summary balance sheet
As at 31 December
Assets
Cash and balances at central banks
Items in the course of collection from other banks
Trading portfolio assets
Financial assets designated at fair value
Derivative financial instruments
Financial investments
Loans and advances to banks
Loans and advances to customers
Reverse repurchase agreements and other similar secured lending
Assets included in disposal groups classified as held for sale
Other assets
Total assets
Liabilities
Deposits from banks
Items in the course of collection due to other banks
Customer accounts
Trading portfolio liabilities
Financial liabilities designated at fair value
Derivative financial instruments
Debt securities in issuea
Subordinated liabilities
Repurchase agreements and other similar secured borrowings
Liabilities included in disposal groups classified as held for sale
Other liabilities
Total liabilities
Equity
Called up share capital and share premium
Other equity instruments
Other reserves
Retained earnings
Total equity excluding non-controlling interests
Non-controlling interests
Total equity
Total liabilities and equity
Net asset value per ordinary share
Tangible net asset value per share
Number of ordinary shares of Barclays PLC (in millions)
Year-end USD exchange rate
Year-end EUR exchange rate
Note
a Debt securities in issue include covered bonds of £8.5bn (2016: £12.4bn).
2017
£m
2016
£m
2015
£m
2014
£m
2013
£m
171,082
2,153
113,760
116,281
237,669
58,916
35,663
365,552
12,546
1,193
18,433
45,687
1,282
133,069
38,968
350,300
91,756
39,422
434,237
186,779
–
22,128
1,133,248 1,213,126 1,120,012 1,357,906 1,343,628
39,695
1,210
114,717
38,300
439,909
86,066
42,111
427,767
131,753
–
36,378
102,353
1,467
80,240
78,608
346,626
63,317
43,251
392,784
13,454
71,454
19,572
49,711
1,011
77,348
76,830
327,709
90,267
41,349
399,217
28,187
7,364
21,019
37,723
446
429,121
37,351
173,718
238,345
73,314
23,826
40,338
–
13,050
55,615
1,359
431,998
53,464
64,796
347,118
86,693
21,695
196,748
–
20,193
1,067,232 1,141,761 1,054,148 1,291,948 1,279,679
58,390
1,177
427,704
45,124
56,972
439,320
86,099
21,153
124,479
–
31,530
47,080
1,013
418,242
33,967
91,745
324,252
69,150
21,467
25,035
5,997
16,200
48,214
636
423,178
34,687
96,031
340,487
75,932
23,383
19,760
65,292
14,161
22,045
8,941
5,383
27,536
63,905
2,111
66,016
19,887
2,063
249
33,186
55,385
8,564
63,949
1,133,248 1,213,126 1,120,012 1,357,906 1,343,628
21,842
6,449
6,051
30,531
64,873
6,492
71,365
21,586
5,305
1,898
31,021
59,810
6,054
65,864
20,809
4,322
2,724
31,712
59,567
6,391
65,958
322p
276p
17,060
1.35
1.13
344p
290p
16,963
1.23
1.17
324p
275p
16,805
1.48
1.36
335p
285p
16,498
1.56
1.28
331p
283p
16,113
1.65
1.20
210 Barclays PLC Annual Report 2017
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Financial review
Balance sheet commentary
Total assets
Total assets decreased £80bn to £1,133bn.
Cash and balances at central banks and items
in the course of collection from other banks
increased £69bn to £173bn, as the cash
contribution to the Group liquidity pool
was increased.
Trading portfolio assets increased £34bn
to £114bn due to increased activity.
Financial assets designated at fair value
increased £38bn to £116bn primarily due to
increased reverse repurchase agreements to
fund trading activity.
Derivative financial instrument assets
decreased £109bn to £238bn which is
consistent with the movement in derivative
financial instrument liabilities. The decrease
reflects the portfolio rundown of Barclays
Non-Core, the adoption of daily settlements
under the Chicago Mercantile Exchange
(CME), an increase in major interest rate
forward curves and the depreciation of
period end USD against GBP.
Financial investments decreased £4bn to
£59bn due to a decrease in government
bonds held in the liquidity pool.
Total loans and advances decreased £35bn
to £401bn which comprised of a lending
reduction of £22bn and a net decrease of
£13bn in settlement and cash collateral
balances.
Assets included in disposal groups classified
as held for sale decreased £70bn to £1bn
driven by the disposal of BAGL and the French
retail business.
Total liabilities
Total liabilities decreased £75bn to £1,067bn.
Deposits from banks decreased £10bn to
£38bn driven by a £7bn decrease due to lower
cash collateral and a decrease in central bank
funding.
Customer accounts increased £6bn to £429bn
driven by a £5bn increase due to increased
funding requirements to fund the liquidity
pool assets and a £14bn increase in deposits.
These were partially offset by a £5bn
reduction in cash collateral balances and a
£7bn reduction in prime brokerage balances.
Repurchase agreements and other similar
secured borrowing increased £21bn to £40bn.
This was primarily due to an increase in
central bank repurchase agreements and
trading desk funding requirements.
Derivative financial instruments decreased
£102bn to £238bn in line with the decrease
in derivative financial instrument assets.
Liabilities included in disposal groups
classified as held for sale decreased £65bn
to £nil driven by the disposal of BAGL and
the French retail business.
Financial liabilities designated at fair value
increased £78bn to £174bn. During the period,
repurchase agreements designated at fair
value have increased £71bn and debt
securities by £7bn.
Total shareholders’ equity
Total shareholders’ equity decreased £5.3bn
to £66.0bn.
Share capital and share premium increased
£0.2bn to £22.0bn due to the issuance of
shares under employee share schemes and
the Barclays PLC Scrip Dividend Programme.
Other equity instruments increased £2.5bn to
£8.9bn primarily due to the issuance of equity
accounted AT1 securities.
The available for sale reserve increased £0.4bn
to £0.3bn. The reserve movement is driven by
fair value movements on available for sale
investments.
Cash flow hedging reserve has decreased
£0.9bn to £1.2bn driven by a £0.6bn decrease
in the fair value of interest rate swaps held for
hedging purposes as forward interest rates
increased and £0.6bn due to gains recycled
to the income statement, offset by a £0.3bn
tax charge.
The currency translation reserve remained
flat at £3.1bn which principally reflected the
depreciation of period end USD against GBP,
offset by a £1.6bn net loss from recycling of
the currency translation reserve to the income
statement. This included a £1.4bn recycling of
the currency translation reserve associated
with the disposal of BAGL.
Non-controlling interests decreased £4.4bn to
£2.1bn, driven by a £3.4bn reduction due to
the disposal of BAGL and £0.9bn relating to
the redemption of preference shares.
Tangible net asset value per share decreased
to 276p (2016: 290p) as profit before tax was
more than offset by the net impact of the
remeasurement of US DTAs in Q4 2017 and
adverse movements across reserves.
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Barclays PLC Annual Report 2017 211
Risk reviewFinancial statementsShareholder informationStrategic reportFinancial reviewGovernance Analysis of results by business
Barclays UK
Income statement information
Net interest income
Net fee, commission and other income
Total income
Credit impairment charges and other provisions
Net operating income
Operating expenses excluding UK bank levy and litigation and conduct
UK bank levy
Litigation and conduct
Operating expenses
Other net expenses
Profit before tax
Attributable profit/(loss)
Balance sheet information
Loans and advances to customers at amortised cost
Total assets
Customer deposits
Loan: deposit ratio
Risk weighted assets
Period end allocated tangible equity
Key facts
Average LTV of mortgage portfolioa
Average LTV of new mortgage lendinga
Number of branches
Mobile banking active customers
30 day arrears rate – Barclaycard Consumer UK
Number of employees (full time equivalent)b
Performance measures
Return on average allocated tangible equity
Average allocated tangible equity
Cost: income ratio
Loan loss rate (bps)
Net interest margin
2017
£m
2016
£m
2015
£m
6,086
1,297
7,383
(783)
6,600
(4,030)
(59)
(759)
(4,848)
(5)
1,747
853
6,048
1,469
7,517
(896)
6,621
(3,792)
(48)
(1,042)
(4,882)
(1)
1,738
828
5,973
1,370
7,343
(706)
6,637
(3,464)
(77)
(2,511)
(6,052)
–
585
(47)
£183.8bn £166.4bn
£237.4bn £209.6bn
£193.4bn £189.0bn
88%
£67.5bn
£8.5bn
95%
£70.9bn
£9.6bn
£166.1bn
£202.5bn
£176.8bn
94%
£69.5bn
£9.0bn
48%
64%
1,208
6.4m
1.8%
22,800
9.8%
£9.1bn
66%
42
3.49%
48%
63%
1,305
5.4m
1.9%
36,000
9.6%
£8.9bn
65%
52
3.62%
49%
64%
1,362
4.5m
2.3%
38,800
(0.3%)
£9.3bn
82%
42
3.56%
Notes
a Average LTV of mortgage portfolio and new mortgage lending calculated on the balance weighted basis.
b As a result of the establishment of the Group Service Company in September 2017, employees who are now employed by the Group Service Company and who were previously
allocated to, or were within, Barclays UK and Barclays International are now reported in Head Office.
212 Barclays PLC Annual Report 2017
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Financial review Analysis of Barclays UK
Analysis of total income
Personal Banking
Barclaycard Consumer UK
Wealth, Entrepreneurs & Business Banking
Total income
Analysis of credit impairment charges and other provisions
Personal Banking
Barclaycard Consumer UK
Wealth, Entrepreneurs & Business Banking
Total credit impairment charges and other provisions
Analysis of loans and advances to customers at amortised cost
Personal Banking
Barclaycard Consumer UK
Wealth, Entrepreneurs & Business Bankinga
Total loans and advances to customers at amortised cost
Analysis of customer deposits
Personal Banking
Barclaycard Consumer UK
Wealth, Entrepreneurs & Business Banking
Total customer deposits
Note
a Includes the integration of the ESHLA portfolio at amortised cost from Barclays Non-Core.
2017
£m
3,823
1,977
1,583
7,383
(222)
(541)
(20)
(783)
2016
£m
3,891
2,022
1,604
7,517
(183)
(683)
(30)
(896)
2015
£m
3,714
2,065
1,564
7,343
(194)
(488)
(24)
(706)
£139.8bn £135.0bn
£16.5bn
£14.9bn
£183.8bn £166.4bn
£16.4bn
£27.6bn
£134.0bn
£16.2bn
£15.9bn
£166.1bn
£141.1bn £139.3bn
–
£49.7bn
£193.4bn £189.0bn
–
£52.3bn
£131.0bn
–
£45.8bn
£176.8bn
home.barclays/annualreport
Barclays PLC Annual Report 2017 213
Risk reviewFinancial statementsShareholder informationStrategic reportFinancial reviewGovernance Credit impairment charges increased 27%
to £896m due to a £200m charge in Q3 2016
following the management review of the cards
portfolio impairment modelling. The 30 day
and 90 day arrears rates on the cards portfolio
improved year on year to 1.9% (2015: 2.3%)
and 0.9% (2015: 1.2%) respectively.
Operating expenses reduced 19% to £4,882m
reflecting lower provisions for UK customer
redress, savings realised from strategic cost
programmes, relating to restructuring of the
branch network and technology
improvements, partially offset by structural
reform programme implementation costs.
The cost: income ratio was 65% (2015: 82%)
and RoTE was 9.6% (2015: (0.3%)).
Loans and advances to customers were stable
at £166.4bn (December 2015: £166.1bn).
Total assets increased £7.1bn to £209.6bn
primarily reflecting an increase in the allocated
liquidity pool.
Customer deposits increased 7% to £189.0bn
primarily driven by higher balances in Personal
Banking and WEBB.
RWAs reduced £2.0bn to £67.5bn primarily
driven by changes in the mortgages credit
risk model.
Analysis of results by business
2017 compared to 2016
Profit before tax increased 1% to £1,747m as
lower PPI charges of £700m (2016: £1,000m)
and a reduction in credit impairment charges
were partially offset by the non-recurrence of
the gain on disposal of Barclays’ share of Visa
Europe Limited in 2016, higher costs of setting
up the ring-fenced bank and increased
investment, primarily in cyber resilience,
digital and technology.
Total income decreased 2% to £7,383m, of
which £151m reflected the non-recurrence of
the gain on disposal of Barclays’ share of Visa
Europe Limited in 2016.
Personal Banking income decreased 2% to
£3,823m, driven by the non-recurrence of the
Visa gain and the impact of the UK base rate
reduction in 2016, partially offset by deposit
pricing initiatives, growth in balances and
an update to effective interest rate modelling.
Barclaycard Consumer UK income decreased
2% to £1,977m reflecting a provision for
remediation in H2 2017. Wealth, Entrepreneurs
& Business Banking (WEBB) income decreased
1% to £1,583m driven by the non-recurrence
of the Visa gain, partially offset by growth
in balances.
Net interest income increased 1% to £6,086m
due to deposit pricing initiatives and growth
in loans and advances to customers and
deposits, partially offset by the impact of the
UK base rate reduction in 2016. Net interest
margin decreased 13bps to 3.49% reflecting
the integration of the Education, Social
Housing and Local Authority (ESHLA)
portfolio from Non-Core on 1 July 2017. Net
fee, commission and other income decreased
12% to £1,297m driven by the non-recurrence
of the Visa gain.
Credit impairment charges decreased 13%
to £783m principally reflecting the non-
recurrence of a £200m charge in 2016
following the management review of the cards
portfolio impairment modelling, partially offset
by higher charges in Barclaycard Consumer
UK and Personal Banking.
Operating expenses decreased 1% to
£4,848m due to lower charges for PPI of
£700m (2016: £1,000m), partially offset by
the costs of setting up the ring-fenced bank
and increased investment, primarily in cyber
resilience, digital and technology. The cost:
income ratio was 66% (2016: 65%).
Loans and advances to customers increased
10% to £183.8bn and total assets increased
13% to £237.4bn, reflecting the integration
of the ESHLA portfolio from Non-Core into
WEBB on 1 July 2017 and mortgage growth
in Personal Banking in H2 2017.
Customer deposits increased 2% to £193.4bn
due to deposit growth, partially offset by the
realignment of clients between Barclays UK
and Barclays International in preparation for
structural reform.
RWAs increased to £70.9bn
(December 2016: £67.5bn) reflecting
the integration of the ESHLA portfolio.
2016 compared to 2015
Profit before tax increased £1,153m to
£1,738m reflecting lower provisions for UK
customer redress and a reduction in operating
expenses. This was partially offset by an
increase in credit impairment charges
following the management review of the
cards portfolio impairment modelling.
Total income, including a gain on disposal
of Barclays’ share of Visa Europe Limited
recognised in Personal Banking and WEBB,
increased 2% to £7,517m.
Personal Banking income increased 5% to
£3,891m driven by the gain on disposal of
Barclays’ share of Visa Europe Limited,
improved deposit margins and balance
growth, partially offset by lower mortgage
margins. Barclaycard Consumer UK income
decreased 2% to £2,022m primarily as a result
of the European Interchange Fee Regulation,
which came into full effect from December
2015, offset by balance growth and gains from
debt sales. WEBB income increased 3% to
£1,604m reflecting the gain on disposal of
Barclays’ share of Visa Europe Limited,
improved margins and deposit growth,
partially offset by reduced transactional
fee income.
Net interest income increased 1% to £6,048m
due to balance growth and deposit pricing
initiatives, partially offset by lower mortgage
margins. Net interest margin increased 6bps
to 3.62% reflecting higher margins on
deposits, partially offset by lower mortgage
margins. Net fee, commission and other
income increased 7% to £1,469m due to the
gain on disposal of Barclays’ share of Visa
Europe Limited, partially offset by the impact
of the European Interchange Fee Regulation in
Barclaycard Consumer UK, which came into
full effect from December 2015, and reduced
fee and commission income in WEBB.
214 Barclays PLC Annual Report 2017
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Financial review Barclays International
Income statement information
Net interest income
Net trading income
Net fee, commission and other income
Total income
Credit impairment charges and other provisions
Net operating income
Operating expenses excluding UK bank levy and litigation and conduct
UK bank levy
Litigation and conduct
Operating expenses
Other net income
Profit before tax
Attributable profit
Balance sheet information
Loans and advances to banks and customers at amortised costa
Trading portfolio assets
Derivative financial instrument assets
Derivative financial instrument liabilities
Reverse repurchase agreements and other similar secured lending
Financial assets designated at fair value
Total assets
Customer depositsb
Loan: deposit ratioc
Risk weighted assets
Period end allocated tangible equity
Key facts
Number of employees (full time equivalent)d
Performance measures
Return on average allocated tangible equity
Average allocated tangible equity
Cost: income ratio
Loan loss rate (bps)
Net interest margin
2017
£m
2016
£m
2015
£m
4,307
3,971
6,104
14,382
(1,506)
12,876
(9,321)
(265)
(269)
(9,855)
254
3,275
847
4,512
4,580
5,903
14,995
(1,355)
13,640
(9,129)
(284)
(48)
(9,461)
32
4,211
2,412
4,324
3,782
5,641
13,747
(922)
12,825
(8,029)
(253)
(1,310)
(9,592)
45
3,278
1,758
£198.7bn £211.3bn
£113.0bn
£73.2bn
£236.2bn £156.2bn
£237.8bn £160.6bn
£13.4bn
£12.4bn
£104.1bn
£62.3bn
£856.1bn £648.5bn
£225.1bn £216.2bn
78%
£210.3bn £212.7bn
£25.6bn
£27.5bn
62%
£184.1bn
£61.9bn
£111.5bn
£119.0bn
£24.7bn
£46.8bn
£532.2bn
£185.6bn
80%
£194.8bn
£23.8bn
11,500
36,900
39,100
3.4%
£28.1bn
69%
75
4.16%
9.8%
£25.5bn
63%
63
3.98%
7.2%
£24.9bn
70%
49
3.80%
Notes
a As at 31 December 2017, loans and advances included £170.4bn (December 2016: £185.9bn) of loans and advances to customers (including settlement balances of £15.7bn
(December 2016: £19.5bn) and cash collateral of £35.9bn (December 2016: £30.1bn)), and £28.3bn (December 2016: £25.4bn) of loans and advances to banks (including
settlement balances of £2.3bn (December 2016: £1.7bn) and cash collateral of £18.0bn (December 2016: £6.3bn)). Loans and advances to banks and customers in respect of
Consumer, Cards and Payments were £38.6bn (December 2016: £39.7bn).
b As at 31 December 2017, customer deposits included settlement balances of £15.2bn (December 2016: £16.6bn) and cash collateral of £27.3bn (December 2016: £20.8bn).
c Loan: deposit ratio excludes investment banking balances other than interest earning lending. Comparatives have been restated to include interest earning lending balances
within the investment banking business.
d As a result of the establishment of the Group Service Company in September 2017, employees who are now employed by the Group Service Company and who were previously
allocated to, or were within, Barclays UK and Barclays International are now reported in Head Office.
home.barclays/annualreport
Barclays PLC Annual Report 2017 215
Risk reviewFinancial statementsShareholder informationStrategic reportFinancial reviewGovernance
Financial review
Analysis of results by business
Analysis of Barclays International
Corporate and Investment Bank
Income statement information
Macro
Credit
Equities
Markets
Banking fees
Corporate lending
Transaction banking
Banking
Other
Total income
Credit impairment charges and other provisions
Operating expenses
Other net income
Profit before tax
Balance sheet information
Loans and advances to banks and customers at amortised cost
Customer deposits
Risk weighted assets
Performance measures
Return on average allocated tangible equity
Average allocated tangible equity
Consumer, Cards and Payments
Income statement information
Total income
Credit impairment charges and other provisions
Operating expenses
Other net income
Profit before tax
Balance sheet information
Loans and advances to banks and customers at amortised cost
Customer deposits
Risk weighted assets
Key facts
30 day arrears rate – Barclaycard US
Total number of Barclaycard business clients
Value of payments processed
Performance measures
Return on average allocated tangible equity
Average allocated tangible equity
2017
£m
2016
£m
2015
£m
1,634
1,241
1,629
4,504
2,612
1,093
1,629
5,334
40
9,878
(213)
(7,742)
133
2,056
2,304
1,185
1,790
5,279
2,397
1,195
1,657
5,249
5
10,533
(260)
(7,624)
1
2,650
2,108
824
1,912
4,844
2,087
1,361
1,663
5,111
495
10,450
(199)
(7,929)
–
2,322
£160.1bn £171.6bn
£165.9bn £166.2bn
£176.2bn £178.6bn
£152.0bn
£143.8bn
£167.3bn
1.1%
£24.0bn
6.1%
£21.9bn
5.4%
£21.9bn
4,504
(1,293)
(2,113)
121
1,219
4,462
(1,095)
(1,837)
31
1,561
3,297
(723)
(1,663)
45
956
£38.6bn
£59.2bn
£34.1bn
£39.7bn
£50.0bn
£34.1bn
£32.1bn
£41.8bn
£27.5bn
2.6%
366,000
£322bn
2.6%
355,000
£296bn
2.2%
341,000
£271bn
16.7%
£4.2bn
31.4%
£3.6bn
20.2%
£3.0bn
216 Barclays PLC Annual Report 2017
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Derivative financial instrument assets and
liabilities increased £80.0bn to £236.2bn and
£77.2bn to £237.8bn respectively, reflecting
the integration of balances from Non-Core on
1 July 2017, partially offset by adoption of daily
settlements under the CME, an increase in
major interest rate forward curves and the
depreciation of period end USD against GBP.
Financial assets designated at fair value
increased £41.8bn to £104.1bn primarily due
to increased reverse repurchase agreements
activity.
Customer deposits increased £8.9bn to
£225.1bn, with Consumer, Cards and
Payments increasing £9.2bn to £59.2bn driven
by the realignment of certain clients from
Barclays UK to Barclays International in
preparation for structural reform.
RWAs decreased £2.4bn to £210.3bn due to
the net impact of the remeasurement of US
DTAs and the depreciation of period end USD
against GBP, partially offset by increased
trading portfolio and securities financing
transaction volumes.
2017 compared to 2016
Profit before tax decreased 22% to £3,275
driven by a 4% decrease in total income, an
11% increase in credit impairment charges
and a 4% increase in operating expenses.
Total income decreased 4% to £14,382m,
including the 5% appreciation of average
USD and the 7% appreciation of average
EUR against GBP, as CIB income decreased
6% to £9,878m, partially offset by a 1%
increase in Consumer, Cards and Payments
income to £4,504m.
Markets income decreased 15% to £4,504m.
Macro income decreased 29% to £1,634m
driven by lower market volatility in rates,
the exit of the energy-related commodities
business and the integration of Non-Core
assets on 1 July 2017. Credit income increased
5% to £1,241m due to improved performance
in municipals. Equities income decreased 9%
to £1,629m driven by US equity derivatives as
a result of lower market volatility, partially
offset by improved performance in equity
financing.
Banking income increased 2% to £5,334m.
Banking fee income increased 9% to £2,612m
due to higher debt and equity underwriting
fees, with fee share gains in banking overall
and debt underwriting. Corporate lending
declined 9% to £1,093m driven by lower
lending balances due to the realignment of
certain clients between Barclays UK and
Barclays International in preparation for
structural reform and the reallocation of RWAs
within CIB, as well as the non-recurrence of
prior year treasury gains and lower work-out
gains. Transaction banking declined 2% to
£1,629m driven by lower trade balances and
the non-recurrence of prior year treasury
gains, partially offset by higher average
deposit balances.
Consumer, Cards and Payments income
increased 1% to £4,504m driven by continued
business growth, a gain of £192m relating to
the Q1 2017 asset sale in US Cards and a
valuation gain on Barclays’ preference shares
in Visa Inc. of £74m, partially offset by the
non-recurrence of the £464m gain on the
disposal of Barclays’ share of Visa Europe
Limited in 2016.
Credit impairment charges increased 11%
to £1,506m, including the appreciation of
average USD and EUR against GBP. CIB credit
impairment charges decreased 18% to £213m
primarily due to the non-recurrence of oil and
gas single name charges in 2016, offset by a
single name charge in 2017. Consumer, Cards
and Payments credit impairment charges
increased 18% to £1,293m primarily due
to a £168m charge in Q3 2017 relating to
deferred consideration from the Q1 2017
asset sale in US Cards, an increase in
underlying delinquency trends and business
growth in US Cards. This was partially offset
by the non-recurrence of a £120m charge in
2016 following the management review of the
cards portfolio impairment modelling. The
30 and 90 day arrears rates within US Cards
were stable at 2.6% (December 2016: 2.6%)
and 1.3% (December 2016: 1.3%) respectively,
including a benefit from the Q1 2017 asset
sale in US Cards.
Operating expenses increased 4% to
£9,855m, including the appreciation of
average USD and EUR against GBP. CIB
operating expenses increased 2% to £7,742m
reflecting a provision of £240m in respect of
foreign exchange matters recognised in
Q4 2017, continued investment in technology,
partially offset by lower restructuring charges
and the reduced impact of the change in
compensation awards introduced in Q4 2016.
Consumer, Cards and Payments increased
15% to £2,113m including continued growth
and investment, primarily within the US Cards
and merchant acquiring businesses.
Other net income increased to £254m
(2016: £32m) due to a gain of £109m on
the sale of Barclays’ share in VocaLink to
MasterCard and a gain of £76m on the sale
of a joint venture in Japan.
Attributable profit reduced to £847m
(2016: £2,412m) including the net tax charge
due to the remeasurement of US DTAs in
Q4 2017.
Loans and advances to banks and customers
at amortised cost decreased £12.6bn to
£198.7bn with CIB decreasing £11.5bn to
£160.1bn due to a reduction in lending.
Consumer, Cards and Payments decreased
£1.1bn to £38.6bn due to the depreciation
of period end USD against GBP, partially offset
by the realignment of certain clients from
Barclays UK to Barclays International in
preparation for structural reform.
Trading portfolio assets increased £39.8bn
to £113.0bn due to increased activity.
home.barclays/annualreport
Barclays PLC Annual Report 2017 217
Risk reviewFinancial statementsShareholder informationStrategic reportFinancial reviewGovernance Financial assets designated at fair value
increased £15.5bn to £62.3bn and reverse
repurchase agreements and other similar
lending decreased £11.3bn to £13.4bn. Since
2015, new reverse repurchase agreements
in certain businesses have been designated
at fair value to better align to the way the
business manages the portfolio’s risk and
performance. On a net basis reverse repos
have increased by £4.2bn as a result of
increased matched book trading.
Customer deposits increased £30.6bn to
£216.2bn, with CIB increasing £22.4bn to
£166.2bn primarily driven by increases in
deposits cash collateral and the appreciation
of USD and EUR against GBP. Consumer, Cards
and Payments increased £8.2bn to £50.0bn
driven by balance growth in Barclaycard US
and Private Banking, and the appreciation of
USD and EUR against GBP.
RWAs increased £17.9bn to £212.7bn, due
to the appreciation of USD against GBP, and
business growth, including the acquisition of
the JetBlue credit card portfolio in Consumer,
Cards and Payments.
Financial review
Analysis of results by business
2016 compared to 2015
Profit before tax increased 28% to £4,211m
due to the gain on disposal of Barclays’ share
of Visa Europe Limited and a 1% decrease in
total operating expenses, partially offset by
a 47% increase in impairment.
Total income increased 9% to £14,995m,
including the appreciation of average USD and
EUR against GBP, with Consumer, Cards and
Payments income increasing 35% to £4,462m
and CIB income increasing 1% to £10,533m.
Markets income increased 9% to £5,279m.
Credit income increased 44% to £1,185m
driven by strong performance in fixed income
flow credit which benefited from increased
market volatility and client demand. Equities
income decreased 6% to £1,790m with lower
client activity in Asia and the simplification
of the EMEA business, partially offset by
improved performance in cash, derivatives
and financing in H2 2016. Macro income
increased 9% to £2,304m driven by increased
activity post the EU referendum decision and
US elections.
Banking income increased 3% to £5,249m.
Banking fees income increased 15% to
£2,397m driven by higher debt underwriting
and advisory fees, partially offset by lower
equity underwriting fees. Corporate lending
reduced 12% to £1,195m due to losses on fair
value hedges and the non-recurrence of
one-off work-out gains recognised in Q2 2015.
Transaction banking was broadly flat at
£1,657m (2015: £1,663m) as income from
higher deposit balances was offset by margin
compression.
Consumer, Cards and Payments income
increased 35% to £4,462m driven by the
£464m gain on disposal of Barclays’ share
of Visa Europe Limited, growth across all key
businesses and the appreciation of average
USD and EUR against GBP.
Credit impairment charges increased 47%
to £1,355m including the appreciation of
average USD and EUR against GBP. CIB credit
impairment charges increased 31% to £260m
driven by the impairment of a number of
single name exposures. Consumer, Cards
and Payments credit impairment charges
increased 51% to £1,095m primarily driven
by balance growth, a change in portfolio mix
and a £120m charge in Q3 2016 following
a management review of the cards portfolio
impairment modelling.
Operating expenses decreased 1% to
£9,461m. CIB decreased 4% to £7,624m
reflecting lower litigation and conduct costs.
This was partially offset by the appreciation of
average USD against GBP, an additional charge
in Q4 2016 relating to the 2016 compensation
awards, higher restructuring costs, £150m
of which related to reducing the real estate
footprint in Q3 2016, and higher structural
reform programme implementation costs
including those relating to the incorporation
of the US IHC on 1 July 2016. Consumer,
Cards and Payments increased 10% to
£1,837m due to continued business growth
and the appreciation of average USD and
EUR against GBP, partially offset by lower
restructuring costs.
The cost: income ratio was 63% (2015: 70%)
and RoTE was 9.8% (2015: 7.2%).
Loans and advances to banks and customers
at amortised cost increased £27.2bn to
£211.3bn with CIB increasing £19.6bn to
£171.6bn due to increased lending and cash
collateral and the appreciation of USD and
EUR against GBP. Consumer, Cards and
Payments increased £7.6bn to £39.7bn driven
by appreciation of USD and EUR against GBP
and growth in Barclaycard US, including the
acquisition of the JetBlue credit card portfolio.
Trading portfolio assets increased £11.3bn to
£73.2bn due to an increase in client activity and
appreciation of major currencies against GBP.
Derivative financial instrument assets and
liabilities increased £44.7bn to £156.2bn and
£41.6bn to £160.6bn respectively, due to the
appreciation of USD and EUR against GBP and
decreases in forward interest rates.
218 Barclays PLC Annual Report 2017
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Head Office
Income statement information
Net interest income
Net fee, commission and other incomea
Total income
Credit impairment charges and other provisions
Net operating (expenses)/income
Operating expenses excluding UK bank levy and litigation and conduct
UK bank levy
Litigation and conduct
Operating expenses
Other net (expenses)/income
(Loss)/profit before tax
Attributable (loss)/profit
Balance sheet information
Total assets
Risk weighted assetsb
Period end allocated tangible equity
Key facts
Number of employees (full time equivalent)c
Performance measures
Average allocated tangible equity
2017
£m
(435)
276
(159)
(17)
(176)
(277)
(41)
(151)
(469)
(189)
(834)
(868)
2016
£m
(183)
286
103
–
103
(135)
(2)
(27)
(164)
128
67
110
2015
£m
(305)
643
338
–
338
(272)
(8)
(66)
(346)
(106)
(114)
11
£39.7bn
£31.8bn
£10.0bn
£75.2bn
£53.3bn
£9.7bn
£59.4bn
£39.7bn
£5.0bn
45,600
100
100
£9.3bn
£6.5bn
£2.6bn
Notes
a Following the early adoption of the own credit provisions of IFRS 9 on 1 January 2017, own credit, which was previously reported in net fee, commission and other income, is now
recognised in other comprehensive income. The comparative figures for net fee, commission and other income include own credit.
b Includes Africa Banking RWAs of £6.4bn (December 2016: £42.3bn).
c As a result of the establishment of the Group Service Company in September 2017, employees who are now employed by the Group Service Company and who were previously
allocated to, or were within, Barclays UK and Barclays International are now reported in Head Office.
Other net income increased to £128m
(2015: expense of £106m) primarily due to
recycling of the currency translation reserve
on the disposal of the Southern European
cards business. The 2015 expense included
losses on sale relating to legacy businesses.
Total assets increased £15.8bn to £75.2bn
primarily driven by the appreciation of ZAR
against GBP.
RWAs increased £13.6bn to £53.3bn primarily
driven by the appreciation of ZAR against GBP
and the reallocation of operational risk RWAs
from Non-Core associated with exited
businesses and assets.
2017 compared to 2016
Loss before tax was £834m
(2016: profit of £67m).
Total income reduced to an expense of £159m
(2016: income of £103m) primarily due to
lower net income from treasury operations.
Operating expenses increased to £469m
(2016: £164m) due to costs associated with
Non-Core assets and businesses, which were
integrated on 1 July 2017, and increased
litigation and conduct costs, including a
settlement to resolve the civil action brought
by the US Federal Energy Regulatory
Commission’s Office of Enforcement and
provisions for other legacy redress.
Other net expenses were £189m
(2016: income of £128m) driven by an
expense of £180m on the recycling of the
currency translation reserve to the income
statement on the sale of Barclays Bank Egypt.
2016 included a gain due to recycling of the
currency translation reserve on disposal of
the Southern European cards business.
Total assets decreased to £39.7bn
(December 2016: £75.2bn) primarily due
to the accounting deconsolidation of BAGL,
which accounted for £65bn of total assets
on deconsolidation from the Barclays Group.
This was partially offset by the integration
of Non-Core assets on 1 July 2017, of which
c.£9bn related to Italian mortgages.
RWAs decreased to £31.8bn
(December 2016: £53.3bn) reflecting
a £31.1bn reduction as a result of the
proportional consolidation of BAGL, partially
offset by the integration of Non-Core assets.
2016 compared to 2015
Profit before tax was £67m
(2015: loss of £114m).
Net operating income decreased 70% to
£103m due to an own credit charge of £35m
(2015: gain of £430m), partially offset by
changes in net income from treasury
operations.
Operating expenses reduced 53% to £164m
primarily due to a reduction in structural
reform implementation costs now allocated
to the businesses and a reduction in litigation
and conduct costs.
home.barclays/annualreport
Barclays PLC Annual Report 2017 219
Risk reviewFinancial statementsShareholder informationStrategic reportFinancial reviewGovernance Analysis of results by business
Barclays Non-Core
Income statement information
Net interest income
Net trading income
Net fee, commission and other income
Total income
Credit impairment charges and other provisions
Net operating (expenses)/income
Operating expenses excluding UK bank levy and litigation and conduct
UK bank levy
Litigation and conduct
Operating expenses
Other net income/(expenses)
Loss before tax
Attributable loss
Balance sheet information
Loans and advances to banks and customers at amortised cost
Derivative financial instrument assets
Derivative financial instrument liabilities
Reverse repurchase agreements and other similar secured lending
Financial assets designated at fair value
Total assets
Customer deposits
Risk weighted assets
Key facts
Number of employees (full time equivalent)
Note
a Represents financial results for the six months ended 30 June 2017.
The Non-Core segment was closed on
1 July 2017 with the residual assets and
liabilities reintegrated into, and associated
financial performance subsequently reported
in, Barclays UK, Barclays International and
Head Office.
Financial results up until 30 June 2017 are
reflected in the Non-Core segment within
the Group’s results for the year ended
31 December 2017.
2017a
£m
(112)
(488)
70
(530)
(30)
(560)
(256)
–
(28)
(284)
197
(647)
(419)
2016
£m
2015
£m
160
(1,703)
379
(1,164)
(122)
(1,286)
(1,509)
(76)
(246)
(1,831)
331
(2,786)
(1,916)
615
(706)
703
612
(134)
478
(1,958)
(88)
(500)
(2,546)
(535)
(2,603)
(2,418)
–
£51.1bn
– £188.7bn
– £178.6bn
£0.1bn
–
–
£14.5bn
– £279.7bn
£12.5bn
–
£32.1bn
–
£51.8bn
£213.7bn
£202.1bn
£3.1bn
£21.4bn
£325.8bn
£20.9bn
£54.3bn
–
5,500
9,900
220 Barclays PLC Annual Report 2017
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Financial review 2017a
£m
2016
£m
2015
£m
1,024
762
1,786
(177)
1,609
(1,130)
–
5
484
(1,090)
(1,435)
(2,041)
(154)
(2,195)
(2,335)
2,169
1,577
3,746
(445)
3,301
(2,345)
(65)
6
897
–
–
897
(306)
591
189
1,950
1,464
3,414
(353)
3,061
(2,091)
(50)
7
927
–
–
927
(301)
626
302
–
–
–
£65.1bn
£42.3bn
£47.9bn
£31.7bn
40,800
41,500
Discontinued Operation: Africa Banking
Income statement information
Net interest income
Net fee, commission and other income
Total income
Credit impairment charges and other provisions
Net operating income
Operating expenses excluding UK bank levy and impairment of Barclays’ holding in BAGL
UK bank levy
Other net income excluding loss on sale of BAGL
Profit before tax excluding impairment of Barclays’ holding in BAGL and loss on sale of BAGL
Impairment of Barclays’ holding in BAGL
Loss on sale of BAGL
(Loss)/profit before tax
Tax charge
(Loss)/profit after tax
Attributable (loss)/profit
Balance sheet information
Total assets
Risk weighted assets
Key facts
Number of employees (full time equivalent)
Note
a The Africa Banking income statement represents five months of results as a discontinued operation to 31 May 2017.
On 1 March 2016, Barclays announced its
intention to reduce the Group’s 62.3% interest
in BAGL to a level which would permit
Barclays to deconsolidate BAGL from a
regulatory perspective and, prior to that, from
an accounting perspective. From this date,
BAGL was treated as a discontinued operation.
On 5 May 2016, Barclays sold 12.2% of the
Group’s interest in BAGL and on 1 June 2017
Barclays sold a further 33.7% of BAGL’s issued
share capital, resulting in the accounting
deconsolidation of BAGL from the Barclays
Group. At this time, Barclays’ holding in BAGL
technically met the requirements to be treated
as an Associate. However, following a revision
of its governance rights in July 2017 and the
difference being immaterial, the holding
was treated as an available for sale asset
from the transaction date.
In Q317 Barclays contributed 1.5% of BAGL’s
ordinary shares to a Black Economic
Empowerment scheme, resulting in Barclays
accounting for 126 million ordinary shares in
BAGL, representing 14.9% of BAGL’s issued
share capital. The retained investment is
reported as an available for sale asset in the
Head Office segment, with Barclays’ share of
BAGL’s dividend recognised in the Head Office
income statement.
For regulatory reporting purposes, BAGL is
treated on a proportional consolidated basis
based on a holding of 14.9% as at Q4 2017.
Subject to regulatory approval, Barclays
expects to fully deconsolidate BAGL from
a regulatory perspective by the end of 2018.
home.barclays/annualreport
Barclays PLC Annual Report 2017 221
Risk reviewFinancial statementsShareholder informationStrategic reportFinancial reviewGovernance Financial review
Analysis of results by business
Margins analysis
Total Barclays UK and Barclays International
net interest income increased 1% to £10.4bn
due to an increase in average customer assets
to £278.5bn (2016: £274.6bn) with growth in
Barclays UK, partially offset by a reduction in
Barclays International.
Net interest margin decreased 2bps to 3.74%
primarily reflecting the integration of ESHLA
loans from Non-Core on 1 July 2017 into
Barclays UK, partially offset by broadly stable
net interest income in Barclays International,
despite reducing average customer assets.
Group net interest income decreased to
£9.8bn (2016: £10.5bn) including net
structural hedge contributions of £1.3bn
(2016: £1.5bn).
Net interest margin by business reflects
movements in the Group’s internal funding
rates which are based on the cost to the
Group of alternative funding in wholesale
markets. The internal funding rate prices
intra-group funding and liquidity to
appropriately give credit to businesses with
net surplus liquidity and to charge those
businesses in need of alternative funding
at a rate that is driven by prevailing market
rates and includes a term premium.
Barclays UK
Barclays Internationala
Total Barclays UK and Barclays International
Otherb
Total net interest income
Year ended 31 December 2017
Year ended 31 December 2016
Average
customer
assets
£m
174,484
104,039
278,523
Net
interest
margin
%
3.49
4.16
3.74
Net
interest
income
£m
6,086
4,326
10,412
(567)
9,845
Net
interest
income
£m
6,048
4,275
10,323
214
10,537
Average
customer
assets
£m
167,233
107,333
274,566
Net
interest
margin
%
3.62
3.98
3.76
Notes
a Barclays International margins include interest earning lending balances within the investment banking business.
b Other includes Head Office and non-lending related investment banking balances. Barclays Non-Core is included for the full comparative period and the first six months of the
current period.
222 Barclays PLC Annual Report 2017
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Financial review
Non-IFRS performance measures
Barclays’ management believes that the
non-IFRS performance measures included in
this document provide valuable information to
the readers of the financial statements as they
enable the reader to identify a more consistent
basis for comparing the business’ performance
between financial periods, and provide more
detail concerning the elements of performance
which the managers of these businesses are
most directly able to influence or are relevant
for an assessment of Barclays PLC and its
subsidiaries (the Group). They also reflect
an important aspect of the way in which
operating targets are defined and performance
is monitored by Barclays’ management.
Any non-IFRS performance measures in
this document are not a substitute for IFRS
measures and readers should consider the
IFRS measures as well.
Non-IFRS performance measures glossary
Measure
Loan: deposit ratio
Period end allocated tangible
equity
Average tangible shareholders’
equity
Definition
Loans and advances divided by customer accounts calculated for Barclays UK and Barclays International,
excluding investment banking balances other than interest earning lending. This excludes particular liabilities
issued by the retail businesses that have characteristics comparable to retail deposits (for example, structured
Certificates of Deposit and retail bonds), which are included within debt securities in issue.
Allocated tangible equity is calculated as 12.0% (2016: 11.5%) of CRD IV fully loaded RWAs for each business,
adjusted for CRD IV fully loaded capital deductions, excluding goodwill and intangible assets, reflecting the
assumptions the Group uses for capital planning purposes. Head Office allocated tangible equity represents
the difference between the Group’s tangible shareholders’ equity and the amounts allocated to businesses.
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.
Return on average tangible
shareholders’ equity
Return on average allocated
tangible 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.
Statutory profit after tax attributable to ordinary shareholders, including an adjustment for the tax credit in
reserves in respect of other equity instruments, as a proportion of average shareholders’ equity excluding
non-controlling interests and other equity instruments adjusted for the deduction of intangible assets and
goodwill. The components of the calculation have been included on page 224.
Statutory profit after tax attributable to ordinary shareholders, including an adjustment for the tax credit
in reserves in respect of other equity instruments, as a proportion of average allocated tangible equity.
The components of the calculation have been included on page 224.
Operating expenses divided by total income.
Operating expenses excluding charges for litigation and conduct. The components of the calculation have
been included on page 225.
Quoted in basis points and represents total loan impairment divided by gross loans and advances to banks
and customers held at amortised cost at the balance sheet date. The components of the calculation have
been included on page 147.
Net interest income divided by the sum of average customer assets. The components of the calculation have
been included on page 222.
Calculated by dividing shareholders’ equity, excluding non-controlling interests and other equity instruments,
less goodwill and intangible assets, by the number of issued ordinary shares. The components of the
calculation have been included on page 225.
Cost: income ratio
Operating expenses excluding
litigation and conduct
Loan loss rate
Tangible net asset value per
share
Net interest margin
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Barclays PLC Annual Report 2017 223
Risk reviewFinancial statementsShareholder informationStrategic reportFinancial reviewGovernance
Financial review
Non-IFRS performance measures
Returns
Return on average tangible equity is calculated
as profit for the period attributable to ordinary
equity holders of the parent (adjusted for
the tax credit recorded in reserves in respect
of interest payments on other equity
instruments) divided by average tangible
equity for the period, excluding non-
controlling and other equity interests
for businesses.
Allocated tangible equity has been calculated
as 12.0% (2016: 11.5%) of CRD IV fully loaded
RWAs for each business, adjusted for CRD IV
fully loaded capital deductions, excluding
goodwill and intangible assets, reflecting
the assumptions the Group uses for capital
planning purposes. Head Office average
allocated tangible equity represents the
difference between the Group’s average
tangible shareholders’ equity and the
amounts allocated to businesses.
For the year ended 31 December 2017
Barclays UK
Corporate and Investment Bank
Consumer, Cards and Payments
Barclays International
Head Officea
Barclays Non-Core
Africa Banking discontinued operationa
Barclays Group
For the year ended 31 December 2016
Barclays UK
Corporate and Investment Bank
Consumer, Cards and Payments
Barclays International
Head Officea
Barclays Non-Core
Africa Banking discontinued operationa
Barclays Group
For the year ended 31 December 2015
Barclays UK
Corporate and Investment Bank
Consumer, Cards and Payments
Barclays International
Head Officea
Barclays Non-Core
Africa Banking discontinued operationa
Barclays Group
Note
a Average allocated tangible equity for Africa Banking is included within Head Office.
Tax credit
in respect
of interest
payments on
other equity
instruments
£m
Profit/(loss)
attributable
to ordinary
equity
holders of
the parent
£m
Attributable
profit/(loss)
£m
Average
tangible
equity
£bn
Return on
average
tangible
equity
%
853
167
680
847
(868)
(419)
(2,335)
(1,922)
828
1,270
1,142
2,412
110
(1,916)
189
1,623
(47)
1,146
612
1,758
11
(2,418)
302
(394)
40
102
18
120
4
10
–
174
29
72
11
83
(1)
17
–
128
14
34
8
42
–
14
–
70
893
269
698
967
(864)
(409)
(2,335)
(1,748)
857
1,342
1,153
2,495
109
(1,899)
189
1,751
(33)
1,180
620
1,800
11
(2,405)
302
(324)
9.1
24.0
4.2
28.1
9.3
2.4
n/m
48.9
8.9
21.9
3.6
25.5
6.5
7.8
n/m
48.7
9.3
21.9
3.0
24.9
2.6
10.9
n/m
47.7
9.8
1.1
16.7
3.4
n/m
n/m
n/m
(3.6)
9.6
6.1
31.4
9.8
n/m
n/m
n/m
3.6
(0.3)
5.4
20.2
7.2
n/m
n/m
n/m
(0.7)
224 Barclays PLC Annual Report 2017
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Performance measures excluding litigation and conduct, losses related to Barclays’ sell down of BAGL and the remeasurement of US DTAs
Barclays Group profit attributable to ordinary equity holders of the parenta
Barclays Group profit attributable to ordinary equity holders
Impact of litigation and conduct
Impact of impairment of Barclays’ holding in BAGL
Impact of loss on the sale of BAGL
Net impact of the remeasurement of US DTAs
Barclays Group profit attributable to ordinary equity holders of the parent excluding litigation and conduct, losses related to
Barclays’ sell down of BAGL and the remeasurement of US DTAs
Barclays Group return on average shareholders’ equity
Barclays Group average tangible shareholders’ equity
Barclays Group return on average tangible shareholders’ equity excluding litigation and conduct, losses related to Barclays’ sell
down of BAGL and the remeasurement of US DTAs
Barclays Group average tangible shareholders’ equity based on a CET1 ratio of 13%
2017
£m
(1,748)
1,150
1,008
1,435
901
2,746
£48.9bn
5.6%
£50.3bn
Barclays Group return on average tangible shareholders’ equity excluding litigation and conduct, losses related to Barclays’ sell
down of BAGL and the remeasurement of US DTAs based on a CET1 ratio of 13%
5.5%
Barclays Group basic earnings per ordinary share
Basic weighted average number of shares
16,996m
Barclays Group basic earnings per ordinary share excluding litigation and conduct, losses related to Barclays’ sell down of BAGL
and the remeasurement of US DTAs
16.2p
Operating expenses excluding litigation and conduct
Barclays Group operating expenses
Impact of litigation and conduct
Barclays Group operating expenses excluding litigation and conduct
Tangible net asset value
Total equity excluding non-controlling interests
Other equity instruments
Goodwill and intangiblesb
Tangible shareholders’ equity excluding non-controlling interests attributable to ordinary shareholders
of the parent
Shares in issue
Tangible net asset value per share
2017
£m
(15,456)
1,207
(14,249)
2016
£m
(16,338)
1,363
(14,975)
2015
£m
(18,536)
4,387
(14,149)
2017
£m
63,905
(8,941)
(7,849)
2016
£m
64,873
(6,449)
(9,245)
2015
£m
59,810
(5,305)
(8,222)
47,115
49,179
46,283
17,060m 16,963m 16,805m
276p
290p
275p
Notes
a The profit after tax attributable to other equity instrument holders of £639m (2016: £457m) is offset by a tax credit recorded in reserves of £174m (2016: £128m). The net amount
of £465m (2016: £329m), along with non-controlling interests is deducted from profit after tax in order to calculate earnings per share and return on average tangible
shareholders’ equity.
b Comparative figures for 2016 and 2015 included goodwill and intangibles in relation to Africa Banking.
home.barclays/annualreport
Barclays PLC Annual Report 2017 225
Risk reviewFinancial statementsShareholder informationStrategic reportFinancial reviewGovernance Presentation of information
Barclays approach to disclosures
Barclays aims to continually enhance its
disclosures and their usefulness to the readers
of the financial statements in the light of
developing market practice and areas of focus.
Consequently Barclays’ disclosures go beyond
the minimum standards required by
accounting standards and other regulatory
requirements.
Barclays continues to support the
recommendations and guidance made by
the Financial Stability Board and its various
task forces which continue to promote a
broadening of disclosures by global banks
in a number of areas, including liquidity and
funding, credit risk and market risk. Barclays
has adopted the recommendations across the
Annual Report and Pillar 3 Report.
In line with the Financial Reporting Council’s
guidance on Clear and Concise reporting,
Barclays has focused reporting on material
items and sought to present information in
order to aid users’ understanding such as
including detail on relevant accounting
policies within each note.
British Bankers’ Association (BBA) Code for
Financial Reporting Disclosure as adopted
by UK Finance in 2017
Barclays has adopted the BBA Code for
Financial Reporting Disclosure and has
prepared the 2017 Annual Report and
Accounts in compliance with the Code.
It is Barclays’ view that best in class
disclosures will continue to evolve in light of
ongoing market and stakeholder engagement
within the banking sector. Barclays is
committed to continuously reflect the
objectives of reporting set out in the BBA
Code for Financial Reporting Disclosure.
This code sets out five disclosure principles
together with supporting guidance which
states that UK banks will:
■■ provide high quality, meaningful and
decision-useful disclosures
■■ review and enhance their financial
instrument disclosures for key areas
of interest
■■ assess the applicability and relevance of
good practice recommendations to their
disclosures acknowledging the importance
of such guidance
■■ seek to enhance the comparability of
financial statement disclosures across the
UK banking sector and
■■ clearly differentiate in their annual reports
between information that is audited and
information that is unaudited.
Statutory accounts
The consolidated accounts of Barclays PLC
and its subsidiaries (set out on pages 234 to
238 along with the accounts of Barclays PLC
itself on pages 239 to 240) have been
prepared in accordance with the IFRSs
as adopted by the European Union. The
accounting policies on pages 241 to 246 and
the notes commencing on page 247 apply
equally to both sets of accounts unless
otherwise stated.
Capital Requirements Country-by-Country
Reporting
HM Treasury has transposed the requirements
set out under CRD IV and issued the Capital
Requirements Country-by-Country Reporting
Regulations 2013. The legislation requires
Barclays PLC to publish additional
information in respect of the year ended
31 December 2017. This information
is available on the Barclays website:
barclays.com/citizenship/reports-and-
publications/country-snapshot.html
226 Barclays PLC Annual Report 2017
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Financial statements
Detailed analysis of our statutory accounts, independently audited and providing in-depth
disclosure on the financial performance of the Group.
Consolidated financial statements
Notes to the financial statements
Performance/return
Assets and liabilities held at fair value
■■ Independent Auditor’s Report
■■ Consolidated income statement
■■ Consolidated statement of comprehensive income
■■ Consolidated balance sheet
■■ Consolidated statement of changes in equity
■■ Consolidated cash flow statement
■■ Parent company accounts
■■ Significant accounting policies
■■ Segmental reporting
■■ Net interest income
■■ Net fee and commission income
■■ Net trading income
■■ Net investment income
■■ Credit impairment charges and other provisions
■■ Operating expenses
■■ Profit/(loss) on disposal of subsidiaries, associates and joint ventures
■■ Tax
■■ Earnings per share
■■ Dividends on ordinary shares
■■ Trading portfolio
■■ Financial assets designated at fair value
■■ Derivative financial instruments
■■ Financial investments
■■ Financial liabilities designated at fair value
■■ Fair value of financial instruments
■■ Offsetting financial assets and financial liabilities
Financial instruments held at amortised cost
■■ Loans and advances to banks and customers
■■ Finance leases
■■ Reverse repurchase and repurchase agreements including other
Non-current assets and other investments
Accruals, provisions, contingent liabilities
and legal proceedings
Capital instruments, equity and reserves
Employee benefits
Scope of consolidation
Other disclosure matters
similar lending and borrowing
■■ Property, plant and equipment
■■ Goodwill and intangible assets
■■ Operating leases
■■ Accruals, deferred income and other liabilities
■■ Provisions
■■ Contingent liabilities and commitments
■■ Legal, competition and regulatory matters
■■ Subordinated liabilities
■■ Ordinary shares, share premium and other equity
■■ Reserves
■■ Non-controlling interests
■■ Share-based payments
■■ Pensions and post-retirement benefits
■■ Principal subsidiaries
■■ Structured entities
■■ Investments in associates and joint ventures
■■ Securitisations
■■ Assets pledged
■■ Related party transactions and Directors’ remuneration
■■ Auditors’ remuneration
■■ Assets included in disposal groups classified as held for sale and
associated liabilities
■■ Barclays PLC (the Parent company)
■■ Related undertakings
Page
228
234
235
236
237
238
239
241
247
249
249
250
250
250
252
252
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259
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262
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277
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282
283
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285
285
294
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297
298
299
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307
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315
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318
Note
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1
2
3
4
5
6
7
8
9
10
11
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13
14
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Barclays PLC Annual Report 2017 227
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance Independent Auditor’s report to the members of Barclays PLC
Our opinion is unmodified
We have audited the financial statements
of Barclays PLC (“the Company”) for the
year ended 31 December 2017 which
comprise the consolidated and Parent
company balance sheets as at 31 December
2017 and the consolidated income statement,
consolidated and Parent company statements
of comprehensive income, cash flow
statements and statements of changes in
equity for the year then ended, and the related
notes, including the significant accounting
policies in note 1.
In our opinion the financial statements:
■■ give a true and fair view of the state of the
Group’s and of the Parent company’s affairs
as at 31 December 2017 and of the Group’s
loss and the Parent company’s profit for the
year then ended;
■■ have been properly prepared in
accordance with International Financial
Reporting Standards as adopted by the
European Union;
■■ have been prepared in accordance with the
requirements of the Companies Act 2006
and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK)
(“ISAs (UK)”) and applicable law. Our
responsibilities are described below. We
believe that the audit evidence we have
obtained is a sufficient and appropriate basis
for our opinion. Our audit opinion is
consistent with our reports to the Board Audit
Committee.
We were appointed as auditor by the directors
on 31 March 2017. The financial year ended
31 December 2017 is our first year as auditor.
We have fulfilled our ethical responsibilities
under, and we remain independent of the
Group in accordance with, UK ethical
requirements including the FRC Ethical
Standard as applied to listed public interest
entities. No non-audit services prohibited by
that standard were provided.
Key audit matters: our assessment of risks
of material misstatement
Key audit matters are those matters that, in
our professional judgement, were of most
significance in the audit of the financial
statements and include the most significant
assessed risks of material misstatement
(whether or not due to fraud) identified by us,
including those which had the greatest effect
on: the overall audit strategy; the allocation
of resources in the audit; and directing the
efforts of the engagement team. We
summarise below the key audit matters in
decreasing order of audit significance, in
arriving at our audit opinion above, together
with our key audit procedures to address
those matters and, as required for public
interest entities, our results from those
procedures. These matters were addressed,
and our results are based on procedures
undertaken, in the context of, and solely for
the purpose of, our audit of the financial
statements as a whole, and in forming our
opinion thereon, and consequently are
incidental to that opinion, and we do not
provide a separate opinion on these matters.
228 Barclays PLC Annual Report 2017
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Independent Auditor’s report How our audit addressed the key audit matter
Our procedures included:
■■ Controls testing: For UK and US Barclaycard and UK mortgages
portfolios we tested the design and operating effectiveness of the key
controls over the completeness and accuracy of the key inputs and
assumptions into the impairment models, the identification of impaired
and forborne accounts and key systems reconciliations. We evaluated
controls over the modelling process, including model monitoring,
validation and approval. We tested controls over model outputs and
recognition and approval of post model adjustments and management
overlays. For corporate exposures, we tested design and operating
effectiveness of the key controls over the determination of whether
loans displayed indicators of impairment;
■■ Our financial risk modelling expertise: In the UK and US Barclaycard
and UK mortgage portfolios we assessed the appropriateness of
the Group’s impairment methodologies using our experience to
independently assess segmentation, emergence periods and recovery
period assumptions. For a sample of customer accounts we
re-evaluated when an emergence period should start by using
underlying customer data and comparing this to the emergence period
in the models used by the Group;
■■ Test of details: We tested a selection of post model adjustments and
management overlays in order to assess the reasonableness of the
adjustments by challenging key assumptions, inspecting the calculation
methodology and tracing a sample back to source data;
■■ Test of details: In the UK and US Barclaycard and UK mortgages
portfolios we analysed account source data to identify accounts that
were paying less than their contractual amount. These accounts were
then checked to the forborne accounts identified by the Group;
■■ Our credit experience: We examined a risk based sample of corporate
exposures on the early watch list not identified as impaired and formed
our own judgement, based on the individual facts and circumstances, as
to whether impairment was required.
Our results:
The results of our testing were satisfactory and we considered the credit
impairment charge and provision recognised to be acceptable.
Our procedures included:
■■ Enquiry of Directors: We enquired of the Directors to obtain their view
on the status of all significant litigation and regulatory matters;
■■ Enquiry of lawyers: For all significant litigation and regulatory matters
we enquired of the Group’s internal legal counsel and inspected internal
notes and reports. We also received formal confirmations from external
counsel. For the most significant litigation and regulatory matters we
also had discussions with external counsel. Based on these procedures
we challenged the timing of the recognition of provisions where there is
potential exposure but it is not clear whether an obligation exists or
where the Directors have determined a reliable estimate is not possible.
For the significant provisions we independently assessed the estimated
value of the provision, based on our enquiries of lawyers;
■■ Assessing transparency: Assessed whether the disclosures detailing
significant litigation and regulatory matters adequately disclose the
potential liabilities and the significant uncertainties that exist.
Our results:
The results of our testing were satisfactory and we considered the
liabilities recognised, and the disclosures made, to be acceptable.
Key audit matter
Impairment of loans and advances to customers
Refer to page 57 (Board Audit Committee Report).
Subjective estimate
The calculation of certain credit provisions for the Group is
inherently judgemental. Individual and collective impairment
provisions (identified and unidentified) may not reflect recent
developments in credit quality, arrears experience, or emerging
macro-economic risks. The most significant areas are:
■■ Complex impairment models - Models used in the UK and US
Barclaycard and UK mortgages portfolios to estimate the existence
of incurred loss events and the resultant expected write-offs.
Judgement is required to determine the inputs, methodologies
and assumptions and these can significantly impact the provisions
held. The most significant judgements include the segmentation
level at which historical loss rates are calculated, and the length
of the recovery period and the loss emergence period applied to
historical loss provisions.
■■ Forborne accounts - Forbearance requires special consideration in
impairment provisioning, as latent losses may not be appropriately
recognised where payment or other concessions have been
granted to the customer to provide temporary relief from debt
obligations. Forbearance has the greatest potential financial
significance on the UK and US Barclaycard and UK mortgages
portfolios.
■■ Identification of impairment - Corporate exposures on the Group’s
early watchlist are individually assessed for impairment based on
a borrower’s financial performance, solvency and liquidity. The
bespoke nature of this assessment means there is an inherent
risk that loss impairment triggers may not be identified on a
timely basis.
Alongside the above, another area of focus is post modelling
adjustments and management overlays in the UK and US Barclaycard
and UK mortgages portfolios as they have the potential to be
significant, judgemental and may be difficult to corroborate.
Litigation and regulatory matters
Contained within the provision for Legal, competition and regulatory
matters of £435 million and Note 29 Legal, competition and
regulatory matters (2016: £455 million)
Refer to page 56 (Board Audit Committee Report), page 283
(accounting policy on accounting for provisions), page 285
(accounting policy on accounting for contingent liabilities),
and page 283 (financial disclosures note 27 Provisions) and
page 285 (financial disclosures note 29 Legal, competition and
regulatory matters)
Determining obligation
The Group and Parent operates in a highly litigious and regulated
environment and faces legal, competition and regulatory challenges
which can lead to potential claims and exposures (together
“litigation and regulatory matters”). In certain litigation and
regulatory matters significant judgment is required by the Directors
to determine if there is a present obligation under relevant
accounting standards.
Subjective estimate
If there is a present obligation the amounts involved can be
potentially significant, and the application of accounting standards
to estimate the expected outflow, if any, of any liability to be
recognised is inherently subjective.
Disclosure quality
When a liability is not recognised for possible significant outflows
but there is more than a remote likelihood of an adverse outcome,
the related disclosure is key to understanding the risks and potential
effect on the Group and Parent.
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Barclays PLC Annual Report 2017 229
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance Key audit matter
Payment Protection Insurance (‘PPI’) Redress
Contained within the provision for Conduct redress PPI of
£1,606 million (2016: £1,979 million)
Refer to page 56 (Board Audit Committee Report), page 283
(accounting policy on accounting for provisions) and page 283
(financial disclosure note 27 Provisions).
Subjective estimate
The calculation of the provision of PPI redress costs for the Group
requires the Directors to determine a number of key inputs. The
determination of these is judgemental and requires the Directors to
consider a range of information. The most significant input into the
PPI provision calculation is the future complaint flow and that is
where we have focussed our procedures.
The Directors have developed a model which calculates the expected
future complaint flow and associated redress cost. In 2017 a key
factor impacting the period over which the model forecasts
complaint flows was the introduction of a Financial Conduct
Authority (“FCA”) timebar for processing new complaints. The
effective date of the timebar is August 2019, and prior to that the
FCA is running a consumer communications campaign to give
potential complainants notice of the timebar.
The Directors have assessed the appropriateness of the provision
with reference to the expected impact of this timebar and also in
the context of the historical observation across the industry in
recent years that the compliant flow has always been greater
than expected.
Disclosure quality
The related PPI disclosures provide the key assumptions
underpinning the calculation of the future complaint flow and
sensitivity of the provision to the flow and are therefore key to
understanding the judgement which has been applied.
How our audit addressed the key audit matter
Our procedures included:
■■ Enquiry of Directors: We enquired of the Directors as to how they have
determined the future complaint flow with particular focus on the way
in which the impact of the FCA consumer communications campaign
was determined. We also enquired to the reason for adjustments in the
provision estimates in 2017, and determined whether these adjustments
were indicative of bias in the estimation process;
■■ Enquiry of regulators: We inspected the regulatory correspondence
with the FCA and PRA to identify any regulatory observations on the
future complaint flow. We also made enquiries of the FCA discussing
in more detail the nature of the matters contained in regulatory
correspondence that could materially affect the level of provisions held;
■■ Controls testing: We tested the design and operating effectiveness of
the key controls over capturing of historic complaints volumes and
estimating the future complaint flow;
■■ Sensitivity analysis: We tested the operation of the model used to
determine the future complaint flow and related redress estimates
and considered the sensitivity of the model to variations in the future
complaint flow. We also considered the appropriateness of the scenarios
used to model the potential range of future complaint flows, with
particular focus on the way the impact of the timebar and FCA
communication campaign have been determined, and considered the
sensitivity of the model to variations in the future complaint flow by
inspecting the calculation methodology and challenging the key
assumptions using our industry knowledge;
■■ Independent reperformance: We built our own model to allow us to
determine a range of potential future complaint flows and compared
these to the Group’s own range. Where there were differences in the
inputs and ranges we challenged the Group’s rationale for these and
assessed whether they were reasonable. We also used our model to
understand the effect of these ranges on the potential future redress
cost;
■■ Assessing transparency: We assessed whether the disclosures
appropriately disclose and address the uncertainty which exists
when determining the future complaint flow. As a part of this, we
re-performed the sensitivity analysis that is disclosed.
Our results:
The results of our testing were satisfactory and we considered the liability
recognised, and the disclosures made, to be acceptable.
230 Barclays PLC Annual Report 2017
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Independent Auditor’s report to the members of Barclays PLCIndependent Auditor’s report Key audit matter
Valuation of financial instruments (trading, held at fair value and
derivatives)
Contained within the level 3 assets and liabilities valued at
£15,598 million and £5,681 million respectively
(2016: £27,020 million and £14,219 million)
Refer to page 56 (Board Audit Committee Report), page 262
(accounting policy on accounting for financial assets and liabilities –
fair values) and page 262 (financial disclosure Note 18 Fair value of
financial instruments).
Subjective valuation
The fair value of the Group’s financial instruments is determined
through the application of valuation techniques which often involve
the exercise of judgement by the Directors and the use of
assumptions, estimates and valuation models.
Estimation uncertainty can be high for those instruments where
significant valuation inputs are unobservable (i.e. Level 3
instruments). At 31 December 2017, Level 3 instruments represented
2.9% of the Group’s financial instrument assets carried at fair value
(£15.6 billion) and 1.2% of the Group’s financial instrument liabilities
carried at fair value (£5.7 billion).
Within this Level 3 population the fair value instrument portfolios in
the Group with the most significant judgements include:
■■ Education, Social Housing and Local Authority (ESHLA) loan
portfolio – as at 31 December 2017 the Group has outstanding
ESHLA loans which require significant judgement in the
valuation due to the long dated nature of the portfolio,
the lack of a secondary market in the relevant loans and
unobservable loan spreads.
■■ Longer-dated portfolios – we identified three portfolios (two
derivative portfolios and a bond package) each with a significant
risk attached to the valuation methodology due to the lack of
observable pricing inputs. The bond package also includes a long
standing valuation disparity with the counterparty.
User Access Management (‘UAM’)
Control Performance
User Access Management key controls are an important component
of the General IT Control environment assuring only authorised
access to the infrastructure, financial systems and data throughout
the Group.
In 2016, controls to detect instances of direct developer access to
the production environment, were not consistently implemented and
operated throughout the Group. Also, where inappropriate direct
developer access had been identified by compensating controls,
there were no follow up activities performed to determine if and how
these access rights were used, potentially resulting in unauthorised
changes to the infrastructure and financial systems.
During 2017 a remediation programme and further compensating
controls were implemented to address inappropriate direct developer
access to infrastructure and financial systems, including an
assessment of potential access by developers that were not covered
by the further compensating controls.
If the above controls for User Access Management are deficient and
are not remediated or adequately mitigated the pervasive nature of
these key controls may undermine our ability to place some reliance
on fully automated and IT dependent controls in our audit.
How our audit addressed the key audit matter
Our procedures included:
■■ Control testing: We tested the design and operating effectiveness of key
controls relating specifically to the ESHLA and the three longer dated
portfolios. These included:
– Controls over independent price verification (IPV) key inputs,
including completeness of positions and risk factors subject to IPV.
For ESHLA we tested the gilt asset swap curve and credit spreads.
For the long dated portfolios we tested material risk parameters;
– Management review controls over fair value adjustments (FVA). For
ESHLA these related to pre-payments. For the longer-dated portfolios
these related to exit adjustments and model shortcoming reserves. In
addition we tested funding and credit adjustments for all significant
risk portfolios.
– Controls over the validation, completeness, implementation and
usage of valuation models. This included controls over adjustments to
mitigate model limitations and assumptions.
■■ Independent reperformance: Our own valuation specialists
independently re-priced a selection of trades from the three longer-
dated portfolios and challenged management on the valuations where
they were outside our expected range.
■■ Methodology choice: In the context of observed industry practice, our
own valuation specialists assisted us in challenging the appropriateness
of significant models and methodologies used in calculating fair values,
risk exposures, completeness of risk factors, and in calculating FVAs;
■■ Comparing valuations: For a selection of material collateral disputes
within the longer-dated portfolios our own valuation specialists
challenged the valuation methodology where significant fair value
differences were observable with the counterparty;
■■ Historical comparison: For the longer-dated bond package portfolio we
inspected significant gains and losses on historical trade exits both in
the current year and prior years and challenged whether these data
points indicate elements of fair value not incorporated in the current
valuation methodologies;
■■ Benchmarking: For the ESHLA portfolio we independently sourced
comparable credit spreads and proxy bond spreads and investigated
significant variances.
Our results:
The results of our testing were satisfactory and we considered the fair value of
level 3 financial instrument assets and liabilities recognised to be acceptable.
Our procedures included:
■■ Assessment of remediation: We inspected selected activities of the
remediation programme to determine the appropriateness of the
remediation and a new mitigating and compensating detective control
implemented in the year;
■■ Control testing: We tested the design and operating effectiveness of the
key controls over User Access Management. This included the new
mitigating and compensating control implemented in the year that
identifies inappropriate developer access to production, the procedures
to assess potential use, and the removal of these access rights;
■■ Control reperformance: for a selection of key automated and technology
dependent controls, that were tested before the remediation programme
concluded, we independently reperformed procedures to determine that
these controls remained unchanged or were changed following the
standard change management process throughout the year;
■■ Extended scope: To determine that a further detective compensating
control and retrospective scan of developer activities on key IT
applications was complete and accurate, we reperformed on a sample
basis management’s assessment of potential access by developers that
were not covered by the further compensating control.
Our results:
Our testing did not identify developers who had access and used the
access without authorisation that would have required us to expand the
extent of our planned detailed testing.
home.barclays/annualreport
Barclays PLC Annual Report 2017 231
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance Our application of materiality and an
overview of the scope of our audit
Materiality
Materiality for the Group financial statements
as a whole was set at £225 million, determined
with reference to a benchmark of group profit
before tax from continuing operations,
normalised to exclude charges related to
litigation and conduct as disclosed in note 2, of
£4,748 million, of which it represents 4.7%.
Materiality for the Parent company financial
statements as a whole was set at £225 million,
determined with reference to a benchmark of
net assets, of which it represents 0.6%.
We agreed to report to the Board Audit
Committee any corrected or uncorrected
identified misstatements exceeding £11 million,
in addition to other identified misstatements
that warranted reporting on qualitative grounds.
Group materiality
1
2
A
B
A £225m
Whole financial
statements
materiality
B £165m
Range of materiality
at 10 components
(£25m-£165m)
C £11m
Misstatements
reported to the
Board Audit
Committee
C
1 Profit before tax
from continuing operations*
2 Group materiality
£4,748m
£225m
*normalised to exclude charges related to litigation and conduct
Scope – general
We subjected 6 of the group’s reporting
components to full scope audits for group
purposes and 4 to an audit of one or more
account balances, of which 3 focused on
loans and advances and related impairment
and interest, and 1 focused on Financial assets
designated at fair value. The latter were not
individually financially significant enough to
require a full scope audit for group purposes,
but did present specific individual risks that
needed to be addressed.
The work on 5 of the 6 components was
performed by component auditors and the
rest, including the audit of the Parent
company, was performed by the Group team.
For those items excluded from normalised
group profit before tax, the component teams
performed procedures on items relating to
their components. The group team performed
procedures on the remaining excluded items.
The components within the scope of our
work accounted for the percentages
illustrated opposite.
Group total income
1
3
2
1 Full scope for group audit purposes
2 Audit of one or more account balance
3 Residual components – other procedures
79%
2%
19%
Group total assets
1
3
2
1 Full scope for group audit purposes
2 Audit of one or more account balance
3 Residual components – other procedures
87%
3%
10%
Scope – disclosure of IFRS 9 effect
The Group is adopting IFRS 9 Financial
Instruments from 1 January 2018 and has
included an estimate of the financial impact
of the change in accounting standard in
accordance with IAS 8 Changes in Accounting
Estimates and Errors as set out in note 1. This
disclosure notes that the estimate has been
prepared under an interim control environment
with models that continue to undergo
validation. While further testing of the financial
impact will be performed as part of our 2018
year end audit, we have performed sufficient
audit procedures for the purposes of assessing
the disclosures made in accordance with IAS
8. Specifically we have:
■■ considered the appropriateness of key
technical decisions, judgements,
assumptions and elections made in
determining the estimate;
■■ considered key classification and
measurement decisions, including business
model assessments and solely payment of
principal and interest outcomes;
■■ involved credit risk modelling and economic
specialists in the consideration of credit risk
modelling decisions and macroeconomic
variables, including forward economic
guidance and generation of multiple
economic scenarios, for a sample of models
used in determining the estimate;
■■ considered interim controls and governance
processes related to the calculation and
approval of the estimated transitional impact.
Team structure
The Group team instructed component
auditors as to the significant areas to be
covered, including the relevant key audit
matters detailed above and the information to
be reported back. The Group team approved
the component materialities, which ranged
from £25 million to £165 million, having
regard to the mix of size and risk profile
of the Group across the components.
The Group team visited all of the components
in scope for group reporting purposes to assess
the audit risk and strategy. Video and telephone
conference meetings were also held with these
component auditors. At these visits and
meetings, we reviewed the components’ key
workpapers, the findings reported to the Group
team were discussed in more detail, and any
further work required by the Group team was
then performed by the component auditor.
The Group operates a shared service centre
in India, the outputs of which are included in
the financial information of the reporting
components it services and therefore it is not a
separate reporting component. The shared
service centre is subject to specified risk-focused
audit procedures, predominantly the testing of
transaction processing, reconciliations and
review controls. Additional procedures are
performed at certain reporting components to
address the audit risks not covered by the work
performed over the shared service centres. The
Group team and certain component teams
visited the shared service centre and performed
consistent risk assessment procedures as
described above for component site visits.
We have nothing to report on going concern
We are required to report to you if:
■■ we have anything material to add or draw
attention to in relation to the directors’
statement in note 1 to the financial
statements on the use of the going concern
basis of accounting with no material
uncertainties that may cast significant
doubt over the Group and Parent company’s
use of that basis for a period of at least
twelve months from the date of approval
of the financial statements; or
■■ the same statement under the Listing Rules
is materially inconsistent with our audit
knowledge.
We have nothing to report in these respects.
We have nothing to report on the other
information in the Annual Report
The directors are responsible for the other
information presented in the Annual Report
together with the financial statements. Our
opinion on the financial statements does not
cover the other information and, accordingly,
we do not express an audit opinion or, except
as explicitly stated below, any form of
assurance conclusion thereon.
Our responsibility is to read the other
information and, in doing so, consider whether,
based on our financial statements audit work,
the information therein is materially misstated
or inconsistent with the financial statements or
our audit knowledge. Based solely on that work
we have not identified material misstatements
in the other information.
232 Barclays PLC Annual Report 2017
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Independent Auditor’s report to the members of Barclays PLCIndependent Auditor’s report
Strategic report and Directors’ report
Based solely on our work on the other
information:
■■ we have not identified material
misstatements in the strategic report
and the Directors’ report;
■■ in our opinion the information given in those
reports for the financial year is consistent
with the financial statements; and
■■ in our opinion those reports have been
prepared in accordance with the Companies
Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’
Remuneration Report to be audited has been
properly prepared in accordance with the
Companies Act 2006.
Disclosures of principal risks and longer-
term viability
Based on the knowledge we acquired during
our financial statements audit, we have
nothing material to add or draw attention
to in relation to:
■■ the directors’ confirmation within the Viability
statement (pages 40 to 41) that they have
carried out a robust assessment of the
principal risks facing the Group, including
those that would threaten its business model,
future performance, solvency and liquidity;
■■ the material existing and emerging risks
disclosures describing these risks within the
Viability Statement (pages 40 to 41) and
explaining how they are being managed
and mitigated; and
■■ the directors’ explanation in the Viability
statement of how they have assessed the
prospects of the Group, over what period
they have done so and why they considered
that period to be appropriate, and their
statement as to whether they have a
reasonable expectation that the Group will
be able to continue in operation and meet
its liabilities as they fall due over the period
of their assessment, including any related
disclosures drawing attention to any
necessary qualifications or assumptions.
Under the Listing Rules we are required to
review the Viability statement. We have
nothing to report in this respect.
Corporate governance disclosures
We are required to report to you if:
■■ we have identified material inconsistencies
between the knowledge we acquired during
our financial statements audit and the
directors’ statement that they consider that
the Annual Report and financial statements
taken as a whole is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the
Group’s position and performance, business
model and strategy; or
■■ the section of the Annual Report describing
the work of the Board Audit Committee
does not appropriately address matters
communicated by us to the Board
Audit Committee.
We are required to report to you if the Corporate
Governance Statement does not properly
disclose a departure from the eleven provisions
of the UK Corporate Governance Code specified
by the Listing Rules for our review.
We have nothing to report in these respects.
We have nothing to report on the other
matters on which we are required to report
by exception
Under the Companies Act 2006, we are
required to report to you if, in our opinion:
■■ adequate accounting records have not been
kept by the Parent company, or returns
adequate for our audit have not been
received from branches not visited by us; or
■■ the Parent company financial statements
and the part of the Directors’ Remuneration
Report to be audited are not in agreement
with the accounting records and returns; or
■■ certain disclosures of directors’ remuneration
specified by law are not made; or
■■ we have not received all the information and
explanations we require for our audit.
We have nothing to report in these respects.
Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set
out on page 88, the directors are responsible
for: the preparation of the financial statements
including being satisfied that they give a true
and fair view; 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; assessing the Group and
Parent company’s ability to continue as a
going concern, disclosing, as applicable,
matters related to going concern; and using
the going concern basis of accounting unless
they either intend to liquidate the Group or
the Parent company or to cease operations,
or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from material
misstatement, whether due to fraud or other
irregularities (see below), or error, and to issue
our opinion in an auditor’s report. Reasonable
assurance is a high level of assurance, but
does not guarantee that an audit conducted in
accordance with ISAs (UK) will always detect
a material misstatement when it exists.
Misstatements can arise from fraud, other
irregularities or error and are considered
material if, individually or in aggregate, they
could reasonably be expected to influence the
economic decisions of users taken on the
basis of the financial statements.
A fuller description of our responsibilities is
provided on the FRC’s website at www.frc.
org.uk/auditorsresponsibilities.
Irregularities – ability to detect
We identified relevant areas of laws and
regulations that could have a material effect
on the financial statements from our sector
experience, through discussion with the
directors and other management (as required
by auditing standards), and from inspection
of the Group’s regulatory correspondence.
We had regard to laws and regulations
in areas that directly affect the financial
statements including financial reporting
(including related company legislation) and
taxation legislation. We considered the extent
of compliance with those laws and regulations
as part of our procedures on the related
annual accounts items.
In addition we considered the impact of laws
and regulations in the specific areas of
regulatory capital and liquidity, conduct
including PPI mis-selling, money laundering,
sanctions list and financial crime, market
abuse regulations and certain aspects of
company legislation recognising the financial
and regulated nature of the Group’s activities.
With the exception of any known or possible
non-compliance, and as required by auditing
standards, our work in respect of these was
limited to enquiry of the directors and other
management and inspection of regulatory
correspondence. We considered the effect of
any known or possible non-compliance with
these as part of our procedures on the related
annual accounts items, including known or
possible non-compliance as set out in certain
key audit matters disclosures in the “Key audit
matters: our assessment of risks of material
misstatement” section of this report.
We communicated identified laws and
regulations throughout our team and
remained alert to any indications of non-
compliance throughout the audit.
As with any audit, there remained a higher
risk of non-detection of non-compliance
with relevant areas of laws and regulations,
as these may involve collusion, forgery,
intentional omissions, misrepresentations,
or the override of internal controls.
The purpose of our audit work and to whom
we owe our responsibilities
This report is made solely to the Company’s
members, as a body, in accordance with Chapter
3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we
might state to the Company’s members those
matters we are required to state to them in an
auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than
the Company and the Company’s members,
as a body, for our audit work, for this report,
or for the opinions we have formed.
Guy Bainbridge (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory
Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
21 February 2018
home.barclays/annualreport
Barclays PLC Annual Report 2017 233
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance Consolidated income statement
For the year ended 31 December
Continuing operations
Interest income
Interest expense
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Net trading income
Net investment income
Other income
Total income
Credit impairment charges and other provisions
Net operating income
Staff costs
Infrastructure costs
Administration and general expenses
Provision for UK customer redress
Provision for ongoing investigations and litigation relating to Foreign Exchange
Operating expenses
Share of post-tax results of associates and joint ventures
Profit/(loss) on disposal of subsidiaries, associates and joint ventures
Profit before tax
Taxation
Profit/(loss) after tax in respect of continuing operations
(Loss)/profit after tax in respect of discontinued operation
(Loss)/profit after tax
Attributable to:
Equity holders of the parent
Other equity instrument holdersa
Total equity holders of the parent
Non-controlling interests in respect of continuing operations
Non-controlling interests in respect of discontinued operation
(Loss)/profit after tax
Earnings per share
Basic (loss)/earnings per ordinary share
Basic earnings/(loss) per ordinary share in respect of continuing operations
Basic (loss)/earnings per ordinary share in respect of discontinued operation
Diluted (loss)/earnings per share
Diluted earnings/(loss) per ordinary share in respect of continuing operations
Diluted (loss)/earnings per ordinary share in respect of discontinued operation
Notes
2017
£m
2016
£m
2015
£m
3
3
4
4
5
6
7
8
8
8
8
9
10
33
33
11
11
11
11
11
11
13,631
(3,786)
9,845
8,751
(1,937)
6,814
3,500
861
56
21,076
(2,336)
18,740
(8,560)
(2,949)
(3,247)
(700)
–
(15,456)
70
187
3,541
(2,240)
1,301
(2,195)
(894)
(1,922)
639
(1,283)
249
140
(894)
(10.3)
3.5
(13.8)
(10.1)
3.4
(13.5)
14,541
(4,004)
10,537
8,570
(1,802)
6,768
2,768
1,324
54
21,451
(2,373)
19,078
(9,423)
(2,998)
(2,917)
(1,000)
–
(16,338)
70
420
3,230
(993)
2,237
591
2,828
1,623
457
2,080
346
402
2,828
10.4
9.3
1.1
10.3
9.2
1.1
13,953
(3,345)
10,608
8,470
(1,611)
6,859
3,426
1,097
50
22,040
(1,762)
20,278
(8,853)
(2,691)
(2,983)
(2,772)
(1,237)
(18,536)
41
(637)
1,146
(1,149)
(3)
626
623
(394)
345
(49)
348
324
623
(1.9)
(3.7)
1.8
(1.9)
(3.7)
1.8
Note
a The profit after tax attributable to other equity instrument holders of £639m (2016: £457m) is offset by a tax credit recorded in reserves of £174m (2016: £128m). The net
amount of £465m (2016: £329m), along with non-controlling interests (NCI) is deducted from profit after tax in order to calculate earnings per share and return on average
shareholders’ equity.
234 Barclays PLC Annual Report 2017
home.barclays/annualreport
Consolidated financial statements Consolidated statement of comprehensive income
For the year ended 31 December
(Loss)/profit after tax
Profit/(loss) after tax in respect of continuing operations
(Loss)/profit after tax in respect of discontinued operation
Other comprehensive (loss)/income that may be recycled to profit or loss from continuing operations:
Currency translation reserve
Currency translation differencesa
Available for sale reserve
Net gains from changes in fair value
Net gains transferred to net profit on disposal
Net losses transferred to net profit due to impairment
Net losses/(gains) transferred to net profit due to fair value hedging
Changes in insurance liabilities and other movements
Tax
Cash flow hedging reserve
Net (losses)/gains from changes in fair value
Net gains transferred to net profit
Tax
Other
Other comprehensive (loss)/income that may be recycled to profit or loss from continuing operations
Other comprehensive income/(loss) not recycled to profit or loss from continuing operations:
Retirement benefit remeasurements
Own credit
Tax
Other comprehensive income/(loss) not recycled to profit or loss from continuing operations
2017
£m
(894)
1,301
(2,195)
2016
£m
2,828
2,237
591
2015
£m
623
(3)
626
(1,337)
3,024
748
473
(294)
3
283
11
(27)
(626)
(643)
321
(5)
(1,841)
115
(7)
(66)
42
2,147
(912)
20
(1,677)
53
(18)
1,455
(365)
(292)
13
3,448
(1,309)
–
329
(980)
64
(374)
17
(148)
86
126
(312)
(238)
57
20
46
1,176
–
(260)
916
Other comprehensive (loss)/income for the year from continuing operations
(1,799)
2,468
962
Other comprehensive income/(loss) for the year from discontinued operation
1,301
1,520
(1,348)
Total comprehensive (loss)/income for the year:
Total comprehensive (loss)/income for the year, net of tax from continuing operations
Total comprehensive (loss)/income for the year, net of tax from discontinued operation
Total comprehensive (loss)/income for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Total comprehensive (loss)/income for the year
Note
a Includes £189m loss (2016: £101m gain) on recycling of currency translation differences.
(498)
(894)
(1,392)
(1,749)
357
(1,392)
4,705
2,111
6,816
5,233
1,583
6,816
959
(722)
237
45
192
237
home.barclays/annualreport
Barclays PLC Annual Report 2017 235
Consolidated financial statementsRisk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance Consolidated balance sheet
As at 31 December
Assets
Cash and balances at central banks
Items in the course of collection from other banks
Trading portfolio assets
Financial assets designated at fair value
Derivative financial instruments
Financial investments
Loans and advances to banks
Loans and advances to customers
Reverse repurchase agreements and other similar secured lending
Prepayments, accrued income and other assets
Investments in associates and joint ventures
Property, plant and equipment
Goodwill and intangible assets
Current tax assets
Deferred tax assets
Retirement benefit assets
Assets included in disposal groups classified as held for sale
Total assets
Liabilities
Deposits from banks
Items in the course of collection due to other banks
Customer accounts
Repurchase agreements and other similar secured borrowing
Trading portfolio liabilities
Financial liabilities designated at fair value
Derivative financial instruments
Debt securities in issue
Subordinated liabilities
Accruals, deferred income and other liabilities
Provisions
Current tax liabilities
Deferred tax liabilities
Retirement benefit liabilities
Liabilities included in disposal groups classified as held for sale
Total liabilities
Equity
Called up share capital and share premium
Other equity instruments
Other reserves
Retained earnings
Total equity excluding non-controlling interests
Non-controlling interests
Total equity
Total liabilities and equity
The Board of Directors approved the financial statements on pages 234 to 322 on 21 February 2018.
John McFarlane
Group Chairman
James E Staley
Group Chief Executive
Tushar Morzaria
Group Finance Director
Notes
2017
£m
2016
£m
2015
£m
171,082
2,153
113,760
116,281
237,669
58,916
35,663
365,552
12,546
2,389
718
2,572
7,849
482
3,457
966
1,193
49,711
1,011
77,348
76,830
327,709
90,267
41,349
399,217
28,187
3,010
573
3,468
8,222
415
4,495
836
7,364
1,133,248 1,213,126 1,120,012
102,353
1,467
80,240
78,608
346,626
63,317
43,251
392,784
13,454
2,893
684
2,825
7,726
561
4,869
14
71,454
13
14
15
16
20
20
22
38
23
24
10
10
35
43
37,723
446
429,121
40,338
37,351
173,718
238,345
73,314
23,826
8,565
3,543
586
44
312
–
47,080
1,013
418,242
25,035
33,967
91,745
324,252
69,150
21,467
10,610
4,142
903
122
423
5,997
1,067,232 1,141,761 1,054,148
48,214
636
423,178
19,760
34,687
96,031
340,487
75,932
23,383
8,871
4,134
737
29
390
65,292
22
13
17
15
30
26
27
10
10
35
43
31
31
32
22,045
8,941
5,383
27,536
63,905
2,111
66,016
21,586
5,305
1,898
31,021
59,810
6,054
65,864
1,133,248 1,213,126 1,120,012
21,842
6,449
6,051
30,531
64,873
6,492
71,365
33
236 Barclays PLC Annual Report 2017
home.barclays/annualreport
Consolidated financial statements
Consolidated statement of changes in equity
Called up
share
capital
and share
premiuma
£m
21,842
–
21,842
–
–
–
–
–
–
–
Other
equity
instru-
mentsa
£m
6,449
–
6,449
639
–
–
–
–
–
–
–
Currency
Cash
Available
trans-
flow
for sale
lation
hedging
reserveb
reserveb
reserveb
£m
£m
£m
3,051
(74) 2,105
–
–
3,051
(74) 2,105
–
–
– (1,336)
–
–
–
(948)
–
–
–
–
–
–
–
–
449
–
–
–
–
Own
credit
reserveb
£m
–
(175)
(175)
–
–
–
–
–
(11)
–
Other
reserves
and
treasury
sharesb
£m
–
Total
equity
excluding
non-
controlling
Retained
interests
earnings
£m
£m
969 30,531 64,873
–
175
969 30,706 64,873
1,052
413
– (1,336)
449
–
(948)
–
53
53
(11)
–
(5)
(5)
–
–
–
–
–
–
–
Non-
controlling
interests
£m
–
249
Total
equity
£m
6,492 71,365
–
6,492 71,365
1,301
(1) (1,337)
449
–
(948)
–
53
–
(11)
–
(5)
–
–
639
449
(948) (1,336)
(11)
–
461
(746)
248
(498)
(11)
438
–
4
(944)
–
1,339
3
–
–
(11)
–
– (2,335) (1,003)
– (1,874) (1,749)
117
–
–
109
(894)
357 (1,392)
117
–
–
–
117
86
–
639
–
–
–
–
–
–
2,490
(639)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
22,045
21,586
–
–
–
–
–
–
–
–
–
2
8,941
5,305
457
–
–
–
–
–
–
–
–
–
364
317
–
–
(387)
–
–
–
–
–
–
–
1,161
1,261
–
–
–
798
–
–
–
–
–
–
3,054
(623)
–
3,022
–
–
–
–
–
457
(387)
798
3,022
–
–
68
–
457
–
(4)
(391)
–
46
844
–
652
3,674
–
188
–
–
–
–
–
–
–
–
–
21,842
1,132
(457)
–
–
–
–
–
12
6,449
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(74) 2,105
–
–
–
–
3,051
–
–
–
–
–
–
–
–
7
(179)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
505
591
–
591
–
–
–
(315)
–
174
(479)
–
2,490
(465)
(479)
(315)
–
–
2,490
(465)
(860) (1,339)
(315)
–
329
–
–
–
(636)
(509)
(359)
8
17
983 27,536 63,905
(307)
–
(307)
(509)
(924)
(415)
(359) (3,462) (3,821)
16
2,111 66,016
(1)
943 31,021 59,810
1,891
1,434
3,022
–
(387)
–
798
–
(980)
(980)
12
12
–
–
–
–
–
–
6,054 65,864
2,237
3,024
(387)
798
(980)
13
346
2
–
–
–
1
–
–
–
–
–
466
4,356
349
4,705
183
649
–
877
5,233
68
1,234
1,583
–
2,111
6,816
68
668
856
–
856
–
–
–
(140)
–
128
(417)
–
–
–
1,132
1,132
(329)
(329)
(417) (1,170) (1,587)
(140)
(140)
–
166
–
–
–
(415)
(757)
(349)
3
(249)
(757)
(349)
15
969 30,531 64,873
–
(249)
(575) (1,332)
252
601
14
(1)
6,492 71,365
Balance as at 31 December 2016
Effects of changes in accounting policiesc
Balance as at 1 January 2017
Profit after tax
Currency translation movements
Available for sale investments
Cash flow hedges
Pension remeasurement
Own credit reserve
Other
Total comprehensive income net of tax from
continuing operations
Total comprehensive income net of tax from
discontinued operation
Total comprehensive income for the year
Issue of new ordinary shares
Issue of shares under employee share
schemes
Issue and exchange of other equity
instruments
Other equity instruments coupons paid
Redemption of preference shares
Increase in treasury shares
Vesting of shares under employee share
schemes
Dividends paid
Net equity impact of BAGL disposal
Other reserve movements
Balance as at 31 December 2017
Balance as at 1 January 2016
Profit after tax
Currency translation movements
Available for sale investments
Cash flow hedges
Pension remeasurement
Other
Total comprehensive income net of tax from
continuing operations
Total comprehensive income net of tax from
discontinued operation
Total comprehensive income for the year
Issue of new ordinary shares
Issue of shares under employee share
schemes
Issue and exchange of other equity
instruments
Other equity instruments coupons paid
Redemption of preference shares
Increase in treasury shares
Vesting of shares under employee share
schemes
Dividends paid
Net equity impact of partial BAGL disposal
Other reserve movements
Balance as at 31 December 2016
Notes
a For further details refer to Note 31.
b For further details refer to Note 32.
c As a result of the early adoption of the own credit provisions of IFRS 9 on 1 January 2017, own credit which was previously recorded in the income statement is now recognised
within other comprehensive income. The cumulative unrealised own credit net loss of £175m has therefore been reclassified from retained earnings to a separate own credit
reserve, within other reserves. During 2017, a £4m loss (net of tax) on own credit has been booked in the reserve.
home.barclays/annualreport
Barclays PLC Annual Report 2017 237
Consolidated financial statementsRisk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance Consolidated cash flow statement
For the year ended 31 December
Continuing operations
Reconciliation of profit before tax to net cash flows from operating activities:
Profit before tax
Adjustment for non-cash items:
Allowance for impairment
Depreciation, amortisation and impairment of property, plant, equipment and intangibles
Other provisions, including pensions
Net profit on disposal of investments and property, plant and equipment
Other non-cash movements including exchange rate movements
Changes in operating assets and liabilities
Net decrease/(increase) in loans and advances to banks and customers
Net decrease in reverse repurchase agreements and other similar lending
Net (decrease)/increase in deposits and debt securities in issue
Net increase/(decrease) in repurchase agreements and other similar borrowing
Net decrease/(increase) in derivative financial instruments
Net (increase)/decrease in trading assets
Net increase/(decrease) in trading liabilities
Net decrease/(increase) in financial assets and liabilities designated at fair value
Net (increase) in other assets
Net (decrease) in other liabilities
Corporate income tax paid
Net cash from operating activities
Purchase of available for sale investments
Proceeds from sale or redemption of available for sale investments
Purchase of property, plant and equipment and intangibles
Proceeds from sale of property, plant and equipment and intangibles
Disposal of discontinued operation, net of cash disposed
Disposal of subsidiaries, net of cash disposed
Other cash flows associated with investing activities
Net cash from investing activities
Dividends paid and other coupon payments on equity instruments
Issuance of subordinated debt
Redemption of subordinated debt
Net issue of shares and other equity instruments
Repurchase of shares and other equity instruments
Net purchase of treasury shares
Net cash from financing activities
Effect of exchange rates on cash and cash equivalents
Net increase in cash and cash equivalents from continuing operations
Net cash from discontinued operation
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Cash and cash equivalents comprise:
Cash and balances at central banks
Loans and advances to banks with original maturity less than three months
Available for sale treasury and other eligible bills with original maturity less than three months
Trading portfolio assets with original maturity less than three months
Cash and cash equivalents held for sale
Notes
2017
£m
2016
£m
2015
£m
3,541
3,230
1,146
2,336
1,241
1,875
(325)
1,031
27,361
908
(7,166)
20,578
6,815
(33,492)
2,664
40,014
(3,775)
(2,187)
(708)
60,711
(83,127)
88,298
(1,456)
283
(1,060)
358
206
3,502
(1,273)
3,041
(1,378)
2,490
(1,339)
(580)
961
(4,773)
60,401
101
60,502
144,110
204,612
171,082
32,820
682
28
–
204,612
2,357
1,261
1,964
(912)
(20,025)
(25,385)
14,733
49,064
(4,852)
(2,318)
(5,577)
880
807
(2,629)
(532)
(780)
11,286
(65,086)
102,515
(1,707)
358
–
595
32
36,707
(1,304)
1,457
(1,143)
1,400
(1,587)
(140)
(1,317)
10,473
57,149
405
57,554
86,556
144,110
102,353
38,252
356
–
3,149
144,110
1,752
1,215
4,241
(374)
226
22,641
103,471
(33,120)
(99,602)
(3,315)
37,091
(10,877)
(3,064)
(2,661)
(1,766)
(1,670)
15,334
(120,061)
114,529
(1,928)
393
–
–
516
(6,551)
(1,496)
879
(556)
1,278
–
(679)
(574)
1,689
9,898
(1,821)
8,077
78,479
86,556
49,711
35,876
816
153
–
86,556
10
30
30
43
Interest received was £21,784m (2016: £22,099m; 2015: £20,376m) and interest paid was £10,310m (2016: £8,850m; 2015: £7,534m).
The Group is required to maintain balances with central banks and other regulatory authorities and these amounted to £3,360m
(2016: £4,254m; 2015: £4,369m).
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.
238 Barclays PLC Annual Report 2017
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Consolidated financial statements Financial statements of Barclays PLC
Parent company accounts
Statement of comprehensive income
For the year ended 31 December
Dividends received from subsidiary
Net interest (expense)/income
Other income
Operating expenses
Profit before tax
Tax
Profit after tax
Other comprehensive income
Total comprehensive income
Profit after tax attributable to:
Ordinary equity holders
Other equity instrument holders
Profit after tax
Total comprehensive income attributable to:
Ordinary equity holders
Other equity instrument holders
Total comprehensive income
Notes
44
2017
£m
674
(10)
690
(96)
1,258
(111)
1,147
60
1,207
508
639
1,147
568
639
1,207
2016
£m
621
5
334
(26)
934
(60)
874
26
900
417
457
874
443
457
900
2015
£m
876
(7)
227
(6)
1,090
(43)
1,047
–
1,047
702
345
1,047
702
345
1,047
For the year ended 31 December 2017, profit after tax was £1,147m (2016: £874m) and total comprehensive income was £1,207m (2016: £900m).
Other comprehensive income of £60m (2016: £26m) relates to the gain on available for sale instruments. The Company has 90 members of
staff (2016: 7).
Balance sheet
As at 31 December
Assets
Investment in subsidiaries
Loans and advances to subsidiaries
Financial investments
Derivative financial instruments
Other assets
Total assets
Liabilities
Deposits from banks
Subordinated liabilities
Debt securities in issue
Other liabilities
Total liabilities
Equity
Called up share capital
Share premium account
Other equity instruments
Other reserves
Retained earnings
Total equity
Total liabilities and equity
Notes
2017
£m
2016
£m
44
44
44
44
44
44
31
31
31
39,354
23,970
4,782
161
202
68,469
500
6,501
22,110
153
29,264
4,265
17,780
8,943
480
7,737
39,205
68,469
36,553
19,421
1,218
268
105
57,565
547
3,789
16,893
14
21,243
4,241
17,601
6,453
420
7,607
36,322
57,565
The financial statements on pages 239 to 240 and the accompanying note on page 317 were approved by the Board of Directors on
21 February 2018 and signed on its behalf by:
John McFarlane
Group Chairman
James E Staley
Group Chief Executive
Tushar Morzaria
Group Finance Director
home.barclays/annualreport
Barclays PLC Annual Report 2017 239
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance Financial statements of Barclays PLC
Parent company accounts
Statement of changes in equity
Balance as at 1 January 2017
Profit after tax and other comprehensive income
Issue of new ordinary shares
Issue of shares under employee share schemes
Issue of other equity instruments
Vesting of employee share schemes
Dividends
Other equity instruments coupons paid
Other
Balance as at 31 December 2017
Balance as at 1 January 2016
Profit after tax and other comprehensive income
Issue of new ordinary shares
Issue of shares under employee share schemes
Issue of other equity instruments
Vesting of employee share schemes
Dividends
Other equity instruments coupons paid
Other
Balance as at 31 December 2016
Notes
12
12
Called up
share capital
and share
premium
£m
21,842
–
117
86
–
–
–
–
–
22,045
Other equity
instruments
£m
6,453
639
–
–
2,490
–
–
(639)
–
8,943
Capital
redemption
reserve
£m
394
–
–
–
–
–
–
–
–
394
Available for
sale reserve
£m
26
60
–
–
–
–
–
–
–
86
21,586
–
68
188
–
–
–
–
–
21,842
5,321
457
–
–
1,132
–
–
(457)
–
6,453
394
–
–
–
–
–
–
–
–
394
–
26
–
–
–
–
–
–
–
26
Retained
earnings
£m
7,607
508
–
27
–
(11)
(509)
123
(8)
7,737
7,851
417
–
–
–
–
(757)
91
5
7,607
Total
equity
£m
36,322
1,207
117
113
2,490
(11)
(509)
(516)
(8)
39,205
35,152
900
68
188
1,132
–
(757)
(366)
5
36,322
Cash flow statement
For the year ended 31 December
Reconciliation of profit before tax to net cash flows from operating activities:
Profit before tax
Changes in operating assets and liabilities
Other non-cash movements
Corporate income tax paid
Net cash generated from operating activities
Capital contribution to subsidiary
Net cash used in investing activities
Issue of shares and other equity instruments
Net increase in loans and advances to subsidiaries of the Parent
Net increase in debt securities in issue
Proceeds of borrowings and issuance of subordinated debt
Dividends paid
Coupons paid on AT1 instruments
Net cash generated from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Net cash generated from operating activities includes:
Dividends received
Interest (paid)/received
2017
£m
2016
£m
2015
£m
1,258
102
76
–
1,436
(2,801)
(2,801)
2,581
(9,707)
6,503
3,019
(392)
(639)
1,365
–
–
–
934
37
62
–
1,033
(1,250)
(1,250)
1,388
(10,942)
9,314
1,671
(757)
(457)
217
–
–
–
1,090
100
52
(27)
1,215
(1,560)
(1,560)
1,771
(4,973)
4,052
921
(1,081)
(345)
345
–
–
–
674
(10)
621
5
876
(7)
The Parent company’s principal activity is to hold the investment in its wholly-owned subsidiaries, Barclays Bank PLC and Barclays Services
Limited. Dividends received are treated as operating income.
The Company was not exposed at 31 December 2017 or 2016 to significant risks arising from the financial instruments it holds, which comprised
loans and advances and other assets which had no market risk or material credit risk.
240 Barclays PLC Annual Report 2017
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Notes to the financial statements
for the year ended 31 December 2017
This section describes Barclays’ 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
These financial statements are prepared for Barclays PLC and its subsidiaries (the Barclays PLC Group or the Group) under Section 399 of the
Companies Act 2006. The Group is a major global financial services provider engaged in retail banking, credit cards, wholesale banking,
investment banking, wealth management and investment management services. In addition, individual financial statements have been
presented for the holding company.
2. Compliance with International Financial Reporting Standards
The consolidated financial statements of the Group, and the individual financial statements of Barclays PLC, have been prepared in accordance
with International Financial Reporting Standards (IFRS) and interpretations (IFRICs) issued by the Interpretations Committee, as published
by the International Accounting Standards Board (IASB). They are also in accordance with IFRS and IFRIC interpretations endorsed by the
European Union. The principal accounting policies applied in the preparation of the consolidated and individual financial statements are set
out below, and in the relevant notes to the financial statements. These policies have been consistently applied.
3. Basis of preparation
The consolidated and individual financial statements have been prepared under the historical cost convention modified to include the fair
valuation of investment property, and particular financial instruments, to the extent required or permitted under IFRS as set out in the relevant
accounting policies. They are stated in millions of pounds Sterling (£m), the functional currency of Barclays PLC.
The financial statements have been prepared on a going concern basis, in accordance with The Companies Act 2006 as applicable
to companies using IFRS.
4. Accounting policies
Barclays prepares financial statements in accordance with IFRS. The Group’s significant accounting policies relating to specific financial
statement items, together with a description of the accounting estimates and judgements that were critical to preparing them, are set
out under the relevant notes. Accounting policies that affect the financial statements as a whole are set out below.
(i) Consolidation
Barclays applies IFRS 10 Consolidated financial statements.
The consolidated financial statements combine the financial statements of Barclays PLC and all its subsidiaries. Subsidiaries are entities over
which Barclays PLC has control. The Group has control over another entity when the Group has all of the following:
1) power over the relevant activities of the investee, for example through voting or other 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 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 Group for the
purposes of the consolidation.
Changes in ownership interests in subsidiaries are accounted for as equity transactions if they occur after control has already been obtained
and they do not result in loss of control.
As the consolidated financial statements include partnerships where the Group member is a partner, advantage has been taken of the
exemption under Regulation 7 of the Partnership (Accounts) Regulations 2008 with regard to preparing and filing of individual partnership
financial statements.
Details of the principal subsidiaries are given in Note 36, and a complete list of all subsidiaries is presented in Note 45.
(ii) Foreign currency translation
The Group applies IAS 21 The Effects of Changes in Foreign Exchange Rates. Transactions and balances in foreign currencies are translated into
Sterling at the rate ruling on the date of the transaction. Foreign currency balances are translated into Sterling at the period end exchange rates.
Exchange gains and losses on such balances are taken to the income statement.
The Group’s foreign operations (including subsidiaries, joint ventures, associates and branches) based mainly outside the UK may have different
functional currencies. The functional currency of an operation is the currency of the main economy to which it is exposed.
Prior to consolidation (or equity accounting) the assets and liabilities of non-Sterling operations are translated at the closing rate and items of
income, expense and other comprehensive income are translated into Sterling at the rate on the date of the transactions. Exchange differences
arising on the translation of foreign operations are included in currency translation reserves within equity. These are transferred to the income
statement when the Group 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.
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(iii) Financial assets and liabilities
The Group applies IAS 39 Financial Instruments: Recognition and Measurement to the recognition, classification and measurement, and
derecognition of financial assets and financial liabilities, the impairment of financial assets, and hedge accounting.
Recognition
The 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 and liabilities are initially recognised at fair value and may be held at fair value or amortised cost depending on the Group’s
intention toward the assets and the nature of the assets and liabilities, mainly determined by their contractual terms.
The accounting policy for each type of financial asset or liability is included within the relevant note for the item. The Group’s policies for
determining the fair values of the assets and liabilities are set out in Note 18.
Derecognition
The Group derecognises a financial asset, or a portion of a financial asset, from its balance sheet where the contractual rights to cash flows
from the asset have expired, or have been transferred, usually by sale, and with them either substantially all the risks and rewards of the asset
or significant risks and rewards, along with the unconditional ability to sell or pledge the asset.
Financial liabilities are 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% 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 Group transfers assets and liabilities, portions of them, or financial risks associated with them can be complex and
it may not be obvious whether substantially all of the risks and rewards have been transferred. It is often necessary to perform a quantitative
analysis. Such an analysis compares the Group’s exposure to variability in asset cash flows before the transfer with its retained exposure after
the transfer.
A cash flow analysis of this nature may require judgement. In particular, it is necessary to estimate the asset’s expected future cash flows
as well as potential variability around this expectation. The method of estimating expected future cash flows depends on the nature of the
asset, with market and market-implied data used to the greatest extent possible. The potential variability around this expectation is typically
determined by stressing underlying parameters to create reasonable alternative upside and downside scenarios. Probabilities are then assigned
to each scenario. Stressed parameters may include default rates, loss severity, or prepayment rates.
(iv) Issued debt and equity instruments
The Group applies IAS 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 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 accounting treatment of
own credit on financial liabilities designated at fair value though profit or loss under the fair value option. Barclays has elected to early adopt the
presentation of Barclays own credit gains and losses in other comprehensive income as allowed by IFRS 9 Financial Instruments, from
1 January 2017. This will have no effect on net assets, and any changes due to own credit in prior periods have not been restated. The
cumulative own credit amount has been reclassified from retained earnings to a separate reserve. Any realised and unrealised amounts
recognised in other comprehensive income will not be reclassified to the income statement in future periods; refer to Note 32 for further details.
There were no other material or amended standards or interpretations that resulted in a change in accounting policy.
Future accounting developments
There have been and are expected to be a number of significant changes to the Group’s financial reporting after 2017 as a result of amended
or new accounting standards that have been or will be issued by the IASB. The most significant of these are as follows:
IFRS 9 – Financial instruments
IFRS 9 Financial Instruments which replaces IAS 39 Financial Instruments: Recognition and Measurement is effective for periods beginning
on or after 1 January 2018 and was endorsed by the EU in November 2016. IFRS 9, in particular the impairment requirements, will lead to
significant changes in the accounting for financial instruments.
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for the year ended 31 December 2017Notes to the financial statements 1 Significant accounting policies continued
i) Impairment
IFRS 9 introduces a revised impairment model which will require entities to recognise expected credit losses based on unbiased forward-
looking information. This replaces the existing IAS 39 incurred loss model which only recognises impairment if there is objective evidence that
a loss has already been incurred and would measure the loss at the most probable outcome. The IFRS 9 impairment model will be applicable to
all financial assets at amortised cost, lease receivables, debt financial assets at fair value through other comprehensive income, loan
commitments and financial guarantee contracts. This contrasts to the IAS 39 impairment model which is not applicable to loan commitments
and financial guarantee contracts, which were covered by IAS 37. In addition, IAS 39 required the impairment of available for sale debt to be
based on the fair value loss rather than estimated future cash flows as for amortised cost assets. Intercompany exposures, including loan
commitments and financial guarantee contracts, are also in scope under IFRS 9 in the standalone reporting entity accounts.
The measurement of expected credit loss will involve increased complexity and judgement including estimation of probabilities of default,
loss given default, a range of unbiased future economic scenarios, estimation of expected lives and estimation of exposures at default and
assessing significant increases in credit risk. It is expected to have a material financial impact and impairment charges will tend to be more
volatile. Impairment will also be recognised earlier and the amounts will be higher. Unsecured products with longer expected lives, such as
revolving credit cards, are expected to be most impacted.
The expected increase in the accounting impairment provision reduces CET1 capital, but the impact is partially mitigated by releasing
the ‘excess of expected loss over impairment’ deduction from CET1 capital. In addition, the European Union will be adopting transitional
arrangements to mitigate or spread the capital impacts of IFRS 9 adoption over a five-year period from 1 January 2018, which Barclays will
apply. Separately, the Basel Committee on Banking Supervision is considering the need for permanent changes to the regulatory capital
framework in order to take account of expected credit loss provisioning.
Key concepts and management judgements
The impairment requirements are complex and require management judgements, estimates and assumptions. Key concepts and management
judgements include:
■■ Determining a significant increase in credit risk since initial recognition
IFRS 9 requires the recognition of 12 month expected credit losses (the portion of lifetime expected credit losses from default events that are
expected within 12 months of the reporting date) if credit risk has not significantly increased since initial recognition (stage 1), and lifetime
expected credit losses for financial instruments for which the credit risk has increased significantly since initial recognition (stage 2) or which
are credit impaired (stage 3). Barclays will assess when a significant increase in credit risk has occurred based on quantitative and qualitative
assessments. Exposures are considered to have resulted in a significant increase in credit risk and are moved to stage 2 when:
– Quantitative test
The annualised cumulative weighted average lifetime probability of default has increased by more than the agreed threshold relative
to the equivalent at origination. The relative thresholds are defined as percentage increases and set at an origination score band and
segment level.
– Qualitative test
Accounts that meet the portfolio’s ‘high risk’ criteria and are subject to closer credit monitoring.
– Backstop criteria
Accounts that are 30 calendar days or more past due. The 30 days past due criteria is a backstop rather than a primary driver of moving
exposures into stage 2.
Exposures will move back to stage 1 once they no longer meet the criteria for a significant increase in credit risk and when any cure criteria
used for credit risk management are met. This is subject to all payments being up to date and the customer evidencing ability and willingness
to maintain future payments.
Barclays will not rely on the low credit risk exemption which would assume facilities of investment grade are not significantly deteriorated.
Determining the probability of default at initial recognition is expected to require management estimates, in particular for exposures issued
before the effective date of IFRS 9. For certain revolving facilities such as credit cards and overdrafts, this is expected to be when the facility
was first entered into which could be a long time in the past.
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
Credit losses are the expected cash shortfalls from what is contractually due over the expected life of the financial instrument, discounted at
the original effective interest rate. Expected credit losses are the unbiased probability-weighted credit losses determined by evaluating a range
of possible outcomes and considering future economic conditions. When there is a non-linear relationship between forward-looking economic
scenarios and their associated credit losses, a range of forward-looking economic scenarios, currently expected to be a minimum of five, will
be considered to ensure a sufficient unbiased representative sample of the complete distribution is included in determining the expected loss.
Stress testing methodologies will be leveraged within forecasting economic scenarios for IFRS 9 purposes.
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■■ Definition of default, credit impaired assets, write-offs, and interest income recognition
The definition of default for the purpose of determining expected credit losses has been aligned to the Regulatory Capital CRR Article 178
definition of default, which considers indicators that the debtor is unlikely to pay, includes exposures in forbearance and is no later than
when the exposure is more than 90 days past due or 180 days past due in the case of UK mortgages. When exposures are identified as
credit impaired or purchased or originated as such, IFRS 9 requires separate disclosure and interest income is required to be calculated
on the carrying value net of the impairment allowance.
Credit impaired is expected to be when the exposure has defaulted which is also anticipated to align to when an exposure is identified
as individually impaired under the incurred loss model of IAS 39. Write-off polices are not expected to change from IAS 39.
■■ Expected life
Lifetime expected credit losses must be measured over the expected life. This is restricted to the maximum contractual life and takes into
account expected prepayment, extension, call and similar options. 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. The expected life for
these revolver facilities is expected to be behavioural life. 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 exposure at default until they occur.
■■ Discounting
Expected credit losses are discounted at the effective interest rate at initial recognition or an approximation thereof and consistent with income
recognition. For loan commitments, the effective interest rate is that 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 as prescribed in IAS 17. 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
Expected credit losses are calculated by multiplying three main components, being the probability of default, loss given default and the
exposure at default, discounted at the original effective interest rate. The regulatory Basel Committee of Banking Supervisors (BCBS) expected
credit loss calculations are leveraged for IFRS 9 modelling but adjusted for key differences which include:
– BCBS requires 12 month through the economic cycle losses, whereas IFRS 9 requires 12 months or lifetime point in time losses based on
conditions at the reporting date and multiple forecasts of the future economic conditions over the expected lives and
– IFRS 9 models do not include certain conservative BCBS model floors and downturn assessments and require discounting to the reporting
date at the original effective interest rate rather than using the cost of capital to the date of default.
Management adjustments will be made to modelled output to account for situations where known or expected risk factors and information
have not been considered in the modelling process, for example, forecast economic scenarios for uncertain political events.
Expected credit loss is measured at the individual financial instrument level, however, a collective approach where financial instruments with
similar risk characteristics are grouped together, with apportionment to individual financial instruments, is used where effects can only be seen
at a collective level, for example, for forward-looking information.
For the IFRS 9 impairment assessment, Barclays Risk Models are used to determine the probability of default, loss given default and exposure at
default. For stage 2 and 3, Barclays applies lifetime probability of defaults but uses 12 month probability of defaults for stage 1. The expected
credit loss drivers of probability of default , exposure at default and loss given default 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 probability of default curve,
which accounts for the different credit risk underwritten over time.
ii) Forbearance
Both performing and non-performing forbearance assets are classified as stage 3 except where it is established that the concession granted has
not resulted in diminished financial obligation and that no other regulatory definitions of default criteria has been triggered, in which case the
asset is classified as stage 2. The minimum probationary period for non-performing forbearance is 12 months and for performing forbearance,
24 months. Hence, a minimum of 36 months is required for non-performing forbearance to move out of a forborne state.
iii) Project governance and credit risk management
Barclays has a jointly accountable Risk and Finance implementation and governance programme with representation from all impacted
departments. The current Impairment Committee structures were initiated and tested from H1 2017, providing oversight for both IAS 39
and IFRS 9 impairment results.
The impairment reporting process commences with the production of economic scenarios. The Senior Scenario Review Committee (SSRC)
reviews and approves the scenario narratives, the core set of macroeconomic variables, probability weightings, and any scenario specific
management overlays which are used in all expected credit loss models. The SSRC attests that the scenarios adequately account for the
non-linearity and asymmetry of the loss distribution.
The Group Impairment Committee, formed of members from both Finance and Risk and attended by both the Group Finance Director and
the CRO, is responsible for overseeing impairment policy and practice across Barclays Group and will approve impairment results.
Reported results and key messages are communicated to the Board Audit Committee, which has an oversight role and provides challenge
of key assumptions, including the basis of the scenarios adopted.
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for the year ended 31 December 2017Notes to the financial statements 1 Significant accounting policies continued
iv) Classification and measurement
IFRS 9 requires financial assets to be classified on the basis of two criteria:
1) the business model within which financial assets are managed, and
2) their contractual cash flow characteristics (whether the cash flows represent ‘solely payments of principal and interest’).
Financial assets will be measured at amortised cost if they are held within a business model whose objective is to hold financial assets in order
to collect contractual cash flows, and their contractual cash flows represent solely payments of principal and interest.
Financial assets will be measured at fair value through other comprehensive income if they are held within a business model whose objective
is achieved by both collecting contractual cash flows and selling financial assets, and their contractual cash flows represent solely payments of
principal and interest.
Business models are determined on initial application and this may differ from the model before 1 January 2018 for certain portfolios. Barclays
assesses the business model at a portfolio level. Information that is considered in determining the business model includes: 1) policies and
objectives for the relevant portfolio, 2) how the performance and risks of the portfolio are managed, evaluated and reported to management,
and 3) the frequency, volume and timing of sales in prior periods, sales expectation for future periods, and the reasons for such sales. Financial
assets managed on a fair value basis and those that are held for trading are held at fair value through profit and loss.
In assessing whether contractual cash flows are solely payments of principal and interest, terms that could change the contractual cash flows
so that it would not meet the condition for solely payments of principal and interest are considered, including: 1) contingent and leverage
features, 2) non-recourse arrangements and 3) features that could modify the time value of money.
Other financial assets are measured at fair value through profit and loss. There is an option to make an irrevocable election for non-traded
equity investments to be measured at fair value through other comprehensive income, in which case dividends are recognised in profit or loss,
but gains or losses are not reclassified to profit or loss upon derecognition, and impairment is not recognised in the income statement.
On 12 October 2017, the IASB published an amendment to IFRS 9, relating to prepayment features with negative compensation; this
amendment is effective from 1 January 2019 with early application permitted, however has yet to be endorsed by the EU. This amendment
allows financial assets with such features to be measured at amortised cost or fair value through other comprehensive income provided
the ‘solely payments of principal and interest’ criteria in IFRS 9 are otherwise met. In addition, the amendment to IFRS 9 clarifies that
a financial asset passes the solely payments of principal and interest criterion regardless of the event or circumstance that causes the early
termination of the contract, and irrespective of which party pays or receives reasonable compensation for the early termination of the contract.
Such prepayment features are present in some fixed rate corporate and investment bank loans, and are considered to meet the criteria for
amortised cost under IFRS 9. Prepayment features are consistent with the solely payments of principal and interest criteria if the prepayment
feature substantially represents unpaid amounts of principal and interest and reasonable compensation for early termination of the contract.
While there are some classification changes these are not significant from a Group perspective.
v) Hedge accounting
IFRS 9 contains revised requirements on hedge accounting, adoption of which is optional. In addition, certain aspects of IAS 39, being the
portfolio fair value hedge for interest rate risk, continues to be available for entities (while applying IFRS 9 to the remainder of the entity’s
hedge accounting relationships) until the IASB completes its accounting for dynamic risk management project.
Based on analysis performed, Barclays will continue applying IAS 39 hedge accounting, although it will implement the amended IFRS 7 hedge
accounting disclosure requirements.
vi) Own credit
Barclays has applied the option in IFRS 9 to recognise changes in own credit for financial liabilities designated at fair value through profit and
loss under the fair value option in other comprehensive income from 1 January 2017.
vii) Expected impact
IFRS 9 will be applied retrospectively on adoption on 1 January 2018. Opening shareholders’ equity is expected to decrease by approximately
£2.2bn post-tax. This impact assessment has been estimated under an interim control environment with models that continue to undergo
validation. The implementation of the comprehensive end state control environment will continue as Barclays introduces business as usual
controls throughout 2018. Barclays will not restate comparatives on initial application of IFRS 9 on 1 January 2018.
IFRS 15 – Revenue from Contracts with Customers
In 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers which will replace IAS 18 Revenue and IAS 11 Construction Contracts.
It applies to all contracts with customers except leases, financial instruments and insurance contracts. The standard establishes a more
systematic approach for revenue measurement and recognition by introducing a five-step model governing revenue recognition. The five-step
model includes: 1) identifying the contract with the customer, 2) identifying each of the performance obligations included in the contract,
3) determining the amount of consideration in the contract, 4) allocating the consideration to each of the identified performance obligations
and 5) recognising revenue as each performance obligation is satisfied. In April 2016, the IASB issued clarifying amendments to IFRS 15 which
provide additional application guidance, but did not change the underlying principles of the standard. The standard was endorsed by the EU
in September 2016.
Barclays will implement this standard on 1 January 2018. Barclays has elected the cumulative effect transition method with a transition
adjustment calculated as of 1 January 2018, and recognised in retained earnings without restating comparative periods. There are no significant
impacts from the adoption of IFRS 15 in relation to the timing of when Barclays recognises revenues or when revenue should be recognised
gross as a principal or net as an agent.
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IFRS 16 – Leases
In January 2016, the IASB issued IFRS 16 Leases, which will replace IAS 17 Leases. IFRS 16 will apply to all leases with the exception of licenses
of intellectual property, rights held by licensing agreement within the scope of IAS 38 Intangible Assets, service concession arrangements,
leases of biological assets within the scope of IAS 41 Agriculture, and leases of minerals, oil, natural gas and similar non-regenerative resources.
IFRS 16 will not result in a significant change to lessor accounting; however for lessee accounting there will no longer be a distinction between
operating and finance leases. Instead, lessees will be required to recognise both a right of use asset and lease liability on-balance sheet for all
leases. As a result, Barclays will observe an increase in both assets and liabilities for transactions currently accounted for as operating leases
as at 1 January 2019 (the effective date of IFRS 16). A scope exemption will apply to short-term and low-value leases. Current project
implementation efforts are focused on preparing and sourcing information. The standard was endorsed by the EU in November 2017.
Barclays will implement this standard on 1 January 2019. Barclays is currently assessing the expected impact of adopting this standard.
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 that was issued
in 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. The standard is effective from 1 January 2021 and has not yet been endorsed by the EU. Barclays is currently assessing the expected
impact of adopting this standard.
IFRS 2 – Classification and Measurement of Share-based Payment Transactions – Amendments to IFRS 2
The IASB issued amendments to IFRS 2 Share-based Payment that address three main areas: the effects of vesting conditions on the
measurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement
features for withholding tax obligations; and accounting where a modification to the terms and conditions of a share-based payment
transaction changes its classification from cash settled to equity settled. The amendments are effective for annual periods beginning on
or after 1 January 2018. Adoption of the amendments will not have a significant impact on Barclays.
IFRIC Interpretation 23 – Uncertainty over Income Tax Treatment
IFRIC 23 clarifies the application of IAS 12 to accounting for income tax treatments that have yet to be accepted by tax authorities, in scenarios
where it may be unclear how tax law applies to a particular transaction or circumstance, or whether a taxation authority will accept an entity’s
tax treatment. The effective date is 1 January 2019. Barclays is currently assessing the impact of IFRIC 23.
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:
■■ Credit impairment charges on page 250
■■ Tax on page 253
■■ Fair value of financial instruments on page 262
■■ Pensions and post retirement benefits – obligations on page 301
■■ Provisions including conduct and legal, competition and regulatory matters on page 283.
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:
■■ Credit risk on page 127 and the tables on pages 138 to 158
■■ Market risk on page 129 and the tables on pages 159 to 163
■■ Treasury and capital risk – capital on page 130 and the tables on pages 179 to 187
■■ Treasury and capital risk – liquidity on page 130 and the tables on pages 166 to 178.
These disclosures are covered by the Audit opinion (included on pages 228 to 233) where referenced as audited.
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for the year ended 31 December 2017Notes to the financial statements Notes to the financial statements
Performance/return
The notes included in this section focus on the results and performance of the Group. Information on the income generated, expenditure
incurred, segmental performance, tax, earnings per share and dividends are included here. For further detail on performance, please see income
statement commentary within Financial review (unaudited) on page 209.
2 Segmental reporting
Presentation of segmental reporting
The 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.
Barclays PLC is a transatlantic consumer and wholesale bank and for segmental reporting purposes defines its divisions as follows:
■■ Barclays UK which offers everyday products and services to retail customers and small to medium sized enterprises based in the UK. The
division includes the UK Personal business; the small UK Corporate and UK Wealth businesses; and the Barclaycard UK consumer credit cards
business.
■■ Barclays International which delivers products and services designed for our larger corporate, wholesale and international banking clients. The
division includes the large UK Corporate business; the international Corporate and Wealth businesses; the Investment Bank; the international
Barclaycard business; and Barclaycard Business Solutions.
■■ Head Office which comprises head office and central support functions (including treasury) and businesses in transition.
The Non-Core segment was closed on 1 July 2017, with the residual assets and liabilities reintegrated into, and associated financial performance
subsequently reported in, Barclays UK, Barclays International and Head Office. Financial results up until 30 June 2017 are reflected in the Non-Core
segment within the Group’s results for the year ended 31 December 2017. Comparative results have not been restated.
Analysis of results by business
For the year ended 31 December 2017
Total income
Credit impairment charges and other provisions
Net operating income/(expenses)
Operating expenses excluding UK bank levy and litigation and conduct
UK bank levy
Litigation and conduct
Operating expenses
Other net (expenses)/incomec
Profit/(loss) before tax from continuing operations
Total assets (£bn)
Number of employees (full time equivalent)d
For the year ended 31 December 2016
Total income
Credit impairment charges and other provisions
Net operating income/(expenses)
Operating expenses excluding UK bank levy and litigation and conduct
UK bank levy
Litigation and conduct
Operating expenses
Other net (expenses)/income
Profit/(loss) before tax from continuing operations
Total assets (£bn)e
Number of employees (full time equivalent)f
Barclays UK
£m
Barclays
International
£m
Head
Officea
£m
Barclays
Non-Coreb
£m
Group
results
£m
7,383
(783)
6,600
(4,030)
(59)
(759)
(4,848)
(5)
1,747
237.4
22,800
7,517
(896)
6,621
(3,792)
(48)
(1,042)
(4,882)
(1)
1,738
209.6
36,000
14,382
(1,506)
12,876
(9,321)
(265)
(269)
(9,855)
254
3,275
856.1
11,500
14,995
(1,355)
13,640
(9,129)
(284)
(48)
(9,461)
32
4,211
648.5
36,900
(159)
(17)
(176)
(277)
(41)
(151)
(469)
(189)
(834)
39.7
45,600
103
–
103
(135)
(2)
(27)
(164)
128
67
75.2
100
(530)
(30)
(560)
(256)
–
(28)
(284)
197
(647)
–
–
21,076
(2,336)
18,740
(13,884)
(365)
(1,207)
(15,456)
257
3,541
1,133.2
79,900
(1,164)
(122)
(1,286)
(1,509)
(76)
(246)
(1,831)
331
(2,786)
279.7
5,500
21,451
(2,373)
19,078
(14,565)
(410)
(1,363)
(16,338)
490
3,230
1,213.0
119,300
Notes
a The reintegration of Non-Core assets on 1 July 2017 resulted in the transfer of c.£9bn of assets into Head Office relating to a portfolio of Italian mortgages. The portfolio
generated a loss before tax of £37m in the second half of the year and included assets of £9bn as at 31 December 2017.
b The Non-Core segment was closed on 1 July 2017. Financial results up until 30 June 2017 are reflected in the Non-Core segment for 2017.
c Other net (expenses)/income represents the share of post-tax results of associates and joint ventures, profit (or loss) on disposal of subsidiaries, associates and joint ventures,
and gains on acquisitions.
d As a result of the establishment of the Group Service Company in September 2017, employees who are now employed by the Group Service Company and who were previously
allocated to, or were within, Barclays UK and Barclays International are now reported in Head Office.
e Africa Banking assets held for sale were reported in Head Office for 2016.
f Number of employees included 40,800 in relation to Africa Banking for 2016.
home.barclays/annualreport
Barclays PLC Annual Report 2017 247
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 2 Segmental reporting continued
Analysis of results by business
For the year ended 31 December 2015
Total income
Credit impairment charges and other provisions
Net operating income
Operating expenses excluding UK bank levy and litigation and conduct
UK bank levy
Litigation and conduct
Operating expenses
Other net income/(expenses)a
Profit/(loss) before tax from continuing operations
Total assets (£bn)b
Number of employees (full time equivalent)c
Barclays
UK
£m
Barclays
International
£m
Head
Office
£m
Barclays
Non-Core
£m
Group
results
£m
7,343
(706)
6,637
(3,464)
(77)
(2,511)
(6,052)
–
585
202.5
38,800
13,747
(922)
12,825
(8,029)
(253)
(1,310)
(9,592)
45
3,278
532.2
39,100
338
–
338
(272)
(8)
(66)
(346)
(106)
(114)
59.4
100
612
(134)
478
(1,958)
(88)
(500)
(2,546)
(535)
(2,603)
325.8
9,900
22,040
(1,762)
20,278
(13,723)
(426)
(4,387)
(18,536)
(596)
1,146
1,120.0
129,400
Notes
a Other net income/(expenses) represents the share of post-tax results of associates and joint ventures, profit (or loss) on disposal of subsidiaries, associates and joint ventures,
and gains on acquisitions.
b Africa Banking assets held for sale were reported in Head Office for 2015.
c Number of employees included 41,500 in relation to Africa Banking for 2015.
Income by geographic region
For the year ended 31 December
Continuing operations
United Kingdom
Europe
Americas
Africa and Middle East
Asia
Total
Income from individual countries which represent more than 5% of total incomea
For the year ended 31 December
Continuing operations
United Kingdom
United States
2017
£m
2016
£m
2015
£m
11,190
1,663
7,443
251
529
21,076
11,096
2,087
7,278
419
571
21,451
12,160
2,245
6,610
387
638
22,040
2017
£m
2016
£m
2015
£m
11,190
6,871
11,096
6,876
12,160
6,228
Note
a Total income based on counterparty location. Income from each single external customer does not amount to 10% or greater of the Group’s total income.
248 Barclays PLC Annual Report 2017
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Performance/returnNotes to the financial statements 3 Net interest income
Accounting for interest income and expenses
The Group applies IAS 39 Financial Instruments: Recognition and Measurement. Interest income on loans and advances at amortised cost,
financial investments debt securities, and interest expense on financial liabilities held at amortised cost, are calculated using the effective
interest method which allocates interest, and direct and incremental fees and costs, over the expected lives of the assets and liabilities.
The effective interest method requires the Group to estimate future cash flows, in some cases based on its experience of customers’ behaviour,
considering all contractual terms of the financial instrument, as well as the expected lives of the assets and liabilities.
Barclays 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 revolving customer 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 transacting
customer balances are recorded within fee and commission expense when incurred. There are no other individual estimates involved in the
calculation of effective interest rates that are material to the results or financial position.
Cash and balances with central banks
Financial investments
Loans and advances to banks
Loans and advances to customers
Other
Interest income
Deposits from banks
Customer accounts
Debt securities in issue
Subordinated liabilities
Other
Interest expense
Net interest income
2017
£m
583
754
286
11,783
225
13,631
(370)
(1,123)
(915)
(1,223)
(155)
(3,786)
9,845
2016
£m
186
740
600
12,958
57
14,541
(265)
(1,514)
(990)
(1,104)
(131)
(4,004)
10,537
2015
£m
157
698
487
12,512
99
13,953
(128)
(1,406)
(553)
(1,015)
(243)
(3,345)
10,608
Costs to originate credit card balances of £497m (2016: £480m; 2015: £368m) have been amortised to interest income during the year.
Interest income includes £48m (2016: £75m; 2015: £91m) accrued on impaired loans.
Included in net interest income is hedge ineffectiveness as detailed in Note 15 amounting to £43m (2016: £71m; 2015: £81m).
4 Net fee and commission income
Accounting for net fee and commission income
The Group applies IAS 18 Revenue. Fees and commissions charged for services provided or received by the Group are recognised as the services
are provided, for example on completion of the underlying transaction.
Fee and commission income
Banking, investment management and credit related fees and commissions
Foreign exchange commission
Fee and commission income
Fee and commission expense
Net fee and commission income
2017
£m
2016
£m
2015
£m
8,622
129
8,751
(1,937)
6,814
8,452
118
8,570
(1,802)
6,768
8,340
130
8,470
(1,611)
6,859
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Barclays PLC Annual Report 2017 249
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 5 Net trading income
Accounting for net trading income
In accordance with IAS 39, 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.
Own credit gains/(losses)
As a result of the early adoption of the own credit provisions of IFRS 9 on 1 January 2017, own credit on financial liabilities designated at fair
value through profit and loss which was previously recorded in the income statement is now recognised within other comprehensive income.
Trading income
Own credit (losses)/gains
Net trading income
2017
£m
3,500
–
3,500
2016
£m
2,803
(35)
2,768
2015
£m
2,996
430
3,426
Included within net trading income were gains of £640m (2016: £31m gain; 2015: £992m gain) on financial assets designated at fair value and
gains of £472m (2016: £346m gain; 2015: £187m loss) on financial liabilities designated at fair value.
6 Net investment income
Accounting for net investment income
Dividends are recognised when the right to receive the dividend has been established. Other accounting policies relating to net investment
income are set out in Note 14 and Note 16.
Net gain from disposal of available for sale investments
Dividend income
Net gain from financial instruments designated at fair value
Other investment income
Net investment income
7 Credit impairment charges and other provisions
2017
£m
298
48
338
177
861
2016
£m
912
8
158
246
1,324
2015
£m
385
8
193
511
1,097
Accounting for the impairment of financial assets
Loans and other assets held at amortised cost
In accordance with IAS 39, the Group assesses at each balance sheet date whether there is objective evidence that loan assets will not be
recovered in full and, wherever necessary, recognises an impairment loss in the income statement.
An impairment loss is recognised if there is objective evidence of impairment as a result of events that have occurred and these have adversely
impacted the estimated future cash flows from the assets. These events include:
■■ becoming aware of significant financial difficulty of the issuer or obligor
■■ a breach of contract, such as a default or delinquency in interest or principal payments
■■ the Group, for economic or legal reasons relating to the borrower’s financial difficulty, grants a concession that it would not otherwise
consider
■■ it becomes probable that the borrower will enter bankruptcy or other financial reorganisation
■■ the disappearance of an active market for that financial asset because of financial difficulties
■■ observable data at a portfolio level indicating that there is a measurable decrease in the estimated future cash flows, although the decrease
cannot yet be ascribed to individual financial assets in the portfolio – such as adverse changes in the payment status of borrowers in the
portfolio or national or local economic conditions that correlate with defaults on the assets in the portfolio.
Impairment assessments are conducted individually for significant assets, which comprise all wholesale customer loans and larger retail
business loans, and collectively for smaller loans and for portfolio level risks, such as country or sectoral risks. For the purposes of the
assessment, loans with similar credit risk characteristics are grouped together – generally on the basis of their product type, industry,
geographical location, collateral type, past due status and other factors relevant to the evaluation of expected future cash flows.
The impairment assessment includes estimating the expected future cash flows from the asset or the group of assets, which are then
discounted using the original effective interest rate calculated for the asset. If this is lower than the carrying value of the asset or the portfolio,
an impairment allowance is raised.
If, in a subsequent period, the amount of the impairment loss decreases, and the decrease can be related objectively to an event occurring after
the impairment was recognised, the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the
reversal is recognised in the income statement.
Following impairment, interest income continues to be recognised at the original effective interest rate on the restated carrying amount,
representing the unwind of the discount of the expected cash flows, including the principal due on non-accrual loans.
Uncollectable loans are written off against the related allowance for loan impairment on completion of the Group’s internal processes when
all reasonably expected recoverable amounts have been collected. Subsequent recoveries of amounts previously written off are credited to
the income statement.
250 Barclays PLC Annual Report 2017
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Performance/returnNotes to the financial statements 7 Credit impairment charges and other provisions continued
Available for sale financial assets
Impairment of available for sale debt instruments
Debt instruments are assessed for impairment in the same way as loans. If impairment is deemed to have occurred, the cumulative decline in
the fair value of the instrument that has previously been recognised in the available for sale reserve is removed from reserves and recognised in
the income statement. This may be reversed if there is evidence that the circumstances of the issuer have improved.
Impairment of available for sale equity instruments
Where there has been a prolonged or significant decline in the fair value of an equity instrument below its acquisition cost, it is deemed to be
impaired. The cumulative net loss that has been previously recognised directly in the available for sale reserve is removed from reserves and
recognised in the income statement.
Increases in the fair value of equity instruments after impairment are recognised directly in other comprehensive income. Further declines
in the fair value of equity instruments after impairment are recognised in the income statement.
Critical accounting estimates and judgements
The calculation of impairment involves the use of judgement based on the Group’s experience of managing credit risk.
Within the retail and small businesses portfolios, which comprise large numbers of small homogeneous assets with similar risk characteristics
where credit scoring techniques are generally used, statistical techniques are used to calculate impairment allowances on a portfolio basis,
based on historical recovery rates and assumed emergence periods. These statistical analyses employ as primary inputs, the extent to which
accounts in the portfolio are in arrears, and historical information on the eventual losses encountered from such delinquent portfolios. There
are many such models in use, each tailored to a product, line of business or customer category. Judgement and knowledge is needed in
selecting the statistical methods to use when the models are developed or revised. The impairment allowance reflected in the financial
statements for these portfolios is therefore considered to be reasonable and supportable. The impairment charge reflected in the income
statement for retail portfolios is £2,095m (2016: £2,053m; 2015: £1,535m) and amounts to 90% (2016: 87%; 2015: 88%) of the total
impairment charge on loans and advances.
For individually significant assets, impairment allowances are calculated on an individual basis and all relevant considerations that have a
bearing on the expected future cash flows are taken into account (for example, the business prospects for the customer, the realisable value
of collateral, the Group’s position relative to other claimants, the reliability of customer information and the likely cost and duration of the
work-out process). The level of the impairment allowance is the difference between the value of the discounted expected future cash flows
(discounted at the loan’s original effective interest rate), and its carrying amount. Subjective judgements are made in the calculation of future
cash flows. Furthermore, judgements change with time as new information becomes available or as work-out strategies evolve, resulting in
frequent revisions to the impairment allowance as individual decisions are taken. Changes in these estimates would result in a change in the
allowances and have a direct impact on the impairment charge. The impairment charge reflected in the financial statements in relation to
wholesale portfolios is £238m (2016: £299m; 2015: £209m) and amounts to 10% (2016: 13%; 2015: 12%) of the total impairment charge
on loans and advances. Further information on impairment allowances and related credit information is set out within the Risk review on
page 156.
New and increased impairment allowances
Releases
Recoveries
Impairment charges on loans and advances
Provision charges/(releases) for undrawn contractually committed facilities and guarantees provided
Loan impairment
Available for sale investment
Reverse repurchase agreements
Credit impairment charges and other provisions
2017
£m
3,187
(533)
(334)
2,320
13
2,333
3
–
2,336
2016
£m
3,259
(551)
(365)
2,343
9
2,352
21
–
2,373
2015
£m
2,641
(535)
(350)
1,756
(12)
1,744
18
–
1,762
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Barclays PLC Annual Report 2017 251
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 8 Operating expenses
Accounting for staff costs
The Group applies IAS 19 Employee benefits in its accounting for most of the components of staff costs.
Short-term employee benefits – salaries, accrued performance costs and social security are recognised over the period in which the employees
provide the services to which the payments relate.
Performance costs – recognised to the extent that the Group has a present obligation to its employees that can be measured reliably and are
recognised over the period of service that employees are required to work to qualify for the 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 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 Group, taking into account the changing employee understanding surrounding those awards, considered it
appropriate for expense to be recognised over the vesting period 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 34 and
Note 35 respectively.
Infrastructure costs
Property and equipment
Depreciation of property, plant and equipment
Operating lease rentals
Amortisation of intangible assets
Impairment of property, equipment and intangible assets
Gain on property disposals
Total infrastructure costs
Administration and general costs
Consultancy, legal and professional fees
Subscriptions, publications, stationery and communications
Marketing, advertising and sponsorship
Travel and accommodation
UK bank levy
Goodwill impairment
Other administration and general expenses
Total administration and general costs
Staff costs
Provision for UK customer redress
Provision for ongoing investigations and litigation including Foreign Exchange
Operating expenses
2017
£m
1,363
446
342
715
80
3
2,949
1,127
630
433
150
365
–
542
3,247
8,560
700
–
15,456
2016
£m
1,180
492
561
670
95
–
2,998
1,105
644
435
136
410
–
187
2,917
9,423
1,000
–
16,338
2015
£m
1,082
475
411
570
150
3
2,691
1,078
678
451
188
425
102
61
2,983
8,853
2,772
1,237
18,536
9 Profit/(loss) on disposal of subsidiaries, associates and joint ventures
During the year, the profit on disposal of subsidiaries, associates and joint ventures was £187m (2016: profit of £420m; 2015: loss of £637m),
principally relating to the sale of VocaLink and Barclays Wealth Services Japan. Please refer to Note 43 for further detail.
252 Barclays PLC Annual Report 2017
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Performance/returnNotes to the financial statements 10 Tax
Accounting for income taxes
Barclays 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 off-setting 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 Group considers an uncertain tax position to exist when it considers that ultimately, in the future, the amount of profit subject to tax may
be greater than the amount initially reflected in the Group’s tax returns. The Group accounts for provisions in respect of uncertain tax positions
in two different ways.
A current tax provision is recognised when it is considered probable that the outcome of a review by a tax authority of an uncertain tax position
will alter the amount of cash tax due to, or from, a tax authority in the future. From recognition, the current tax provision is then measured at
the amount the Group ultimately expects to pay the tax authority to resolve the position.
Deferred tax provisions are adjustments made to the carrying value of deferred tax assets in respect of uncertain tax positions. A deferred tax
provision is recognised when it is considered probable that the outcome of a review by a tax authority of an uncertain tax position will result in
a reduction in the carrying value of the deferred tax asset. From recognition of a provision, measurement of the underlying deferred tax asset is
adjusted to take into account the expected impact of resolving the uncertain tax position on the loss or temporary difference giving rise to the
deferred tax asset.
The approach taken to measurement takes account of whether the uncertain tax position is a discrete position that will be reviewed by the tax
authority in isolation from any other position, or one of a number of issues which are expected to be reviewed together concurrently and
resolved simultaneously with a tax authority. Barclays’ measurement of provisions is based upon its best estimate of the additional profit that
will become subject to tax. For a discrete position, consideration is given only to the merits of that position. Where a number of issues are
expected to be reviewed and resolved together, Barclays will take into account not only the merits of its position in respect of each particular
issue but also the overall level of provision relative to the aggregate of the uncertain tax positions across all the issues that are expected to be
resolved at the same time. In addition, in assessing provision levels, it is assumed that tax authorities will review uncertain tax positions and
that all facts will be fully and transparently disclosed.
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 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 is provided
in this note.
Current tax charge/(credit)
Current year
Adjustments in respect of prior years
Deferred tax charge/(credit)
Current year
Adjustments in respect of prior years
Tax charge
2017
£m
768
55
823
1,507
(90)
1,417
2,240
2016
£m
896
(361)
535
393
65
458
993
2015
£m
1,605
(188)
1,417
(346)
78
(268)
1,149
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Barclays PLC Annual Report 2017 253
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 10 Tax continued
The table below shows the reconciliation between the actual tax charge and the tax charge that would result from applying the standard UK
corporation tax rate to the Group’s profit before tax.
Profit before tax from continuing operations
Tax charge based on the standard UK corporation tax rate of 19.25%
(2016: 20%; 2015: 20.25%)
Impact of profits/losses earned in territories with different statutory rates to the UK
(weighted average tax rate is 29.4% (2016: 32.8%; 2015: 33.4%))
2017
£m
3,541
2017
%
2016
£m
3,230
2016
%
2015
£m
1,146
2015
%
682
19.3%
646
20.0%
232
20.3%
356
10.1%
415
12.8%
151
13.1%
Recurring items:
Non-creditable taxes including withholding taxes
Non-deductible expenses
Impact of UK bank levy being non-deductible
Tax adjustments in respect of share-based payments
Non-taxable gains and income
Changes in recognition of deferred tax and effect of unrecognised tax losses
Impact of Barclays Bank PLC's overseas branches being taxed both locally and
in the UK
Adjustments in respect of prior years
Other items
Non-recurring items:
Remeasurement of US deferred tax assets due to US tax rate reduction
Impact of the UK branch exemption election on US branch deferred tax assets
Non-deductible provisions for UK customer redress
Non-deductible provisions for investigations and litigation
Non-taxable gains and income on divestments
Non-deductible impairments and losses on divestments
Total tax charge
191
90
70
5
(178)
(71)
5.4%
2.5%
2.0%
0.1%
(5.0%)
(2.0%)
(61)
(35)
128
(1.7%)
(1.0%)
3.6%
1,177
(276)
129
72
(39)
–
2,240
33.2%
(7.8%)
3.6%
2.0%
(1.1%)
–
63.3%
277
114
82
34
(199)
(178)
(128)
(296)
88
–
–
203
48
(180)
67
993
8.6%
3.5%
2.5%
1.1%
(6.2%)
(5.5%)
(4.0%)
(9.2%)
2.7%
309
67
96
30
27.0%
5.8%
8.4%
2.6%
(197) (17.2%)
(6.2%)
(71)
(35)
(110)
144
(3.1%)
(9.6%)
12.6%
–
–
6.3%
1.5%
(5.6%)
2.1%
–
–
24.7%
22.8%
(4.4%)
3.4%
30.7% 1,149 100.3%
–
–
283
261
(50)
39
Factors driving the effective tax rate
The effective tax rate of 63.3% is higher than the UK corporation tax rate of 19.25% primarily due to the impact of the Tax Cuts and Jobs Act
(US Tax Reform), enacted on 22 December 2017, which reduced the US federal corporate income tax rate from 35% to 21%. As the rate reduction
was enacted before the balance sheet date, this has resulted in a one-off tax charge as a result of the remeasurement of the Group’s US deferred
tax assets in the 2017 period. This downward remeasurement of the Group’s US deferred tax assets as a result of the rate reduction is partially
offset by the increase in the value of the US branch deferred tax assets as a result of Barclays Bank PLC making a tax election in the period to
exclude the future profits and losses of its overseas branches from UK taxation.
In addition, the effective tax rate is also affected by profits earned outside the UK being taxed at local statutory tax rates that are higher than the
UK tax rate, provisions for UK customer redress, investigations and litigation being non-deductible for tax purposes, non-creditable taxes and
non-deductible expenses including UK bank levy. These factors, which have each increased the effective tax rate, are partially offset by the impact
of non-taxable gains and income in the period.
The Group’s future tax charge will be sensitive to the geographic mix of profits earned and the tax rates in force in the jurisdictions that the Group
operates in. In the UK, legislation to reduce the corporation tax rate to 17% from 1 April 2020 has been enacted.
The reduction of the US federal corporate income tax rate to 21% from 1 January 2018 is expected to have a positive impact on the returns
generated by the Group’s US business. The ultimate impact however, is subject to any effect of the Base Erosion Anti-abuse Tax (BEAT), which
was introduced by US Tax Reform and presented as an anti-avoidance provision, but is capable of having broad application to companies making
payments to foreign affiliates. The provisions introducing the BEAT are complex and there are currently uncertainties surrounding their practical
and technical application. The Group is currently considering any future impact of the BEAT which may reduce the benefit of the reduction in the
US federal corporate income tax rate.
Tax in the consolidated statement of comprehensive income
The tax relating to each component of other comprehensive income can be found in the consolidated statement of comprehensive income which
additionally includes within Other a tax charge of £5m (2016: £21m credit) relating to share-based payments.
Tax in respect of discontinued operation
Tax relating to the discontinued operation can be found in the BAGL disposal group income statement (refer to Note 43). The tax charge of £154m
(2016: £306m charge) relates entirely to the profit from the ordinary activities of the discontinued operation.
254 Barclays PLC Annual Report 2017
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Performance/returnNotes to the financial statements 10 Tax continued
Current tax assets and liabilities
Movements on current tax assets and liabilities were as follows:
Assets
Liabilities
As at 1 January
Income statement from continuing operations
Other comprehensive income
Corporate income tax paid
Other movements
Assets
Liabilities
As at 31 December
Deferred tax assets and liabilities
The deferred tax amounts on the balance sheet were as follows:
Intermediate Holding Company (IHC Tax Group)
Barclays Bank PLC (US Branch Tax Group)
Barclays PLC – UK tax group
Other
Deferred tax asset
Deferred tax liability
Net deferred tax
2017
£m
561
(737)
(176)
(823)
93
708
94
(104)
482
(586)
(104)
2017
£m
1,413
1,234
492
318
3,457
(44)
3,413
2016
£m
415
(903)
(488)
(535)
23
780
44
(176)
561
(737)
(176)
2016
£m
2,207
1,766
575
321
4,869
(29)
4,840
US deferred tax assets in the IHC and US Branch Tax Groups
The deferred tax asset in the IHC Tax Group of £1,413m (2016: £2,207m) includes £286m (2016: £321m) relating to tax losses and the deferred
tax asset in the US Branch Tax Group of £1,234m (2016: £1,766m) includes £283m (2016: £142m) relating to tax losses. The deferred tax assets
of the Group’s US business have been remeasured due to the reduction in the US federal corporate income tax rate enacted in the year. No
account has been taken of the impact of any potential future BEAT liabilities in measuring the US deferred tax assets and liabilities and any future
BEAT liabilities would be accounted for in the period they arise. Under US tax rules, losses occurring prior to 1 January 2018 can be carried forward
and offset against profits for a period of 20 years. The losses first arose in 2011 in the IHC Tax Group and 2008 in the US Branch Tax Group and
therefore, any unused amounts may begin to expire in 2031 and 2028 respectively. The remaining US deferred tax assets relate to temporary
differences for which there is no time limit on recovery. The deferred tax assets for the IHC and the US Branch Tax Groups’ tax losses are currently
projected to be fully utilised by 2019.
In prior periods, the US Branch deferred tax assets have been measured as the difference between the UK and US tax rates to take into account
UK taxation expected to arise on the profits of the US Branch. During the period, Barclays Bank PLC made a UK tax election that causes the future
profits or losses of the Company’s overseas branches to be excluded from the charge to UK tax and therefore subject to tax only in the applicable
overseas jurisdiction. The deferred tax assets held by the US Branch of Barclays Bank PLC have been remeasured to the US tax rate as a result of
this election.
UK tax group deferred tax asset
The deferred tax asset in the UK tax group of £492m (2016: £575m) relates entirely to temporary differences.
Other deferred tax assets
The deferred tax asset of £318m (2016: £321m) in other entities within the Group includes £27m (2016: £40m) relating to tax losses carried
forward. These deferred tax assets relate to a number of different territories and their recognition is based on profit forecasts or local country
law which indicate that it is probable that the losses and temporary differences will be utilised.
home.barclays/annualreport
Barclays PLC Annual Report 2017 255
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 10 Tax continued
Of the deferred tax asset of £318m (2016: £321m), an amount of £218m (2016: £267m) relates to entities which have suffered a loss in either
the current or prior year. This has been taken into account in reaching the above conclusion that these deferred tax assets will be fully recovered
in the future.
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.
Fixed asset
timing
differences
£m
1,801
(92)
1,709
(353)
–
(118)
1,238
1,266
(28)
1,238
Available
for sale
investments
£m
183
(141)
42
–
(3)
–
39
200
(161)
39
Cash flow
hedges
£m
–
(333)
(333)
–
262
(4)
(75)
1
(76)
(75)
Retirement
benefit
obligations
£m
91
–
91
(322)
49
16
(166)
52
(218)
(166)
Loan
impairment
allowance
£m
151
–
151
(38)
–
(5)
108
108
–
108
Other
provisions
£m
251
–
251
(69)
–
(25)
157
157
–
157
Tax losses
carried
forward
£m
503
–
503
131
–
(38)
596
596
–
596
Share-based
payments
and deferred
compensation
£m
732
–
732
(307)
(22)
(19)
384
384
–
384
Assets
Liabilities
At 1 January 2017
Income statement
Other comprehensive income
Other movements
Assets
Liabilities
At 31 December 2017
Assets
Liabilities
At 1 January 2016
Income statement
Other comprehensive income
Other movements
Assets
Liabilities
At 31 December 2016
2,008
(194)
1,814
(358)
–
253
1,709
1,801
(92)
1,709
28
(70)
(42)
9
49
26
42
183
(141)
42
5
(239)
(234)
(7)
(61)
(31)
(333)
–
(333)
(333)
95
(144)
(49)
(8)
132
16
91
91
–
91
157
–
157
52
–
(58)
151
151
–
151
261
–
261
17
–
(27)
251
251
–
251
902
–
902
(522)
–
123
503
503
–
503
623
–
623
15
20
74
732
732
–
732
Other
£m
2,013
(319)
1,694
(459)
22
(125)
1,132
1,362
(230)
1,132
1,511
(570)
941
344
(6)
415
1,694
2,013
(319)
1,694
Total
£m
5,725
(885)
4,840
(1,417)
308
(318)
3,413
4,126
(713)
3,413
5,590
(1,217)
4,373
(458)
134
791
4,840
5,725
(885)
4,840
Other movements include the impact of changes in foreign exchange rates as well as deferred tax amounts relating to acquisitions, disposals and
transfers to held for sale.
The amount of deferred tax liability expected to be settled after more than 12 months is £522m (2016: £273m). The amount of deferred tax assets
expected to be recovered after more than 12 months is £3,399m (2016: £5,066m). 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
Deferred tax assets have not been recognised in respect of gross deductible temporary differences of £157m (2016: £64m) and gross tax losses of
£17,919m (2016: £16,820m). The tax losses include capital losses of £3,126m (2016: £3,138m) and unused tax credits of £546m (2016: £514m).
Of these tax losses, £409m (2016: £394m) expire within five years, £193m (2016: £57m) expire within six to ten years, £2,016m (2016: £358m)
expire within 11 to 20 years and £15,301m (2016: £16,011m) can be carried forward indefinitely. Deferred tax assets have not been recognised in
respect of these items because it is not probable that future taxable profits and gains will be available against which they can be utilised.
Group investments in subsidiaries, branches and associates
Deferred tax is not recognised in respect of the value of Group’s investments in subsidiaries, branches and associates where the Group is able to
control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future.
The aggregate amount of these temporary differences for which deferred tax liabilities have not been recognised decreased in the period to
£0.1bn (2016: £2bn) following the reduction of the Group’s holding in BAGL during 2017.
256 Barclays PLC Annual Report 2017
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Performance/returnNotes to the financial statements 11 Earnings per share
(Loss)/profit attributable to ordinary equity holders of the parent in respect of continuing and
discontinued operation
Tax credit on profit after tax attributable to other equity instrument holders
Total (loss)/profit attributable to ordinary equity holders of the parent in respect of continuing and
discontinued operation
Continuing operations
Profit/(loss) attributable to ordinary equity holders of the parent in respect of continuing operations
Tax credit on profit after tax attributable to other equity instrument holders
Profit/(loss) attributable to equity holders of the parent in respect of continuing operations
Discontinued operation
(Loss)/profit attributable to ordinary equity holders of the parent in respect of discontinued operation
Dilutive impact of convertible options in respect of discontinued operation
(Loss)/profit attributable to equity holders of the parent in respect of discontinued operation including
dilutive impact on convertible options
(Loss)/profit attributable to equity holders of the parent in respect of continuing and discontinued
operation including dilutive impact on convertible options
Basic weighted average number of shares in issue
Number of potential ordinary shares
Diluted weighted average number of shares
2017
£m
(1,922)
174
2016
£m
1,623
128
2015
£m
(394)
70
(1,748)
1,751
(324)
413
174
587
1,434
128
1,562
(2,335)
–
(2,335)
–
189
(1)
188
(696)
70
(626)
302
–
302
(1,748)
1,750
(324)
2017
million
16,996
288
17,284
2016
million
16,860
184
17,044
2015
million
16,687
367
17,054
(Loss)/earnings per ordinary share
Earnings/(loss) per ordinary share in respect of continuing operations
(Loss)/earnings per ordinary share in respect of discontinued operation
Basic earnings per share
2017
p
(10.3)
3.5
(13.8)
2016
p
10.4
9.3
1.1
2015
p
(1.9)
(3.7)
1.8
Diluted earnings per share
2017
p
(10.1)
3.4
(13.5)
2016
p
10.3
9.2
1.1
2015
p
(1.9)
(3.7)
1.8
The calculation of basic earnings per share is based on the profit attributable to equity holders of the parent and the basic weighted average
number of shares excluding treasury shares held in employee benefit trusts or held for trading. When calculating the diluted earnings per share,
the weighted average number of shares in issue is adjusted for the effects of all dilutive potential ordinary shares held in respect of Barclays PLC,
totalling 288m (2016: 184m) shares. The increase in the number of potential ordinary shares is mainly due to the widening of the spread between
the average share price of £2.08 (2016: £1.74) and the average weighted strike price of £1.41 (2016: £1.88) compared to the prior year. The total
number of share options outstanding, under schemes considered to be potentially dilutive, was 534m (2016: 584m). These options have strike
prices ranging from £1.20 to £2.28.
Of the total number of employee share options and share awards at 31 December 2017, 10m (2016: 93m) were anti-dilutive.
The 136m (2016: 173m) increase in the basic weighted average number of shares since 31 December 2016 to 16,996m is primarily due to shares
issued under employee share schemes and the Scrip Dividend Programme.
12 Dividends on ordinary shares
The Directors have approved a final dividend in respect of 2017 of 2.0p per ordinary share of 25p each, which will be paid on 05 April 2018 to
shareholders on the Share Register on 02 March 2018, resulting in a total dividend of 3.0p per share for the year. On 31 December 2017, there were
17,060m ordinary shares in issue. The financial statements for the year ended 31 December 2017 does not reflect this dividend, which will be
accounted for in shareholders’ equity as an appropriation of retained profits in the year ending 31 December 2018. The 2017 financial statements
include the 2017 interim dividends of £170m (2016: £169m) and final dividend declared in relation to 2016 of £339m (2016: £588m). Dividends
are funded out of distributable reserves, for further detail, see page 88 (unaudited).
home.barclays/annualreport
Barclays PLC Annual Report 2017 257
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance The notes included in this section focus on assets and liabilities the Group holds and recognises at fair value. Fair value refers to the price that
would be received to sell an asset or the price that would be paid to transfer a liability in an arm’s-length transaction with a willing counterparty,
which may be an observable market price or, where there is no quoted price for the instrument, may be an estimate based on available market
data. Detail regarding the Group’s approach to managing market risk can be found on page on 129.
13 Trading portfolio
Accounting for trading portfolio assets and liabilities
In accordance with IAS 39, all assets and liabilities held for trading purposes are held at fair value with gains and losses in the changes in fair
value taken to the income statement in net trading income (Note 5).
Debt securities and other eligible bills
Equity securities
Traded loans
Commodities
Trading portfolio assets/(liabilities)
14 Financial assets designated at fair value
Trading portfolio assets
2017
£m
51,200
59,338
3,140
82
113,760
2016
£m
38,789
38,329
2,975
147
80,240
Trading portfolio liabilities
2016
£m
(26,842)
(7,831)
–
(14)
(34,687)
2017
£m
(29,045)
(8,306)
–
–
(37,351)
Accounting for financial assets designated at fair value
In accordance with IAS 39, financial assets may be designated at fair value, with gains and losses taken to the income statement within net
trading income (Note 5) and net investment income (Note 6). The Group has the ability to make the fair value designation when holding the
instruments at fair value reduces an accounting mismatch (caused by an offsetting liability or asset being held at fair value), or is managed by
the Group on the basis of its fair value, or includes terms that have substantive derivative characteristics described in Note 15.
The details on how the fair value amounts are derived for financial assets designated at fair value are described in Note 18.
Loans and advances
Debt securities
Equity securities
Reverse repurchase agreements
Customers' assets held under investment contracts
Other financial assets
Financial assets designated at fair value
2017
£m
11,037
15
4,670
100,040
–
519
116,281
2016
£m
10,519
70
4,558
63,162
37
262
78,608
Credit risk of loans and advances designated at fair value and related credit derivatives
The following table shows the maximum exposure to credit risk, the changes in fair value attributable to changes in credit risk, and the cumulative
changes in fair value since initial recognition together with the amount by which related credit derivatives mitigate this risk:
Loans and advances designated at fair value, attributable to credit risk
Value mitigated by related credit derivatives
Maximum exposure as at
31 December
2017
£m
11,037
256
2016
£m
10,519
339
Changes in fair value during
the year ended
2017
£m
10
1
2016
£m
(42)
(2)
Cumulative changes in fair
value from inception
2017
£m
2
(12)
2016
£m
(42)
(13)
258 Barclays PLC Annual Report 2017
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Assets and liabilities held at fair valueNotes to the financial statements 15 Derivative financial instruments
Accounting for derivatives
Derivative instruments are contracts whose value is derived from one or more underlying financial instruments or indices defined in the
contract. They include swaps, forward-rate agreements, futures, options and combinations of these instruments and primarily affect the
Group’s net interest income, net trading income and derivative assets and liabilities. Notional amounts of the contracts are not recorded
on the balance sheet.
The Group applies IAS 39. All derivative instruments are held at fair value through profit or loss, 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 other financial asset or 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.
Hedge accounting
The Group applies hedge accounting to represent, to the maximum possible extent permitted under accounting standards, the economic
effects of its interest and currency risk management strategies. Derivatives are used to hedge interest rate, exchange rate, commodity,
and equity exposures and exposures to certain indices such as house price indices and retail price indices related to non-trading positions.
Where derivatives are held for risk management purposes, and when transactions meet the required criteria for documentation and hedge
effectiveness, the Group applies fair value hedge accounting, cash flow hedge accounting, or hedging of a net investment in a foreign
operation, as appropriate to the risks being hedged.
Fair value hedge accounting
Changes in fair value of derivatives that qualify and are designated as fair value hedges are recorded in the income statement, together with
changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The fair value changes adjust the carrying value
of the hedged asset or liability held at amortised cost.
If hedge relationships no longer meet the criteria for hedge accounting, hedge accounting is discontinued. For fair value hedges of interest rate
risk, the fair value adjustment to the hedged item is amortised to the income statement over the period to maturity of the previously designated
hedge relationship using the effective interest method. If the hedged item is sold or repaid, the unamortised fair value adjustment is recognised
immediately in the income statement.
Cash flow hedge accounting
For qualifying cash flow hedges, the fair value gain or loss associated with the effective portion of the cash flow hedge is recognised initially
in other comprehensive income, and then recycled to the income statement in the periods when the hedged item will affect profit or loss.
Any ineffective portion of the gain or loss on the hedging instrument is recognised in the income statement immediately.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss
existing in equity at that time remains in equity and is recognised when the hedged item is ultimately recognised in the income statement.
When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was recognised in equity is immediately transferred
to the income statement.
Hedges of net investments
The Group’s net investments in foreign operations, including monetary items accounted for as part of the net investment, are hedged for
foreign currency risks using both derivatives and foreign currency borrowings. Hedges of net investments are accounted for similarly to cash
flow hedges; the effective portion of the gain or loss on the hedging instrument is being recognised directly in other comprehensive income
and the ineffective portion being recognised immediately in the income statement. The cumulative gain or loss recognised in other
comprehensive income is recognised in the income statement on the disposal or partial disposal of the foreign operation, or other reductions
in the Group’s investment in the operation.
Total derivatives
2017
Total derivative assets/(liabilities) held for trading
Total derivative assets/(liabilities) held for risk management
Derivative assets/(liabilities)
Notional
contract
amount
£m
35,686,673
231,348
35,918,021
Fair value
Assets
£m
237,504
165
237,669
Liabilities
£m
Notional
contract
amount
£m
(237,236) 36,185,820
336,524
(238,345) 36,522,344
(1,109)
2016
Fair value
Assets
£m
345,624
1,002
346,626
Liabilities
£m
(339,646)
(841)
(340,487)
Further information on netting arrangements of derivative financial instruments can be found within Note 19.
Trading derivatives are managed within the Group’s market risk management policies, which are outlined on page 129.
The Group’s exposure to credit risk arising from derivative contracts are outlined in the Credit risk section on page 157.
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Barclays PLC Annual Report 2017 259
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 15 Derivative financial instruments continued
The fair values and notional amounts of derivative instruments held for trading are set out in the following table:
Derivatives held for trading
2017
2016
Notional
contract
amount
£m
Fair value
Assets
£m
Liabilities
£m
Notional
contract
amount
£m
Fair value
Assets
£m
Liabilities
£m
Foreign exchange derivatives
Forward foreign exchange
Currency swaps
OTC options bought and sold
OTC derivatives
Foreign exchange derivatives cleared by central counterparty
Exchange traded futures and options – bought and sold
Foreign exchange derivatives
Interest rate derivatives
Interest rate swaps
Forward-rate agreements
OTC options bought and sold
OTC derivatives
Interest rate derivatives cleared by central counterpartya
Exchange traded futures and options – bought and sold
Interest rate derivatives
Credit derivatives
OTC swaps
Credit derivatives cleared by central counterparty
Credit derivatives
Equity and stock index derivatives
OTC options bought and sold
Equity swaps and forwards
OTC derivatives
Exchange traded futures and options – bought and sold
Equity and stock index derivatives
Commodity derivatives
OTC options bought and sold
Commodity swaps and forwards
OTC derivatives
Exchange traded futures and options – bought and sold
Commodity derivatives
Derivative assets/(liabilities) held for trading
3,131,184
1,098,587
506,156
4,735,927
59,618
24,266
4,819,811
5,680,977
268,277
2,384,453
8,333,707
13,215,545
7,644,560
29,193,812
411,160
303,841
715,001
58,456
103,283
161,739
632,662
794,401
4,465
12,755
17,220
146,428
163,648
35,686,673
26,534
23,675
4,056
54,265
607
30
54,902
121,560
87
27,235
148,882
3,675
362
152,919
7,595
4,954
12,549
5,262
2,235
7,497
7,201
14,698
32
662
694
1,742
2,436
237,504
(26,177)
(22,003)
(4,665)
(52,845)
(585)
(30)
(53,460)
2,308,922
1,086,552
772,031
4,167,505
43,478
18,813
4,229,796
(112,187)
(88)
(29,635)
(141,910)
4,799,897
296,559
2,522,430
7,618,886
(3,390) 14,439,407
7,952,733
(145,658) 30,011,026
(358)
(6,233)
(5,319)
(11,552)
(9,591)
(5,478)
(15,069)
(9,050)
(24,119)
615,057
332,743
947,800
102,545
105,120
207,665
585,620
793,285
(103)
(753)
(856)
(1,591)
(2,447)
14,053
16,086
30,139
173,774
203,913
(237,236) 36,185,820
32,442
40,083
6,338
78,863
366
31
79,260
153,822
999
42,412
197,233
30,503
397
228,133
11,811
4,462
16,273
6,766
2,253
9,019
8,070
17,089
395
1,528
1,923
2,946
4,869
345,624
(30,907)
(40,164)
(6,762)
(77,833)
(388)
(27)
(78,248)
(143,059)
(968)
(43,373)
(187,400)
(31,528)
(370)
(219,298)
(10,513)
(4,572)
(15,085)
(8,837)
(4,435)
(13,272)
(8,600)
(21,872)
(461)
(1,821)
(2,282)
(2,861)
(5,143)
(339,646)
Total OTC derivatives held for trading
Total derivatives cleared by central counterparty held for
trading
Total exchange traded derivatives held for trading
Derivative assets/(liabilities) held for trading
13,659,753
218,933
(216,913) 12,639,252
298,849
(291,300)
13,579,004
8,447,916
35,686,673
9,236
9,335
237,504
(9,294) 14,815,628
(11,029)
8,730,940
(237,236) 36,185,820
35,331
11,444
345,624
(36,488)
(11,858)
(339,646)
260 Barclays PLC Annual Report 2017
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Assets and liabilities held at fair valueNotes to the financial statements 15 Derivative financial instruments continued
The fair values and notional amounts of derivative instruments held for risk management are set out in the following table:
Derivatives held for risk management
2017
2016
Derivatives designated as cash flow hedges
Currency swaps
Interest rate swaps
Interest rate derivatives cleared by central counterparty
Derivatives designated as cash flow hedges
Derivatives designated as fair value hedges
Interest rate swaps
Interest rate derivatives cleared by central counterparty
Derivatives designated as fair value hedges
Derivatives designated as hedges of net investments
Forward foreign exchange
Derivatives designated as hedges of net investments
Derivative assets/(liabilities) held for risk management
Total OTC derivatives held for risk management
Total derivatives cleared by central counterparty held
for risk management
Derivative assets/(liabilities) held for risk management
Notional
contract
amount
£m
–
1,482
122,103
123,585
7,345
97,436
104,781
2,982
2,982
231,348
11,809
219,539
231,348
Fair value
Assets
£m
Liabilities
£m
Fair value
Assets
£m
Liabilities
£m
Notional
contract
amount
£m
1,357
5,965
181,541
188,863
10,733
130,842
141,575
6,086
6,086
336,524
–
(3)
–
(3)
(1,096)
–
(1,096)
(10)
(10)
(1,109)
453
154
62
669
301
–
301
32
32
1,002
(1,109)
24,141
940
–
(1,109)
312,383
336,524
62
1,002
–
7
–
7
117
–
117
41
41
165
165
–
165
–
(6)
(27)
(33)
(744)
–
(744)
(64)
(64)
(841)
(814)
(27)
(841)
The Group has hedged the following forecast cash flows, which primarily vary with interest rates. These cash flows are expected to impact the
income statement in the following periods, excluding any hedge adjustments that may be applied:
2017
Forecast receivable cash flows
Forecast payable cash flows
2016
Forecast receivable cash flows
Forecast payable cash flows
Total
£m
2,671
–
2,616
52
Up to
one year
£m
One to
two years
£m
Two to
three years
£m
Three to
four years
£m
Four to
five years
£m
More than
five years
£m
484
–
455
15
584
–
531
16
561
–
511
7
416
–
411
6
305
–
327
5
321
–
381
3
The maximum length of time over which the Group hedges exposure to the variability in future cash flows for forecast transactions, excluding
those forecast transactions related to the payment of variable interest on existing financial instruments is 10 years (2016: 10 years).
Amounts recognised in net interest income
Gains on the hedged items attributable to the hedged risk
Losses on the hedging instruments
Fair value ineffectiveness
Cash flow hedging ineffectiveness
Net investment hedging ineffectiveness
2017
£m
550
(460)
90
(135)
2
2016
£m
1,787
(1,741)
46
28
(3)
Gains and losses transferred from the cash flow hedging reserve to the income statement included a £nil (2016: £17m gain) transferred to
interest income; a £632m gain (2016: £491m gain) to interest expense; a £nil (2016: £17m gain) to administration and general expenses;
and a £nil (2016: £75m loss) to taxation.
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Accounting for financial investments
Available for sale financial assets are held at fair value with gains and losses being included in other comprehensive income. The Group uses
this classification for assets that are not derivatives and are not held for trading purposes or otherwise designated at fair value through profit
or loss, or at amortised cost. Dividends and interest (calculated using the effective interest method) are recognised in the income statement in
net interest income (Note 3) or, net investment income (Note 6). On disposal, the cumulative gain or loss recognised in other comprehensive
income is also included in net investment income.
Held to maturity assets are held at amortised cost. The Group uses this classification when there is an intent and ability to hold the asset
to maturity. Interest on the investments are recognised in the income statement within net interest income (Note 3).
Available for sale debt securities and other eligible bills
Available for sale equity securities
Held to maturity debt securities
Financial investments
17 Financial liabilities designated at fair value
2017
£m
52,020
1,787
5,109
58,916
2016
£m
57,703
438
5,176
63,317
Accounting for liabilities designated at fair value through profit and loss
In accordance with IAS 39, financial liabilities may be designated at fair value, with gains and losses taken to the income statement within net
trading income (Note 5) and net investment income (Note 6). Movements in own credit are reported through other comprehensive income
from January 2017 upon early adoption of IFRS 9. The Group has the ability to make the fair value designation when holding the instruments
at fair value reduces an accounting mismatch (caused by an offsetting liability or asset being held at fair value), or is managed by the Group
on the basis of its fair value, or includes terms that have substantive derivative characteristics (Note 15).
The details on how the fair value amounts are arrived for financial liabilities designated at fair value are described in Note 18.
Debt securities
Deposits
Liabilities to customers under investment contracts
Repurchase agreements
Other financial liabilities
Financial liabilities designated at fair value
The cumulative own credit net loss recognised is £179m (2016: £239m loss).
18 Fair value of financial instruments
2017
2016
Contractual
amount due
on maturity
£m
46,920
4,414
–
126,822
16
178,172
Fair value
£m
42,563
4,448
–
126,691
16
173,718
Contractual
amount due
on maturity
£m
37,034
5,303
–
55,760
30
98,127
Fair value
£m
34,985
5,269
37
55,710
30
96,031
Accounting for financial assets and liabilities – fair values
The Group applies IAS 39. All financial instruments are initially recognised at fair value on the date of initial recognition (including transaction
costs, other than financial instruments held at fair value through profit or loss) and, depending on the classification of the asset or liability, may
continue to be held at fair value either through profit or loss or other comprehensive income. The fair value of a financial instrument is the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date.
Wherever possible, fair value is determined by reference to a quoted market price for that instrument. For many of the Group’s financial assets
and liabilities, especially derivatives, quoted prices are not available and valuation models are used to estimate fair value. The models calculate
the expected cash flows under the terms of each specific contract and then discount these values back to a present value. These models use
as their basis independently sourced market inputs including, for example, interest rate yield curves, equities and commodities prices, option
volatilities and currency rates.
For financial liabilities measured at fair value, the carrying amount reflects the effect on fair value of changes in own credit spreads derived from
observable market data such as in primary issuance and redemption activity for structured notes.
On initial recognition, it is presumed that the transaction price is the fair value unless there is observable information available in an active
market to the contrary. The best evidence of an instrument’s fair value on initial recognition is typically the transaction price. However, if fair
value can be evidenced by comparison with other observable current market transactions in the same instrument, or is based on a valuation
technique whose inputs include only data from observable markets, then the instrument should be recognised at the fair value derived from
such observable market data.
For valuations that have made use of 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.
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Assets and liabilities held at fair valueNotes to the financial statements 18 Fair value of financial instruments continued
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 270.
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 requires an entity to classify its assets and liabilities according to a hierarchy that reflects the observability of
significant market inputs. The three levels of the fair value hierarchy are defined below.
Quoted market prices – Level 1
Assets and liabilities are classified as Level 1 if their value is observable in an active market. Such instruments are valued by reference to
unadjusted quoted prices for identical assets or liabilities in active markets where the quoted price is readily available, and the price represents
actual and regularly occurring market transactions. An active market is one in which transactions occur with sufficient volume and frequency to
provide pricing information on an ongoing basis.
Valuation technique using observable inputs – Level 2
Assets and liabilities classified as Level 2 have been valued using models whose inputs are observable 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 the Group’s assets and liabilities that are held at fair value disaggregated by valuation technique (fair value hierarchy)
and balance sheet classification:
Assets and liabilities held at fair value
As at 31 December
Trading portfolio assets
Financial assets designated at fair value
Derivative financial assets
Available for sale investments
Investment property
Assets included in disposal groups classified
as held for salea
Total assets
Trading portfolio liabilities
Financial liabilities designated at fair value
Derivative financial liabilities
Liabilities included in disposal groups
classified as held for salea
Total liabilities
2017
Valuation technique using
Level 3
£m
1,977
7,747
5,334
395
116
Level 2
£m
47,858
104,187
228,549
30,571
–
Level 1
£m
63,925
4,347
3,786
22,841
–
Total
£m
113,760
116,281
237,669
53,807
116
Level 1
£m
41,550
4,031
5,261
21,218
–
2016
Valuation technique using
Level 3
£m
2,065
9,947
8,546
372
81
Level 2
£m
36,625
64,630
332,819
36,551
–
Total
£m
80,240
78,608
346,626
58,141
81
–
94,899
–
411,165
29
15,598
29
521,662
6,754
78,814
8,511
479,136
6,009
27,020
21,274
584,970
(20,905)
–
(3,631)
(16,442)
(173,238)
(229,517)
(4)
(480)
(5,197)
(37,351)
(173,718)
(238,345)
(20,205)
(70)
(5,051)
(14,475)
(95,121)
(328,265)
(7)
(840)
(7,171)
(34,687)
(96,031)
(340,487)
–
(24,536)
–
(419,197)
–
(5,681)
–
(449,414)
(397)
(25,723)
(5,224)
(443,085)
(6,201)
(14,219)
(11,822)
(483,027)
Note
a Disposal groups held for sale and measured at fair value less cost to sell are included in the fair value table.
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18 Fair value of financial instruments continued
The following table shows the Group’s assets and liabilities that are held at fair value disaggregated by valuation technique (fair value hierarchy)
and product type:
Assets and liabilities held at fair value by product type
Assets
Valuation technique using
Level 1
£m
Level 2
£m
As at 31 December 2017
Interest rate derivatives
Foreign exchange derivatives
Credit derivatives
Equity derivatives
Commodity derivatives
Government and government sponsored debt
Corporate debt
Certificates of deposit, commercial paper and other money market
instruments
Reverse repurchase and repurchase agreements
Non-asset backed loans
Asset backed securities
Issued debt
Equity cash products
Private equity investments
Assets and liabilities held for sale
Othera
Total
As at 31 December 2016
Interest rate derivatives
Foreign exchange derivatives
Credit derivatives
Equity derivatives
Commodity derivatives
Government and government sponsored debt
Corporate debt
Certificates of deposit, commercial paper and other money market
instruments
Reverse repurchase and repurchase agreements
Non-asset backed loans
Asset backed securities
Issued debt
Equity cash products
Private equity investments
Assets and liabilities held for sale
Othera
Total
–
–
–
3,786
–
34,783
–
–
–
–
–
–
56,322
8
–
–
94,899
–
–
–
4,210
1,052
31,203
46
–
–
–
–
–
35,399
23
6,754
127
78,814
150,325
54,783
11,163
9,848
2,430
49,853
15,098
1,491
100,038
5,710
1,837
–
7,690
1
–
898
411,165
222,892
79,612
14,662
11,842
3,809
49,834
11,921
994
63,162
2,888
1,956
–
6,478
110
8,511
465
479,136
Liabilities
Valuation technique using
Level 1
£m
Level 2
£m
Level 3
£m
–
–
–
(3,631)
–
(13,079)
–
–
–
–
–
–
(7,826)
–
–
–
(24,536)
–
–
–
(4,058)
(991)
(12,761)
(27)
–
–
–
–
–
(7,416)
–
(397)
(73)
(25,723)
(143,890)
(53,346)
(11,312)
(18,527)
(2,442)
(13,116)
(3,580)
(7,377)
(126,691)
–
(221)
(38,176)
(388)
–
–
(131)
(419,197)
(215,213)
(78,263)
(14,844)
(15,808)
(4,138)
(11,454)
(1,907)
(6,936)
(55,710)
–
(256)
(31,973)
(934)
(18)
(5,224)
(407)
(443,085)
(2,867)
(124)
(240)
(1,961)
(5)
–
(4)
(250)
–
–
–
(214)
–
(16)
–
–
(5,681)
(4,860)
(51)
(241)
(2,007)
(13)
–
(5)
(319)
–
–
–
(298)
(2)
(12)
(6,201)
(210)
(14,219)
Level 3
£m
2,718
160
1,386
1,064
6
49
871
–
–
6,657
626
–
112
817
29
1,103
15,598
5,759
132
1,611
1,037
8
3
969
–
–
8,767
515
–
150
856
6,009
1,204
27,020
Note
a Other includes commercial real estate loans, funds and fund-linked products, asset backed loans, physical commodities 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 for the material products within Levels 2 and 3, and observability and sensitivity analysis for products within
Level 3, are described below.
Interest rate derivatives
Description: Derivatives linked to interest rates or inflation indices. The category includes futures, interest rate and inflation swaps, swaptions,
caps, floors, inflation options, balance guaranteed swaps and other exotic interest rate derivatives.
Valuation: Interest rate and inflation derivatives are generally valued using curves of forward rates constructed from market data to project and
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.
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Assets and liabilities held at fair valueNotes to the financial statements 18 Fair value of financial instruments continued
Observability: In general, inputs are considered observable up to liquid maturities which are determined separately for each input and underlying.
Unobservable inputs are generally set by referencing liquid market instruments and applying extrapolation techniques or inferred via another
reasonable method.
Level 3 sensitivity: Sensitivity to unobservable valuation inputs is based on the dispersion of consensus data services where available,
or alternatively it is based on stress scenarios or historic data.
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: FX derivatives are valued using industry standard and bespoke models depending on the product type. Valuation inputs include
FX rates, interest rates, FX volatilities, interest rate volatilities, FX interest rate correlations and others as appropriate.
Observability: FX correlations, forwards and volatilities are generally observable up to liquid maturities which are determined separately for each
input and underlying. Unobservable inputs are set by referencing liquid market instruments and applying extrapolation techniques, or inferred via
another reasonable method.
Level 3 sensitivity: Sensitivity relating to unobservable valuation inputs is primarily based on the dispersion of consensus data services.
Credit derivatives
Description: Derivatives linked to the credit spread of a referenced entity, index or basket of referenced entities or a pool of referenced assets
(e.g. a securitised product). The category includes single name and index credit default swaps (CDS), asset backed CDS and synthetic
collateralised debt obligations (CDOs).
Valuation: CDS are valued on industry standard models using curves of credit spreads as the principal input. Credit spreads are observed directly
from broker data, third-party vendors or priced to proxies. Synthetic CDOs are valued using a model that incorporates credit spreads, recovery
rates, correlations and interest rates, and is calibrated to the index tranche market.
Observability: CDS contracts referencing entities that are actively traded are generally considered observable. Other valuation inputs are
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.
Level 3 sensitivity: Sensitivity to unobservable CDS contracts is determined by applying a shift to credit spread curves based on the average range
of pricing observed in the market for similar CDS. Sensitivity to unobservable synthetic CDOs is calculated using correlation levels derived from the
range of contributors to a consensus bespoke service.
Equity derivatives
Description: Exchange traded or OTC derivatives linked to equity indices and single names. The category includes vanilla and exotic equity products.
Valuation: Equity derivatives are valued using industry standard models. Valuation inputs include stock prices, dividends, volatilities, interest rates,
equity repurchase curves and, for multi-asset products, correlations.
Observability: In general, valuation inputs are observable up to liquid maturities which are determined separately for each input and underlying.
Unobservable inputs are set by referencing liquid market instruments and applying extrapolation techniques, or inferred via another reasonable method.
Level 3 sensitivity: Sensitivity is generally estimated using the dispersion of consensus data services.
Commodity derivatives
Description: Exchange traded and OTC derivatives based on underlying commodities such as metals, crude oil and refined products, agricultural,
power and natural gas.
Valuation: Commodity swaps and options are valued using models incorporating discounting of cash flows and other industry standard modelling
techniques. Valuation inputs include forward curves, volatilities implied from market observable inputs and correlations.
Observability: Commodity correlations, forwards and volatilities are generally observable up to liquid maturities which are determined separately
for each input and underlying. Unobservable inputs are set with reference to similar observable products, or by applying extrapolation techniques
to observable inputs.
Level 3 sensitivity: Sensitivity is determined primarily by measuring historical variability over a period of years. Where historical data is unavailable
or uncertainty is due to volumetric risk, sensitivity is measured by applying appropriate stress scenarios or using proxy bid-offer spread levels.
Complex derivative instruments
Valuation estimates made by counterparties with respect to complex derivative instruments, for the purpose of determining the amount of
collateral to be posted, often differ, sometimes significantly, from Barclays’ own estimates. In almost all cases, Barclays has been able to
successfully resolve such differences or otherwise reach an accommodation with respect to collateral posting levels, including in certain cases, by
entering into compromise collateral arrangements. Due to the ongoing nature of collateral calls, Barclays will often be engaged in discussion with
one or more counterparties in respect of such differences at any given time. Valuation estimates made by counterparties for collateral purposes
are considered, like any other third-party valuation, when determining Barclays’ fair value estimates.
Government and government sponsored debt
Description: Government bonds, supra sovereign bonds and agency bonds.
Valuation: Liquid bonds that are actively traded through an exchange or clearing house are marked to the levels observed in these markets. Other
actively traded bonds are valued using observable market prices sourced from broker quotes, inter-dealer prices or other reliable pricing sources.
Observability: Prices for actively traded bonds are considered observable. Unobservable bonds prices are generally determined by reference to
bond yields for actively traded bonds from the same (or a similar) issuer.
Level 3 sensitivity: Sensitivity is generally determined by using a range of observable alternative prices.
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Corporate debt
Description: Primarily corporate bonds.
Valuation: Corporate bonds are valued using observable market prices sourced from broker quotes, inter-dealer prices or other reliable pricing
sources.
Observability: Prices for actively traded bonds are considered observable. Unobservable bonds prices are generally determined by reference
to bond yields or CDS spreads for actively traded instruments issued by or referencing the same (or a similar) issuer.
Level 3 sensitivity: Sensitivity is generally determined by applying a shift to bond yields using the average ranges of external levels observed
in the market for similar bonds.
Certificates of deposit, commercial paper and other money market instruments
Description: Certificates of deposit, commercial paper and other money market instruments.
Valuation: Instruments are valued using observable market prices sourced from broker quotes, inter-dealer prices or other reliable pricing services.
Observability: Prices for actively traded instruments are considered observable. Unobservable instrument prices are generally determined by
reference to bond yields or CDS spreads for actively traded instruments issued by or referencing the same (or a similar) issuer.
Level 3 sensitivity: Sensitivity is generally calculated by using a range of observable alternative prices.
Reverse repurchase and repurchase agreements
Description: Includes securities purchased under resale agreements, securities sold under repurchase agreements, and other similar secured
lending agreements. The agreements are primarily short-term in nature.
Valuation: Repurchase and reverse repurchase agreements are generally valued by discounting the expected future cash flows using industry
standard models that incorporate market interest rates and repurchase rates, based on the specific details of the transaction.
Observability: Inputs are deemed observable up to liquid maturities, and are determined based on the specific features of the transaction.
Unobservable inputs are generally set by referencing liquid market instruments and applying extrapolation techniques, or inferred via another
reasonable method.
Level 3 sensitivity: Sensitivity is generally estimated using the dispersion of consensus data services, stress scenarios or historic data. In general,
the sensitivity of unobservable inputs is not significant to the overall valuation given the predominantly short-term nature of the agreements.
Non-asset backed loans
Description: Largely made up of fixed rate loans.
Valuation: Fixed rate loans are valued using models that discount expected future cash flows based on interest rates and loan spreads.
Observability: Within this loan population, the loan spread is generally unobservable. Unobservable loan spreads are determined by incorporating
funding costs, the level of comparable assets such as gilts, issuer credit quality and other factors.
Level 3 sensitivity: The sensitivity of fixed rate loans is calculated by applying a shift to loan spreads.
Asset backed securities
Description: Securities that are linked to the cash flows of a pool of referenced assets via securitisation. The category includes residential mortgage
backed securities, commercial mortgage backed securities, CDOs, collateralised loan obligations (CLOs) and other asset backed securities.
Valuation: Where available, valuations are based on observable market prices sourced from broker quotes and inter-dealer prices. Otherwise,
valuations are determined using industry standard discounted cash flow analysis that calculates the fair value based on valuation inputs such as
constant default rate, conditional prepayment rate, loss given default and yield. These inputs are determined by reference to a number of sources
including proxying to observed transactions, market indices or market research, and by assessing underlying collateral performance.
Proxying to observed transactions, indices or research requires an assessment and comparison of the relevant securities’ underlying attributes
including collateral, tranche, vintage, underlying asset composition (historical losses, borrower characteristics and loan attributes such as loan
to value ratio and geographic concentration) and credit ratings (original and current).
Observability: Where an asset backed product does not have an observable market price and the valuation is determined using a discounted cash
flow analysis, the instrument is considered unobservable.
Level 3 sensitivity: The sensitivity analysis for asset backed products is based on externally sourced pricing dispersion or by stressing the inputs
of discount cash flow analysis.
Issued debt
Description: Debt notes issued by Barclays.
Valuation: Issued debt is valued using discounted cash flow techniques and industry standard models incorporating various inputs observed
for each instrument.
Observability: Barclays issued notes are generally observable. Structured notes are debt instruments containing embedded derivatives. Where
either an input to the embedded derivative or the debt instrument is deemed unobservable and significant to the overall valuation of the note,
the structured note is classified as Level 3.
Level 3 sensitivity: Sensitivity to the unobservable input in the embedded derivative is calculated in line with the method used for the derivative
instrument concerned.
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Assets and liabilities held at fair valueNotes to the financial statements 18 Fair value of financial instruments continued
Equity cash products
Description: Includes listed equities, Exchange Traded Funds (ETF) and preference shares.
Valuation: Valuation of equity cash products is primarily determined through market observable prices.
Observability: Prices for actively traded equity cash products are considered observable. Unobservable equity prices are generally determined
by reference to actively traded instruments that are similar in nature, or inferred via another reasonable method.
Level 3 sensitivity: Sensitivity is generally calculated based on applying a shift to the valuation of the underlying asset.
Private equity investments
Description: Includes private equity holdings and principal investments.
Valuation: Private equity investments are valued in accordance with the ‘International Private Equity and Venture Capital Valuation Guidelines’
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: Inputs are considered observable if there is active trading in a liquid market of products with significant sensitivity to the inputs.
Unobservable inputs include earnings estimates, multiples of comparative companies, marketability discounts and discount rates.
Level 3 sensitivity: Private equity valuation models are each sensitive to a number of key assumptions, such as projected future earnings,
comparator multiples, marketability discounts and discount rates. Valuation sensitivity is generally estimated by shifting assumptions to
reasonable alternative levels.
Assets and liabilities held for sale
Description: Assets and liabilities held for sale consist of disposal groups Barclays intend to sell.
Valuation: Assets and liabilities held for sale are valued at the lower of carrying value and fair value less costs to sell.
Level 3 sensitivity: The disposal groups that are measured at fair value less cost to sell are valued at the agreed price less costs to sell and are not
expected to display significant sensitivity. The sensitivity of the assets and liabilities measured at carrying value is explained within the relevant
product descriptions.
Other
Description: Other includes commercial real estate loans, funds and fund-linked products, asset backed loans, physical commodities and
investment property.
Assets and liabilities reclassified between Level 1 and Level 2
During the period, there were transfers of £3,807m of government bond assets and £1,023m/£(950)m of commodity derivative assets and
liabilities from Level 1 to Level 2 (2016: £2,340m of government bond assets transferred from Level 2 to Level 1) to reflect the market observability
of these product types. These transfers are reflected as if they had taken place at the beginning of the year.
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.
During the year:
■■ £721m of net interest rate derivatives were transferred from Level 3 to Level 2 to reflect the market observability of the products
■■ £2,284m of non-asset backed loans were derecognised due to a substantial modification of terms on the ESHLA loans. The restructured loans
are measured on an amortised cost basis.
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Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 18 Fair value of financial instruments continued
Analysis of movements in Level 3 assets and liabilities
Total gains and losses
in the period
recognised in the
income statement
Trading
income
£m
Other
income
£m
Total
gains
or losses
recog-
nised
in OCI
£m
As at
1 January
2017
£m
Purchases
£m
Sales
£m
Issues
£m
3
969
151
515
77
350
2,065
8,616
201
562
–
568
46
73
435
195
24
2
775
–
(47)
(187)
(78)
(11)
(77)
(400)
–
27
26
–
4,675
–
(25)
(127)
–
(4,646)
–
–
–
–
–
–
–
–
–
–
–
–
Settle-
ments
£m
–
(98)
(221)
(9)
–
(97)
(425)
(2,284)
(3)
(1)
(1)
(247)
–
21
(8)
9
(19)
25
28
159
(17)
(1)
(7)
41
–
–
–
–
–
(1)
(1)
–
(3)
29
–
197
9,947
4,728
(4,798)
–
(2,536)
175
223
Government and government
sponsored debt
Corporate debt
Non-asset backed loans
Asset backed securities
Equity cash products
Other
Trading portfolio assets
Non-asset backed loans
Asset backed loans
Private equity investments
Equity cash products
Other
Financial assets designated
at fair value
Equity cash products
Private equity investments
Other
Available for sale investments
73
294
5
372
–
15
36
51
–
(78)
–
(78)
Investment property
81
114
(69)
Trading portfolio liabilities
(7)
(4)
1
Certificates of deposit, commercial
paper and other money market
instruments
Issued debt
Other
Financial liabilities designated
at fair value
Interest rate derivatives
Foreign exchange derivatives
Credit derivatives
Equity derivatives
Commodity derivatives
Net derivative financial
instrumentsa
Assets and liabilities held for sale
Total
Net assets held for sale measured
at fair value on non-recurring basis
Total
(319)
(298)
(223)
(840)
899
81
1,370
(970)
(5)
–
–
–
–
58
–
5
(220)
–
69
84
–
153
(1)
–
(2)
(14)
–
1,375
574
13,567
(157)
–
5,507
(17)
(574)
(5,782)
1
(5)
–
(4)
(10)
–
9
–
(6)
3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2)
(2)
–
–
–
–
204
204
(208)
(12)
(29)
374
–
125
–
(2,634)
–
–
–
–
–
2
–
–
–
–
(166)
27
(128)
(43)
4
(306)
–
(101)
–
–
–
–
–
–
–
–
–
–
–
–
–
2
37
1
40
–
–
–
–
–
–
–
–
–
–
–
Transfers
In
£m
–
6
1
–
–
3
10
–
6
21
16
16
59
5
60
–
65
–
(1)
As at 31
December
2017
£m
49
871
166
627
68
196
1,977
6,491
155
498
8
595
Out
£m
–
(53)
(5)
(5)
(3)
(9)
(75)
–
(31)
(11)
–
(9)
(51)
7,747
(45)
(4)
–
(49)
–
5
36
319
40
395
116
(4)
(104)
–
–
95
–
9
(250)
(214)
(16)
(104)
104
(480)
(11)
(13)
(69)
(16)
1
(721)
(46)
(1)
(7)
–
(775)
–
(841)
(150)
37
1,146
(896)
–
137
–
9,888
29
9,917
13,567
5,507
(5,782)
–
(2,634)
(101)
211
40
(79)
(841)
Note
a The derivative financial instruments are represented on a net basis. On a gross basis, derivative financial assets are £5,334m (2016: £8,546m) and derivative financial liabilities are
£5,197m (2016: £7,171m).
268 Barclays PLC Annual Report 2017
home.barclays/annualreport
–
–
211
–
–
40
(108)
–
(79)
Assets and liabilities held at fair valueNotes to the financial statements
18 Fair value of financial instruments continued
Analysis of movements in Level 3 assets and liabilities
Total gains and losses
in the period
recognised in the
income statement
Trading
income
£m
Other
income
£m
Total
gains
or losses
recog-
nised
in OCI
£m
As at
1 January
2016
£m
320
2,843
507
743
121
374
4,908
Purchases
£m
Sales
£m
Issues
£m
–
38
173
129
4
55
399
(317)
(48)
(498)
(295)
(4)
(89)
(1,251)
–
(225)
(51)
(26)
(2,729)
–
–
–
–
–
–
–
–
–
–
–
–
15,963
256
457
26
595
–
48
38
–
2,658
Settle-
ments
£m
–
(5)
(4)
(171)
–
(1)
(181)
–
206
(38)
111
(15)
30
294
(8,602)
(20)
(3)
–
(33)
1,155
30
16
–
37
–
–
–
–
–
–
–
100
–
120
–
85
17,297
2,744
(3,031)
–
(8,658)
1,238
305
24
877
20
921
82
–
(272)
(538)
(244)
(1,054)
418
(104)
1,685
(857)
(506)
52
15
1
68
–
–
–
–
–
–
(7)
(254)
(7)
(268)
(3)
(9)
–
–
–
–
45
–
2
196
–
3
30
(306)
7
–
–
–
–
–
–
–
–
(407)
(16)
(423)
–
–
(19)
–
–
48
231
83
(19)
362
–
2
–
(83)
–
(6)
40
(119)
(34)
91
–
–
–
–
–
(1)
2
–
(48)
(46)
228
6
111
(98)
(3)
3
–
1
4
2
–
(7)
9
(2)
–
–
–
–
–
–
636
424
23,214
243
126
3,580
(266)
(166)
(4,994)
(81)
(116)
(216)
(28)
85
(8,843)
244
–
1,729
–
172
483
–
–
70
–
–
–
–
–
–
–
–
–
–
–
–
–
2
63
5
70
–
–
–
–
–
–
–
–
–
–
–
Transfers
As at 31
December
2016
£m
Out
£m
In
£m
–
32
18
1
–
1
52
–
112
6
–
41
–
(2,097)
(7)
(3)
(29)
(20)
(2,156)
–
–
(21)
–
(86)
3
969
151
515
77
350
2,065
8,616
201
562
–
568
159
(107)
9,947
–
–
1
1
–
–
(1)
–
–
(1)
–
3
73
294
5
372
81
(7)
(301)
–
(50)
230
–
38
(319)
(298)
(223)
(351)
268
(840)
294
55
3
(15)
–
337
–
198
(83)
52
(6)
(86)
413
899
81
1,370
(970)
(5)
290
49
1,375
574
(1,654) 13,567
Government and government
sponsored debt
Corporate debt
Non-asset backed loans
Asset backed securities
Equity cash products
Other
Trading portfolio assets
Non-asset backed loans
Asset backed loans
Private equity investments
Equity cash products
Other
Financial assets designated
at fair value
Equity cash products
Private equity investments
Other
Available for sale investments
Investment property
Trading portfolio liabilities
Certificates of deposit, commercial
paper and other money market
instruments
Issued debt
Other
Financial liabilities designated
at fair value
Interest rate derivatives
Foreign exchange derivatives
Credit derivatives
Equity derivatives
Commodity derivatives
Net derivative financial
instrumentsa
Assets and liabilities held for sale
Total
Net liabilities held for sale measured
at fair value on non-recurring basis
Total
23,214
3,580
(4,994)
(216)
(8,843)
1,729
483
70
198
(766)
(1,654) 12,801
Note
a The derivative financial instruments are represented on a net basis. On a gross basis, derivative financial assets are £5,334m (2016: £8,546m) and derivative financial liabilities are
£5,197m (2016: £7,171m).
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Barclays PLC Annual Report 2017 269
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 18 Fair value of financial instruments continued
Unrealised gains and losses on Level 3 financial assets and liabilities
The following table discloses the unrealised gains and losses recognised in the year arising on Level 3 financial assets and liabilities held
at year end:
Unrealised gains and losses recognised during the period on Level 3 assets and liabilities held at year end
As at 31 December
Trading portfolio assets
Financial assets designated at fair value
Available for sale investments
Investment property
Trading portfolio liabilities
Financial liabilities designated at fair value
Net derivative financial instruments
Assets and liabilities held for sale
Total
Income statement
2017
Trading
income
£m
(34)
147
–
–
3
58
(301)
–
(127)
Other
income
£m
–
200
(4)
(10)
–
10
–
–
196
Other
compre-
hensive
income
£m
–
–
29
–
–
–
–
–
29
Income statement
2016
Total
£m
(34)
347
25
(10)
3
68
(301)
–
98
Trading
income
£m
243
227
–
–
(1)
96
175
–
740
Other
income
£m
–
271
6
2
–
(6)
–
128
401
Other
compre-
hensive
income
£m
–
–
70
–
–
–
–
–
70
Totala
£m
243
498
76
2
(1)
90
175
128
1,211
Note
a The unrealised gain of £1,211m on Level 3 assets in 2016 is largely offset by losses on related Level 2 and Level 1 portfolio hedges.
Sensitivity analysis of valuations using unobservable inputs
As at 31 December
Interest rate derivatives
Foreign exchange derivatives
Credit derivatives
Equity derivatives
Commodity derivatives
Corporate debt
Certificates of deposit, commercial paper and
other money market instruments
Non-asset backed loans
Asset backed securities
Issued debt
Equity cash products
Private equity investments
Assets and liabilities held for sale
Othera
Total
2017
2016
Favourable changes
Income
statement
£m
114
6
106
99
3
4
Equity
£m
–
–
–
–
–
–
–
243
1
–
12
133
–
5
726
–
–
–
–
24
13
–
–
37
Unfavourable changes
Income
statement
£m
(138)
(6)
(79)
(99)
(3)
(3)
–
(468)
–
–
(8)
(138)
–
(5)
(947)
Equity
£m
–
–
–
–
–
–
–
–
–
–
(24)
(13)
–
–
(37)
Favourable changes
Income
statement
£m
209
15
127
163
5
7
Equity
£m
–
–
–
–
–
–
–
462
1
–
12
104
3
155
1,263
–
–
–
–
26
18
–
–
44
Unfavourable changes
Income
statement
£m
(249)
(15)
(133)
(164)
(5)
(2)
(1)
(597)
(1)
–
(11)
(104)
(3)
(113)
(1,398)
Equity
£m
–
–
–
–
–
–
–
–
–
–
(26)
(21)
–
–
(47)
Note
a Other includes commercial real estate loans, funds and fund-linked products, asset backed loans, physical commodities 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 £763m (2016: £1,307m) or to decrease fair values by up to £984m (2016: £1,445m) with
substantially all the potential effect impacting profit and loss rather than reserves.
270 Barclays PLC Annual Report 2017
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Assets and liabilities held at fair valueNotes to the financial statements
18 Fair value of financial instruments continued
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)
Significant
unobservable inputs
2017
Range
2016
Range
Min
Max
Min
Max
Unitsa
Derivative financial
instrumentsb
Interest rate
derivatives
Discounted cash flows
Comparable pricing
Option model
Credit derivatives
Equity derivatives
Discounted cash flows
Option model
Non-derivative financial
instruments
Non-asset backed loans
Corporate debt
Asset backed securities
Private equity investments
Discounted cash flow
Discounted cash flows
Comparable pricing
Comparable pricing
Discounted cash flows
Comparable pricing
EBITDA multiple
Inflation forwards
Credit spread
Price
Inflation volatility
IR – IR correlation
FX – IR correlation
Interest rate volatility
Credit spread
Equity volatility
Equity – equity correlation
Equity – FX correlation
Discounted margin
Loan spread
Price
Price
Price
Credit spread
Price
EBITDA multiple
1
45
–
35
(24)
(30)
5
122
3
(100)
(100)
(105)
30
–
–
–
140
–
8
3
1,320
100
201
99
24
353
190
92
100
45
301
596
50
100
100
190
99
13
(1)
25
–
35
(26)
(15)
9
133
1
(90)
(80)
(130)
30
–
–
–
145
–
5
8
1,669
100
207
98
81
295
274
150
100
25
331
1,495
99
100
121
190
270
17
%
bps
points
bps vol
%
%
bps vol
bps
%
%
%
bps
bps
points
points
points
bps
points
multiple
Notes
a 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 bps equals 1.5%.
b Certain derivative instruments are classified as Level 3 due to a significant unobservable credit spread input into the calculation of the Credit Valuation Adjustment for the
instruments. The range of significant unobservable credit spreads is between 31-596bps (2016: 65-874bps).
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.
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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 zero defaults since inception. While the overall loan spread range is from 30bps to 596bps (2016: 30bps to
1,495bps), the vast majority of spreads are concentrated towards the bottom end of this range, with 99% of the loan notional being valued with
spreads less than 200bps consistently for both years.
In general, a significant increase in loan spreads in isolation will result in a fair value decrease for a loan.
Loss given default
Loss given default represents the expected loss upon liquidation of the collateral as a percentage of the balance outstanding.
In general, a significant increase in the loss given default in isolation will translate to lower recovery and lower projected cash flows to pay to the
securitisation, resulting in a movement in fair value that is unfavourable for the holder of the securitised product.
EBITDA multiple
EBITDA multiple is the ratio of the valuation of the investment to the earnings before interest, taxes, depreciation and amortisation.
In general, a significant increase in the multiple will result in a fair value increase for an investment.
Fair value adjustments
Key balance sheet valuation adjustments are quantified below:
Exit price adjustments derived from market bid-offer spreads
Uncollateralised derivative funding
Derivative credit valuation adjustments
Derivative debit valuation adjustments
2017
£m
(391)
(45)
(103)
131
2016
£m
(475)
(82)
(237)
242
Exit price adjustments derived from market bid-offer spreads
The 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 reduced by £84m to £391m as a result of risk reduction and spread tightening.
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.
272 Barclays PLC Annual Report 2017
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Assets and liabilities held at fair valueNotes to the financial statements 18 Fair value of financial instruments continued
Uncollateralised
A fair value adjustment of £45m 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 Value Adjustment (FFVA). FFVA has decreased by £37m to £45m mainly
as a result of material trade unwinds.
FFVA is determined by calculating the net expected exposure at a counterparty level and applying a funding rate to the exposure that reflects the
market cost of funding. Barclays’ internal Treasury rates are used as an input to the calculation. The approach takes into account the probability of
default of each counterparty, as well as any mandatory break clauses.
FFVA incorporates a scaling factor which is an estimate of the extent to which the cost of funding is incorporated into observed traded levels.
On calibrating the scaling factor, it is with the assumption that Credit Valuation Adjustments (CVA) and Debit Valuation Adjustments (DVA) are
retained as valuation components incorporated into such levels. The effect of incorporating this scaling factor at 31 December 2017 was to reduce
FFVA by £138m (2016: £246m).
The approach outlined above has been in use since 2012 with no significant changes.
Barclays continues to monitor market practices and activity to ensure the approach to uncollateralised derivative valuation remains appropriate.
The above approach has been in use since 2012 with no significant changes.
Derivative credit and debit valuation adjustments
CVA and DVA are incorporated into derivative valuations to reflect the impact on fair value of counterparty credit risk and Barclays’ own credit
quality respectively. These adjustments are calculated for uncollateralised and partially collateralised derivatives across all asset classes. CVA and
DVA are calculated using estimates of exposure at default, probability of default and recovery rates, at a counterparty level. Counterparties include
(but 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 £50m (2016: £95m) increase in CVA.
Correlation between counterparty credit and underlying derivative risk factors, termed ‘wrong-way,’ or ‘right-way’ risk, is not systematically
incorporated into the CVA calculation but is adjusted where the underlying exposure is directly related to the counterparty.
CVA decreased by £134m to £103m, primarily due to reductions in the average maturity of the portfolio driven by trade unwinds. DVA reduced
by £111m to £131m, primarily as a result of Barclays’ credit spreads tightening and trade unwinds.
Portfolio exemptions
The Group uses the portfolio exemption in IFRS 13 Fair Value Measurement to measure the fair value of groups of financial assets and liabilities.
Instruments are measured using the price that would be received to sell a net long position (i.e. an asset) for a particular risk exposure or to
transfer a net short position (i.e. a liability) for a particular risk exposure in an orderly transaction between market participants at the balance sheet
date under current market conditions. Accordingly, the Group measures the fair value of the group of financial assets and liabilities consistently
with how market participants would price the net risk exposure at the measurement date.
Unrecognised gains as a result of the use of valuation models using unobservable inputs
For instruments where fair value cannot be evidenced by reference to observable market data, initial recognition occurs at the transaction price.
This is achieved by recognising a reserve for the difference between unobservable fair value and transaction price.
For financial instruments measured at fair value on an ongoing basis the reserve was £109m (2016: £179m). During 2017 there were additions
of £34m (2016: £29m) and amortisation and releases of £104m (2016: £37m).
Third party credit enhancements
Structured and brokered certificates of deposit issued by Barclays are insured up to $250,000 per depositor by the Federal Deposit Insurance
Corporation (FDIC) in the US. The FDIC is funded by premiums that Barclays and other banks pay for deposit insurance coverage. The carrying
value of these issued certificates of deposit that are designated under the IAS 39 fair value option includes this third party credit enhancement.
The on-balance sheet value of these brokered certificates of deposit amounted to £4,070m (2016: £3,905m).
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Barclays PLC Annual Report 2017 273
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 18 Fair value of financial instruments continued
Comparison of carrying amounts and fair values for assets and liabilities not held at fair value
The following table summarises the fair value of financial assets and liabilities measured at amortised cost on the Group’s balance sheet:
As at 31 December
Financial assets
Held to maturity
Loans and advances to banks
Loans and advances to customers:
– Home loans
– Credit cards, unsecured and other
retail lending
– Finance lease receivablesa
– Corporate loans
Reverse repurchase agreements and
other similar secured lending
Assets included in disposal groups
classified as held for saleb
Financial liabilities
Deposits from banks
Customer accounts:
– Current and demand accounts
– Savings accounts
– Other time deposits
Debt securities in issue
Repurchase agreements and other
similar secured borrowing
Subordinated liabilities
Liabilities included in disposal groups
classified as held for saleb
2017
2016
Carrying
amount
£m
Fair value
£m
Level 1
£m
Level 2
£m
Level 3
£m
Carrying
amount
£m
Fair value
£m
Level 1
£m
Level 2
£m
Level 3
£m
5,109
35,663
5,285
35,660
5,285
3,701
–
31,959
–
–
5,176
43,251
5,347
43,228
5,347
7,256
–
34,987
–
985
–
655
147,002 145,262
55,767
2,854
55,106
2,964
159,929 157,890
12,546
12,546
1,164
1,195
– 145,262 144,765 141,155
–
– 141,155
–
54,451
57,699
57,808
1,598
1,602
48,750 188,609 186,715
737
42
56,920
126,979
59,736
– 109,140
–
–
12,546
–
13,454
13,454
–
13,454
–
–
1,195
43,593
44,838
1,070
4,614
39,154
(37,723) (37,729)
(4,375) (33,354)
–
(48,214)
(48,212)
(5,256)
(42,895)
(61)
–
(145,950) (145,927) (145,927)
(134,339) (134,369) (134,369)
–
(148,832) (148,897) (62,750) (80,296)
(72,431)
(73,314) (74,752)
–
– (138,204) (138,197) (127,258)
– (133,344) (133,370) (120,471)
(48,853)
(196)
(5,851) (151,630) (151,632)
(76,971)
(75,932)
(2,321)
(10,921)
(12,891)
(96,240)
(74,712)
(18)
(8)
(6,539)
(2,063)
(40,338) (40,338)
(23,826) (25,084)
–
–
–
–
–
(40,338)
(25,084)
–
–
–
–
(19,760)
(23,383)
(19,760)
(24,547)
–
–
(19,760)
(24,547)
–
–
(51,775)
(51,788)
(22,264)
(28,998)
(526)
Notes
a The fair value hierarchy for finance lease receivables is not required as part of the standard.
b Disposal groups held for sale and measured at fair value less cost to sell are included in the fair value table.
The fair value is an estimate of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. As a wide range of valuation techniques are available, it may not be appropriate to directly compare
this fair value information to independent market sources or other financial institutions. Different valuation methodologies and assumptions can
have a significant impact on fair values which are based on unobservable inputs.
Financial assets
The carrying value of financial assets held at amortised cost is determined in accordance with the relevant accounting policy in Note 20.
Loans and advances to banks
The fair value of loans and advances, for the purpose of this disclosure, is derived from discounting expected cash flows in a way that reflects
the current market price for lending to issuers of similar credit quality. Where market data or credit information on the underlying borrowers is
unavailable, a number of proxy/extrapolation techniques are employed to determine the appropriate discount rates.
There is minimal difference between the fair value and carrying amount due to the short-term nature of the lending, i.e. predominantly overnight
deposit, and the high credit quality of counterparties.
Loans and advances to customers
The fair value of loans and advances to customers, for the purpose of this disclosure, is derived from discounting expected cash flows in a way
that reflects the current market price for lending to issuers of similar credit quality.
For retail lending, i.e. home loans and credit cards, tailored discounted cash flow models are predominantly used to estimate the fair value
of different product types. For example, for home loans different models are used to estimate fair values of tracker, offset and fixed rate
mortgage products.
Key inputs to these models are the differentials between historic and current product margins and estimated prepayment rates.
The discount of fair value to carrying amount for home loans has reduced to 1.2% (2016: 2.5%) due to changes in product mix across the loan
portfolio and movements in product margins.
The fair value of corporate loans is calculated by the use of discounted cash flow techniques where the gross loan values are discounted at a rate
of difference between contractual margins and hurdle rates or spreads where Barclays charges a margin over LIBOR depending on credit quality
and loss given default and years to maturity. The discount between the carrying and fair value has increased to 1.3% (2016: 1.0%).
274 Barclays PLC Annual Report 2017
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Assets and liabilities held at fair valueNotes to the financial statements
18 Fair value of financial instruments continued
Reverse repurchase agreements
The fair value of reverse repurchase agreements approximates carrying amount as these balances are generally short dated and fully collateralised.
Financial liabilities
The carrying value of financial liabilities held at amortised cost is determined in accordance with the accounting policy in Note 22.
Deposits from banks and customer accounts
In many cases, the fair value disclosed approximates carrying value because the instruments are short term in nature or have interest rates that
reprice frequently, such as customer accounts and other deposits and short-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. There were transfers of
£34,163m of deposits from banks and customers from Level 2 to Level 1 to reflect the market observability of these product types.
Debt securities in issue
Fair values of other debt securities in issue are based on quoted prices where available, or where the instruments are short dated, carrying amount
approximates fair value. The fair value difference has increased to 2.0% (2016: 1.4%).
Repurchase agreements
The fair value of repurchase agreements approximates carrying amounts as these balances are generally short dated.
Subordinated liabilities
Fair values for dated and undated convertible and non-convertible loan capital are based on quoted market rates for the issuer concerned or
issuers with similar terms and conditions.
19 Offsetting financial assets and financial liabilities
In accordance with IAS 32 Financial Instruments: Presentation, the Group reports financial assets and financial liabilities on a net basis
on the balance sheet only if there is a legally enforceable right to set-off the recognised amounts and there is intention to settle on a net basis,
or to realise the asset and settle the liability simultaneously. The following table shows the impact of netting arrangements on:
■■ all financial assets and liabilities that are reported net on the balance sheet
■■ all derivative financial instruments and reverse repurchase and repurchase agreements and other similar secured lending and borrowing
agreements that are subject to enforceable master netting arrangements or similar agreements, but do not qualify for balance sheet netting.
The table identifies the amounts that have been offset in the balance sheet and also those amounts that are covered by enforceable netting
arrangements (offsetting arrangements and financial collateral) but do not qualify for netting under the requirements of IAS 32 described above.
The ‘Net amounts’ presented on the next page are not intended to represent the Group’s actual exposure to credit risk, as a variety of credit
mitigation strategies are employed in addition to netting and collateral arrangements.
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Barclays PLC Annual Report 2017 275
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 19 Offsetting financial assets and financial liabilities continued
As at 31 December 2017
Derivative financial assets
Reverse repurchase agreements and other
similar secured lendinge
Total assets
Derivative financial liabilities
Repurchase agreements and other similar
secured borrowinge
Total liabilities
As at 31 December 2016
Derivative financial assets
Reverse repurchase agreements and other
similar secured lending
Total assets
Derivative financial liabilities
Repurchase agreements and other similar
secured borrowinge
Total liabilities
Amounts subject to enforceable netting arrangements
Effects of offsetting on-balance sheet
Related amounts not offseta
Gross
amounts
£m
256,881
Amounts
offsetb
£m
(21,638)
Net amounts
reported on
the balance
sheet
£m
235,243
Financial
instruments
£m
(184,265)
Financial
collateral
£m
(39,262)
Net
amount
£m
11,716
Amounts not
subject to
enforceable
netting
arrange-
mentsc
£m
2,426
Balance
sheet totald
£m
237,669
326,340
583,221
(253,030)
(223,495)
(245,133)
21,065
102,845
338,088
(231,965)
–
(184,265)
184,265
(102,380)
(141,642)
36,444
465
12,181
(11,256)
112,586
9,741
12,167
350,255
(6,380) (238,345)
(374,616)
(627,646)
223,495
244,560
(151,121)
(383,086)
–
184,265
151,073
187,517
(48)
(11,304)
(15,908) (167,029)
(22,288) (405,374)
353,078
(11,934)
341,144
(273,602)
(49,923)
17,619
5,482
346,626
257,430
610,508
(345,752)
(187,262)
(199,196)
10,962
70,168
411,312
(334,790)
–
(273,602)
273,602
(69,932)
(119,855)
47,383
236
17,855
(13,805)
6,448
11,930
(5,697)
76,616
423,242
(340,487)
(257,854)
(603,606)
187,262
198,224
(70,592)
(405,382)
–
273,602
68,897
116,280
(1,695)
(15,500)
(4,878)
(10,575)
(75,470)
(415,957)
Notes
a Financial collateral of £39,262m (2016: £49,923m) was received in respect of derivative assets, including £33,092m (2016: £41,641m) of cash collateral and £6,170m
(2016: £8,282m) of non-cash collateral. Financial collateral of £36,444m (2016: £47,383m) was placed in respect of derivative liabilities, including £32,575m (2016: £43,763m) of
cash collateral and £3,869m (2016: £3,620m) of non-cash collateral. The collateral amounts are limited to net balance sheet exposure so as to not include over-collateralisation.
Of the £33,092m (2016: £41,641m) cash collateral held, £19,351m (2016: £26,834m) was included in deposits from banks and £13,741m (2016: £14,807m), was included in
customer accounts. Of the £32,575m (2016: £43,763m) cash collateral placed, £14,493m (2016: £17,587m) was included in loans and advances to banks and £18,082m (2016:
£26,176m) was included in loans and advances to customers.
b Amounts offset for derivative financial assets include cash collateral netted of £2,393m (2016: £972m). Amounts offset for derivative financial liabilities include cash collateral
netted of £1,820m (2016: £nil). Settlements assets and liabilities have been offset amounting to £13,241m (2016: £10,486m). No other significant recognised financial assets
and liabilities were offset in the balance sheet. Therefore, the only balance sheet categories necessary for inclusion in the table are those shown above.
c This column includes contractual rights of set-off that are subject to uncertainty under the laws of the relevant jurisdiction.
d The balance sheet total is the sum of ‘Net amounts reported on the balance sheet’ that are subject to enforceable netting arrangements and ‘Amounts not subject to enforceable
netting arrangements’.
e Repurchase and reverse repurchase agreements include instruments at amortised cost and instruments designated at fair value through profit and loss. Reverse repurchase
agreements and other similar secured lending of £112,586m (2016: £76,616m) is split by fair value £100,040m (2016: £63,162m) and amortised cost £12,546m (2016: £13,454m).
Repurchase agreements and other similar secured borrowing of £167,029m (2016: £75,470m) is split by fair value £126,691m (2016: £55,710m) and amortised cost £40,338m
(2016: £19,760m).
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.
Repurchase and reverse repurchase agreements and other similar secured lending and borrowing
The ‘Amounts offset’ column identifies financial assets and liabilities that are subject to set-off under netting agreements, such as Global Master
Repurchase 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 Group are further explained in the Credit risk
mitigation section on page 128.
276 Barclays PLC Annual Report 2017
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Assets and liabilities held at fair valueNotes to the financial statements Notes to the financial statements
Financial instruments held at amortised cost
The notes included in this section focus on assets that are held at amortised cost arising from the Group’s retail and wholesale lending
including loans and advances, finance leases, repurchase and reverse repurchase agreements and similar secured lending. Details regarding
the Group’s liquidity and capital position can be found on pages 166 to 187.
20 Loans and advances to banks and customers
Accounting for financial instruments held at amortised cost
Loans and advances to customers and banks, customer accounts, debt securities and most financial liabilities, are held at amortised cost.
That is, the initial fair value (which is normally the amount advanced or borrowed) is adjusted for repayments and the amortisation of coupon,
fees and expenses to represent the effective interest rate of the asset or liability. 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.
In accordance with IAS 39, where the Group no longer intends to trade in financial assets it may transfer them out of the held for trading
classification and measure them at amortised cost if they meet the definition of a loan. The initial value used for the purposes of establishing
amortised cost is fair value on the date of the transfer.
As at 31 December
Gross loans and advances to banks
Less: allowance for impairment
Loans and advances to banks
Gross loans and advances to customers
Less: allowance for impairment
Loans and advances to customers
21 Finance leases
2017
£m
35,663
–
35,663
2016
£m
43,251
–
43,251
370,204
(4,652)
365,552
397,404
(4,620)
392,784
Accounting for finance leases
The Group applies IAS 17 Leases in accounting for finance leases, both where it is the lessor or the lessee. A finance lease is a lease which
confers substantially all the risks and rewards of the leased assets on the lessee. Where the Group is the lessor, the leased asset is not held on
the balance sheet; instead a finance lease receivable is recognised representing the minimum lease payments receivable under the terms of the
lease, discounted at the rate of interest implicit in the lease. Where the Group is the lessee, the leased asset is recognised in property, plant and
equipment and a finance lease liability is recognised, representing the minimum lease payments payable under the lease, discounted at the rate
of interest implicit in the lease.
Interest income or expense is recognised in interest receivable or payable, allocated to accounting periods to reflect a constant periodic rate of
return.
Finance lease receivables
Finance lease receivables are included within loans and advances to customers. The Group specialises in the provision of leasing and other asset
finance facilities across a broad range of asset types to business customers.
Gross
investment
in finance
lease
receivables
£m
1,130
1,750
284
3,164
2017
2016
Present
value of
minimum
lease
payments
receivable
£m
1,039
1,615
252
2,906
Un-
guaranteed
residual
values
£m
69
156
21
246
Gross
investment
in finance
lease
receivables
£m
646
986
73
1,705
Future
finance
income
£m
(91)
(135)
(32)
(258)
Present
value of
minimum
lease
payments
receivable
£m
609
929
69
1,607
Un-
guaranteed
residual
values
£m
60
132
19
211
Future
finance
income
£m
(37)
(57)
(4)
(98)
Not more than one year
Over one year but not more than five years
Over five years
Total
Following a review in 2017, a portfolio of assets within loans and advances to customers has been identified as finance leases. This has resulted in
an increase in the finance lease receivables balance of £1,537m in 2017 as reflected in the table above.
The impairment allowance for uncollectable finance lease receivables amounted to £57m (2016: £6m).
Finance lease liabilities
The Group leases items of property, plant and equipment on terms that meet the definition of finance leases. Finance lease liabilities are included
within Note 26.
As at 31 December 2017, the total future minimum payments under finance leases were £20m (2016: £15m). The carrying amount of assets held
under finance leases was £9m (2016: £15m).
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Barclays PLC Annual Report 2017 277
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 22 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 Group provides a loan
or cash collateral in exchange for the transfer of collateral, generally in the form of marketable securities subject to an agreement to transfer the
securities back at a fixed price in the future. Repurchase agreements are where the Group obtains such loans or cash collateral, in exchange for
the transfer of collateral.
Accounting for reverse repurchase and repurchase agreements including other similar lending and borrowing
The Group purchases (a reverse repurchase agreement) or borrows securities subject to a commitment to resell or return them. The securities
are not included in the balance sheet as the Group does not acquire the risks and rewards of ownership. Consideration paid (or cash collateral
provided) is accounted for as a loan asset at amortised cost, unless it is designated at fair value through profit and loss.
The Group may also sell (a repurchase agreement) or lend securities subject to a commitment to repurchase or redeem them. The securities
are retained on the balance sheet as the Group retains substantially all the risks and rewards of ownership. Consideration received (or cash
collateral provided) is accounted for as a financial liability at amortised cost, unless it is designated at fair value through profit and loss.
As at 31 December
Assets
Banks
Customers
Reverse repurchase agreements and other similar secured lending at amortised cost
Liabilities
Banks
Customers
Repurchase agreements and other similar secured borrowing at amortised cost
2017
£m
2016
£m
7,374
5,172
12,546
2,769
10,685
13,454
30,105
10,233
40,338
12,820
6,940
19,760
278 Barclays PLC Annual Report 2017
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Financial instruments held at amortised costNotes to the financial statements Notes to the financial statements
Non-current assets and other investments
The notes included in this section focus on the Group’s non-current tangible and intangible assets and property, plant and equipment, which
provide long-term future economic benefits.
23 Property, plant and equipment
Accounting for property, plant and equipment
The Group applies IAS 16 Property Plant and Equipment and IAS 40 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 the enhancement to the asset.
Depreciation is provided on the depreciable amount of items of property, plant and equipment on a straight-line basis over their estimated
useful economic lives. Depreciation rates, methods and the residual values underlying the calculation of depreciation of items of property, plant
and equipment are kept under review to take account of any change in circumstances. The Group uses the following annual rates in calculating
depreciation:
Annual rates in calculating depreciation
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
Depreciation rate
Not depreciated
2-3.3%
Over the remaining life of the lease
6-10%
6-10%
17-33%
9-20%
Where leasehold property has a remaining useful life of less than 17 years, costs of adaptation and installed equipment are depreciated over the
remaining life of the lease.
Investment property
The Group initially recognises investment property at cost, and subsequently at fair value at each balance sheet date, reflecting market
conditions at the reporting date. Gains and losses on remeasurement are included in the income statement.
Cost
As at 1 January 2017
Additions
Disposals
Change in fair value of investment properties
Exchange and other movements
As at 31 December 2017
Accumulated depreciation and impairment
As at 1 January 2017
Depreciation charge
Impairment
Disposals
Exchange and other movements
As at 31 December 2017
Net book value
Cost
As at 1 January 2016
Additions
Disposals
Change in fair value of investment properties
Exchange and other movementsa
As at 31 December 2016
Accumulated depreciation and impairment
As at 1 January 2016
Depreciation charge
Disposals
Exchange and other movementsa
As at 31 December 2016
Net book value
Investment
property
£m
Property
£m
Equipment
£m
Leased
assets
£m
81
114
(69)
(5)
(5)
116
–
–
–
–
–
116
140
–
(6)
–
(53)
81
–
–
–
–
–
81
3,429
220
(18)
–
(138)
3,493
(1,483)
(171)
(28)
–
14
(1,668)
1,825
3,919
167
(761)
–
104
3,429
(1,697)
(186)
635
(235)
(1,483)
1,946
3,840
299
(1.082)
–
(309)
2,748
(3,043)
(275)
–
972
229
(2,117)
631
4,259
370
(631)
–
(158)
3,840
(3,177)
(327)
405
56
(3,043)
797
10
–
(1)
–
–
9
(9)
–
–
–
–
(9)
–
62
–
–
–
(52)
10
(38)
–
–
29
(9)
1
Total
£m
7,360
633
(1,170)
(5)
(452)
6,366
–
(4,535)
(446)
(28)
972
243
(3,794)
2,572
8,380
537
(1,398)
–
(159)
7,360
–
(4,912)
(513)
1,040
(150)
(4,535)
2,825
Notes
a Includes property, plant and equipment relating to BAGL of £627m (cost of £1,066m less accumulated depreciation of £439m) which was reclassified to held for sale.
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23 Property, plant and equipment continued
Property rentals of £2m (2016: £7m) and £8m (2016: £6m) have been included in net investment income and other income respectively.
The fair value of investment property is determined by reference to current market prices for similar properties, adjusted as necessary for condition
and location, or by reference to recent transactions updated to reflect current economic conditions. Discounted cash flow techniques may be
employed to calculate fair value where there have been no recent transactions, using current external market inputs such as market rents and
interest rates. Valuations are carried out by management with the support of appropriately qualified independent valuers. Refer to Note 18 for
further details.
24 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 and IAS 36 Impairment of Assets.
Goodwill arising on the acquisition of subsidiaries represents the excess of the fair value of the purchase consideration over the fair value
of the Group’s share of the assets acquired and the liabilities and contingent liabilities assumed on the date of the acquisition.
Goodwill is reviewed annually for impairment, or more frequently when there are indications that impairment may have occurred. The test
involves comparing the carrying value of goodwill with the present value of the pre-tax cash flows, discounted at a rate of interest that reflects
the inherent risks, of the cash generating unit (CGU) to which the goodwill relates, or the CGU’s fair value if this is higher.
Intangible assets
Intangible assets other than goodwill are accounted for in accordance with IAS 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.
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
Goodwill
Internally generated softwarea
Other software
Customer lists
Licences and other
Amortisation period
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.
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.
280 Barclays PLC Annual Report 2017
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Non-current assets and other investmentsNotes to the financial statements 24 Goodwill and intangible assets continued
2017
Cost
As at 1 January 2017
Additions and disposals
Exchange and other movements
As at 31 December 2017
Accumulated amortisation and impairment
As at 1 January 2017
Disposals
Amortisation charge
Impairment charge
Exchange and other movements
As at 31 December 2017
Net book value
2016
Cost
As at 1 January 2016
Additions and disposals
Exchange and other movements
As at 31 December 2016
Accumulated amortisation and impairment
As at 1 January 2016
Disposals
Amortisation charge
Impairment charge
Exchange and other movements
As at 31 December 2016
Net book value
Internally
generated
software
£m
Goodwill
£m
Other
software
£m
Customer
lists
£m
Licences
and other
£m
Total
£m
4,847
–
(88)
4,759
(930)
–
–
–
70
(860)
3,899
5,603
(77)
(679)
4,847
(998)
77
–
–
(9)
(930)
3,917
4,927
662
(88)
5,501
(1,864)
207
(546)
(52)
60
(2,195)
3,306
4,112
955
(140)
4,927
(1,634)
46
(476)
(72)
272
(1,864)
3,063
204
16
207
427
(143)
10
(32)
–
(148)
(313)
114
542
2
(340)
204
(212)
1
(36)
(1)
105
(143)
61
1,708
(15)
(146)
1,547
(1,231)
15
(101)
–
108
(1,209)
338
1,665
59
(16)
1,708
(1,081)
14
(129)
–
(35)
(1,231)
477
551
13
(45)
519
(343)
24
(36)
–
28
(327)
192
703
78
(230)
551
(478)
12
(29)
(1)
153
(343)
208
12,237
676
(160)
12,753
(4,511)
256
(715)
(52)
118
(4,904)
7,849
12,625
1,017
(1,405)
12,237
(4,403)
150
(670)
(74)
486
(4,511)
7,726
2017
£m
3,574
325
3,899
2016
£m
3,556
361
3,917
Goodwill
Goodwill is allocated to business operations according to business segments as follows:
Barclays UK
Barclays International
Total net book value of goodwill
Goodwill
Testing goodwill for impairment involves a significant amount of judgement. This includes the identification of independent CGUs and the
allocation of goodwill to these units based on which units are expected to benefit from the acquisition. The allocation is reviewed following
business reorganisations. Cash flow projections necessarily take into account changes in the market in which a business operates including
the level of growth, competitive activity, and the impacts of regulatory change. Determining both the expected pre-tax cash flows and the risk
adjusted interest rate appropriate to the operating unit requires the exercise of judgement. The estimation of pre-tax cash flows is sensitive
to the periods for which detailed forecasts are available and to assumptions regarding long-term sustainable cash flows.
Other intangible assets
Determining the estimated useful lives of intangible assets (such as those arising from contractual relationships) requires an analysis of
circumstances. The assessment of whether an asset is exhibiting indicators of impairment as well as the calculation of impairment, which requires
the 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.
Impairment testing of goodwill
During 2017, the Group recognised an impairment charge of £nil (2016: £nil).
Key assumptions
The key assumptions used for impairment testing are set out below for each significant goodwill balance. Other goodwill of £769m (2016: £787m)
was allocated to multiple CGUs which are not considered individually significant.
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Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 24 Goodwill and intangible assets continued
Barclays UK
Goodwill relating to Woolwich in Personal Banking and Business Banking was £3,130m (2016: £3,130m) of the total Barclays UK balance. The
carrying value of the CGU has been determined by using net asset value. The recoverable amount of the CGU, calculated as value in use, has been
determined using cash flow predictions based on financial budgets approved by management and covering a five-year period, with a terminal
growth rate of 2.0% (2016: 2.0%) applied thereafter. The forecast cash flows have been discounted at a pre-tax rate of 13.9% (2016: 14.6%).
Based on these assumptions, the recoverable amount exceeded the carrying amount including goodwill by £5,262m (2016: £4,130m). A one
percentage point change in the discount rate or terminal growth rate would increase or decrease the recoverable amount by £1,128m (2016:
£988m) and £734m (2016: £615m) respectively. A reduction in the forecast cash flows of 10% per annum would reduce the recoverable amount
by £1,409m (2016: £1,293m).
The increase in headroom in 2017 reflects changes in discount rate and future cash flow projections.
25 Operating leases
Accounting for operating leases
The Group applies IAS 17 Leases, for operating leases. An operating lease is a lease where substantially all of the risks and rewards of the leased
assets remain with the lessor. Where the Group is the lessor, lease income is recognised on a straight-line basis over the period of the lease
unless another systematic basis is more appropriate. The Group holds the leased assets on-balance sheet within property, plant and equipment.
Where the Group is the lessee, rentals payable are recognised as an expense in the income statement on a straight-line basis over the lease
term unless another systematic basis is more appropriate.
Operating lease receivables
The Group acts as lessor, whereby items of plant and equipment are purchased and then leased to third parties under arrangements qualifying
as operating leases. The future minimum lease payments expected to be received under non-cancellable operating leases was £nil (2016: £nil).
Operating lease commitments
The Group leases various offices, branches and other premises under non-cancellable operating lease arrangements. With such operating lease
arrangements, the asset is kept on the lessor’s balance sheet and the Group reports the future minimum lease payments as an expense over the
lease term. The leases have various terms, escalation and renewal rights. There are no contingent rents payable.
Operating lease rentals of £342m (2016: £560m) have been included in administration and general expenses.
The future minimum lease payments by the Group under non-cancellable operating leases are as follows:
Not more than one year
Over one year but not more than five years
Over five years
Total
2017
2016
Property
£m
332
844
1,337
2,513
Equipment
£m
2
21
–
23
Property
£m
364
974
1,520
2,858
Equipment
£m
–
23
–
23
Total future minimum sublease payments to be received under non-cancellable subleases was £53m (2016: £2m).
282 Barclays PLC Annual Report 2017
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Non-current assets and other investmentsNotes to the financial statements Notes to the financial statements
Accruals, provisions, contingent liabilities and
legal proceedings
The notes included in this section focus on the Group’s accruals, provisions and contingent liabilities. Provisions are recognised for present
obligations arising as consequences of past events where it is probable that a transfer of economic benefit will be necessary to settle the
obligation, and it can be reliably estimated. Contingent liabilities reflect potential liabilities that are not recognised on the balance sheet.
26 Accruals, deferred income and other liabilities
Accruals and deferred income
Other creditors
Obligations under finance leases (refer to Note 21)
Insurance contract liabilities, including unit-linked liabilities
Accruals, deferred income and other liabilities
27 Provisions
2017
£m
3,951
4,563
20
31
8,565
2016
£m
4,422
4,382
15
52
8,871
Accounting for provisions
The 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 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. Provision is made for undrawn loan commitments if it is probable that the facility will be drawn and result in the recognition of an asset
at an amount less than the amount advanced.
Critical accounting estimates and judgements
The financial reporting of provisions involves a significant degree of judgement and is complex. Identifying whether a present obligation exists
and estimating the probability, timing, nature and quantum of the outflows that may arise from past events requires judgements to be made
based on the specific facts and circumstances relating to individual events and often requires specialist professional advice. When matters are
at an early stage, accounting judgements and estimates can be difficult because of the high degree of uncertainty involved. Management
continues to monitor matters as they develop to re-evaluate on an ongoing basis whether provisions should be recognised, however there can
remain a wide range of possible outcomes and uncertainties, particularly in relation to legal, competition and regulatory matters, and as a result
it is often not practicable to make meaningful estimates even when matters are at a more advanced stage.
The complexity of such matters often requires the input of specialist professional advice in making assessments to produce estimates.
Customer redress and legal, competition and regulatory matters are areas where a higher degree of professional judgement is required. The
amount that is recognised as a provision can also be very sensitive to the assumptions made in calculating it. This gives rise to a large range of
potential outcomes which require judgement in determining an appropriate provision level. See below for information on payment protection
redress and Note 29 for more detail of legal, competition and regulatory matters.
As at 1 January 2017
Additions
Amounts utilised
Unused amounts reversed
Exchange and other movements
As at 31 December 2017
Onerous
contracts
£m
385
81
Redundancy
and
restructuring
£m
206
163
(210)
(33)
2
225
(124)
(85)
(1)
159
Undrawn
contractually
committed
facilities and
guarantees
£m
67
73
(1)
(60)
–
79
Customer redress
Payment
Protection
Insurance
£m
1,979
709
(1,094)
–
12
1,606
Other
customer
redress
£m
712
369
(345)
(83)
(14)
639
Legal,
competition
and
regulatory
matters
£m
455
398
(341)
(55)
(22)
435
Sundry
provisions
£m
330
182
(99)
(30)
17
400
Total
£m
4,134
1,975
(2,214)
(346)
(6)
3,543
Provisions expected to be recovered or settled within no more than 12 months after 31 December 2017 were £2,394m (2016: £2,045m).
Onerous contracts
Onerous contract provisions comprise an estimate of the costs involved with fulfilling the terms and conditions of contracts net of any expected
benefits to be received.
Redundancy and restructuring
These provisions comprise the estimated cost of restructuring, including redundancy costs where an obligation exists. Additions made during
the year relate to formal restructuring plans and have either been utilised, or reversed, where total costs are now expected to be lower than the
original provision amount.
Undrawn contractually committed facilities and guarantees
Provisions are made if it is probable that a facility will be drawn and the resulting asset is expected to have a realisable value that is less than the
amount advanced.
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27 Provisions continued
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 Barclays’ business activities. Provisions for other customer redress include
£211m (2016: £264m) in respect of historic pricing practices associated with Foreign Exchange transactions for certain customers between 2005
and 2012 and smaller provisions across the retail and corporate businesses which are likely to be utilised in the next 12 months. Included within
provisions for UK customer redress on the face of the consolidated income statement is PPI and material additions in respect of historic pricing
practices associated with Foreign Exchange transactions for certain customers between 2005 and 2012 and Packaged Bank Accounts.
Legal, competition and regulatory matters
The 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 29.
Sundry provisions
This category includes provisions that do not fit into any of the other categories, such as fraud losses and dilapidation provisions.
Payment Protection Insurance Redress
As at 31 December 2017, Barclays had recognised cumulative provisions totalling £9.2bn (2016: £8.4bn) against the cost of Payment Protection
Insurance (PPI) redress and associated processing costs with utilisation of £7.6bn (2016: £6.4bn), leaving a residual provision of £1.6bn
(2016: £2.0bn).
Through to 31 December 2017, 2.1m (2016: 1.8m) customer initiated claimsa had been received and processed. The volume of claims received
during 2017 increased 16% from 2016. This increase may have been impacted by a FCA advertising campaign launched in H2 2017.
The current provision reflects the estimated costs of PPI redress primarily relating to customer initiated complaints and ongoing remediation
programmes, based on information at year end. This also includes liabilities managed by third parties arising from portfolios previously sold
where Barclays remains liable, based on information at year end.
As at 31 December 2017, the provision of £1.6bn represents Barclays’ best estimate of expected PPI redress reflecting the complaints deadline
implemented by the FCA of 29 August 2019. However, it is possible the eventual outcome may differ from the current estimate. We will continue
to review the adequacy of provision level in respect of the future impacts.
The PPI provision is calculated using a number of key assumptions which continue to involve significant modelling and management judgement:
■■ Customer initiated claim volumes – claims received but not yet processed plus an estimate of future claims initiated by customers, where
the volume is anticipated to cease after the PPI deadline.
■■ Average claim redress – the expected average payment to customers for upheld claims based on the type and age of the policy/policies.
■■ Processing cost per claim – the cost to Barclays of assessing and processing each valid claim.
These assumptions remain subjective, mainly due to the uncertainty associated with future claims levels, which include complaints driven by
CMC activity and the FCA advertising campaign.
The following table details actual data through to 31 December 2017, key forecast assumptions used in the provision calculation and a sensitivity
analysis illustrating the impact on the provision if the future expected assumptions prove too high or too low.
Assumption
Customer initiated claims received and processed (thousands)a
Average uphold rate per claim (%)b
Average redress per valid claim (£)c
Cumulative
actual to
31.12.17
2,130
87
2,036
Future
expected
570
87
1,989
Sensitivity
analysis
increase/
decrease in
provision
50k=£104m
1%=£11m
£100=£50m
Notes
a Total claims received directly by Barclays to date, including those received via claims management companies but excluding those for which no PPI policy exists and excluding
responses to proactive mailing. The sensitivity analysis has been calculated to show the impact a 50,000 increase or decrease in the number of customer initiated claims would
have on the provision level.
b Average uphold rate per customer initiated claims received directly by Barclays and proactive mailings, excluding those for which no PPI policy exists. The sensitivity analysis has
been calculated to show the impact a 1% change in the average uphold rate per claim would have on the provision level.
c Average redress stated on a per policy basis for future customer initiated complaints received directly by Barclays. The sensitivity analysis has been calculated to show the impact
a £100 increase or decrease in the average redress per claim would have on the provision level.
284 Barclays PLC Annual Report 2017
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Accruals, provisions, contingent liabilities and legal proceedingsNotes to the financial statements 28 Contingent liabilities and commitments
Accounting for contingent liabilities
Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events, and present obligations where
the transfer of economic resources is uncertain or cannot be reliably measured. Contingent liabilities are not recognised on the balance sheet
but are disclosed unless the outflow of economic resources is remote.
The following table summarises the nominal principal amount of contingent liabilities and commitments which are not recorded on-balance sheet:
Guarantees and letters of credit pledged as collateral security
Performance guarantees, acceptances and endorsements
Total contingent liabilities
Documentary credits and other short-term trade related transactions
Standby facilities, credit lines and other commitments
Total commitments
2017
£m
14,275
4,737
19,012
2016
£m
15,303
4,636
19,939
812
314,761
315,573
1,005
302,681
303,686
The Financial Services Compensation Scheme
The Financial Services Compensation Scheme (the FSCS) is the UK’s government-backed compensation scheme for customers of authorised
institutions that are unable to pay claims. The compensation paid out to customers is funded through loan facilities provided by HM Treasury to
the FSCS which at 31 December 2017 stood at approximately £4.7bn (2016: £15.7bn). During 2017, the HM Treasury loan facility has reduced by
the Bradford and Bingley repayment of £10.9bn, following the sale from UK Asset Resolution. Barclays’ liability is restricted to the proportionate
outstanding amount that the FSCS is unable to repay to Treasury. The FSCS levy on UK licensed deposit-taking institutions has been recognised in
2017. Barclays has included an accrual of £2.7m in other liabilities as at 31 December 2017 (2016: £55m) in respect of the Barclays portion of the
Interest Levy.
Further details on contingent liabilities relating to legal and competition and regulatory matters can be found in Note 29.
29 Legal, competition and regulatory matters
Barclays PLC, Barclays Bank PLC and the Group face legal, competition and regulatory challenges, many of which are beyond our control.
The extent of the impact on Barclays PLC, Barclays Bank PLC and the Group of these matters cannot always be predicted but may materially impact
our operations, financial results, condition and prospects. Matters arising from a set of similar circumstances can give rise to either a contingent
liability or a provision, or both, depending on the relevant facts and circumstances. The 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 27. The Group
has not disclosed an estimate of the potential financial effect on the Group of contingent liabilities where it is not currently practicable to do so.
Investigations into certain advisory services agreements and other matters and civil action
The UK Serious Fraud Office (SFO), the Financial Conduct Authority (FCA), the US Department of Justice (DOJ) and the US Securities and Exchange
Commission (SEC) have been conducting investigations into certain advisory services agreements entered into by Barclays Bank PLC.
Background Information
Barclays Bank PLC entered into two advisory services agreements with Qatar Holding LLC (Qatar Holding) in June and October 2008 (the
Agreements). The FCA commenced an investigation into whether the Agreements may have related to Barclays PLC’s capital raisings in June and
November 2008 (the Capital Raisings). The existence of the June 2008 advisory services agreement was disclosed, but the entry into the advisory
services agreement in October 2008 and the fees payable under the Agreements, which amounted to a total of £322m payable over a period
of five years, were not disclosed in the announcements or public documents relating to the Capital Raisings. The SFO also commenced an
investigation into the Agreements and into a $3bn loan (the Loan) provided by Barclays Bank PLC in November 2008 to the State of Qatar.
SFO Proceedings
In June 2017, the SFO charged Barclays PLC with two offences of conspiring with certain former senior officers and employees of Barclays to
commit fraud by false representations relating to the Agreements and one offence of unlawful financial assistance contrary to section 151 of the
Companies Act 1985 in relation to the Loan. In February 2018, the SFO also charged Barclays Bank PLC with the same offence in respect of the
Loan. Barclays PLC and Barclays Bank PLC intend to defend the respective charges brought against them (the Charges). The trial of the Charges
has been scheduled to begin in January 2019.
FCA Proceedings and other investigations
In September 2013, the FCA issued warning notices (the Notices) finding that, while Barclays PLC and Barclays Bank PLC believed at the time
of the execution of the Agreements that there should be at least some unspecified and undetermined value to be derived from them, the primary
purpose of the Agreements was not to obtain advisory services but to make additional payments, which would not be disclosed, for the Qatari
participation in the Capital Raisings. The Notices concluded that Barclays PLC and Barclays Bank PLC were in breach of certain disclosure-related
listing rules and Barclays PLC was also in breach of Listing Principle 3 (the requirement to act with integrity towards holders and potential holders
of the Company’s shares). In this regard, the FCA considers that Barclays PLC and Barclays Bank PLC acted recklessly. The financial penalty
provided in the Notices against the Group is £50m. Barclays PLC and Barclays Bank PLC continue to contest the findings. The FCA action has
been stayed due to the SFO proceedings.
In addition, the DOJ and the SEC have been conducting investigations relating to the Agreements.
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legal proceedings
29 Legal, competition and regulatory matters continued
Civil Action
In January 2016, PCP Capital Partners LLP and PCP International Finance Limited (PCP) served a claim on Barclays Bank PLC seeking damages of
£721.4m plus interest and costs 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.
Following amendment of their claim in November 2017, PCP now seeks damages of up to £1,477m (plus interest from November 2017) and costs.
Barclays Bank PLC is defending the claim and trial is scheduled to commence in October 2019.
Claimed Amounts/Financial Impact
It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might
have upon the Group’s operating results, cash flows or financial position in any particular period. PCP has made a claim against Barclays Bank PLC
for damages of up to £1,477m plus interest and costs. This amount does not necessarily reflect Barclays Bank PLC’s potential financial exposure if
a ruling were to be made against it in that matter.
Investigations into certain business relationships
In 2012, the DOJ and SEC commenced investigations in relation to whether certain relationships with third parties who assist Barclays PLC to win
or retain business are compliant with the US Foreign Corrupt Practices Act. Various regulators in other jurisdictions are also being briefed on the
investigations. Separately, the Group is cooperating with the DOJ and SEC in relation to an investigation into certain of its hiring practices in Asia
and elsewhere and is keeping certain regulators in other jurisdictions informed.
Claimed Amounts/Financial Impact
It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might
have upon the Group’s operating results, cash flows or financial position in any particular period.
Investigations relating to whistleblowing systems and controls
The FCA and Prudential Regulation Authority (PRA) are conducting investigations in relation to the Group Chief Executive Officer (CEO)
and Barclays Bank PLC in connection with certain whistleblowing issues.
Background Information
In April 2017, the FCA and PRA commenced investigations into the CEO as to his individual conduct and senior manager responsibilities relating
to Barclays’ whistleblowing programme and to his attempt in 2016 to identify the author of a letter that was treated by Barclays Bank PLC as
a whistleblow; and Barclays Bank PLC, as to its responsibilities relating to the attempt by the CEO to identify the author of the letter, as well
as Barclays’ systems and controls and culture relating to whistleblowing.
The attempt to identify the author of the letter first came to the attention of the Barclays PLC Board (Board) early in 2017. The Board instructed
an external law firm to conduct a focussed investigation into the matter and also notified the FCA and PRA and other relevant authorities.
The investigation found, and the Board concluded, that the CEO honestly, but mistakenly, believed that it was permissible to identify the author.
However, the Board concluded that the CEO made an error in becoming involved with, and not applying appropriate governance around the
matter, and in taking action to attempt to identify the author of the letter.
Barclays and the CEO are cooperating fully with the FCA and PRA investigations. Barclays is also providing information to, and cooperating with,
authorities in the US with respect to these matters.
Claimed Amounts/Financial Impact
It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might
have upon the Group’s operating results, cash flows or financial position in any particular period.
Investigations relating to retail structured deposits and capital protected structured notes
The FCA is conducting enforcement investigations in relation to certain structured deposits and notes provided by Barclays in the past.
Background Information
In 2015, the FCA commenced an enforcement investigation relating to the design, manufacture and sale of structured deposits by Barclays from
November 2009. The investigation is at an advanced stage. In January 2018, the FCA also commenced an enforcement investigation relating to
the design, manufacture and sale of capital protected structured notes by Barclays from June 2008 to July 2014.
Claimed Amounts/Financial Impact
It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might
have upon the Group’s operating results, cash flows or financial position in any particular period.
Investigation into collections and recoveries relating to unsecured lending
In February 2018, the FCA commenced an enforcement investigation in relation to whether or not Barclays Bank PLC, from July 2015, implemented
effective systems and controls with respect to collections and recoveries and whether or not it paid due consideration to the interests of
customers in default and arrears.
Claimed Amounts/Financial Impact
It is not currently practicable to provide an estimate of the financial impact of the investigation on the Group or what effect that it might have
upon the Group’s operating results, cash flows or financial position in any particular period.
286 Barclays PLC Annual Report 2017
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Notes to the financial statements 29 Legal, competition and regulatory matters continued
Investigation into Americas Wealth & Investment Management advisory business
The SEC has carried out an investigation into certain practices in Barclays’ former Wealth Americas investment advisory business relating to
certain due diligence failures, fee and billing practices and mutual fund fee waivers and related disclosures. In May 2017, the SEC announced
a settlement pursuant to which Barclays Capital Inc. (BCI) agreed to resolve this matter for USD97m, consisting of a penalty of USD30m paid
to the SEC and USD67m paid to the clients, in remediation and disgorgement.
Investigation into suspected money laundering related to foreign exchange transactions in South African operation
Absa Bank Limited, a subsidiary of Barclays Africa Group Limited, which was a subsidiary of Barclays at the relevant time, identified potentially
fraudulent activity by certain of its customers using advance payments for imports in 2014 and 2015 to effect foreign exchange transfers from
South Africa to beneficiary accounts located in East Asia, UK, Europe and the US. As a result, the Group conducted a review of relevant activity,
processes, systems and controls. The Group is continuing to provide information to relevant authorities as part of the Group’s ongoing
cooperation.
Claimed Amounts/Financial Impact
It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might
have upon the Group’s operating results, cash flows or financial position in any particular period.
Investigations into LIBOR and other benchmarks
Regulators and law enforcement agencies, including certain competition authorities, from a number of governments have been conducting
investigations relating to Barclays Bank PLC’s involvement in manipulating certain financial benchmarks, such as LIBOR and EURIBOR.
Background Information
In 2012, Barclays Bank PLC announced that it had reached settlements with the Financial Services Authority (FSA) (as predecessor to the FCA),
the US Commodity Futures Trading Commission (CFTC) and the DOJ in relation to their investigations concerning certain benchmark interest
rate submissions, and Barclays Bank PLC paid total penalties of £290m. The settlement with the DOJ was made by entry into a Non-Prosecution
Agreement (NPA) which has now expired. Barclays PLC, Barclays Bank PLC and BCI have reached settlements with certain other regulators and
law enforcement agencies. Barclays Bank PLC continues to respond to requests for information from the SFO in relation to its ongoing LIBOR
investigation, including in respect of Barclays Bank PLC. The investigation by the prosecutor’s office in Trani, Italy also remains pending.
Claimed Amounts/Financial Impact
It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might
have upon the Group’s operating results, cash flows or financial position in any particular period.
LIBOR and other benchmark civil actions
A number of individuals and corporates in a range of jurisdictions have threatened or brought civil actions against the Group and other banks
in relation to LIBOR and/or other benchmarks.
Background Information
Following settlement of the investigations referred to above in ‘Investigations into LIBOR and other Benchmarks’ various individuals and
corporates in a range of jurisdictions have threatened or brought civil actions against the Group. While certain cases have been dismissed or
settled subject to approval from the court (and in the case of class actions, the right of class members to opt out of the settlement and to seek
to file their own claims), other actions remain pending and their ultimate impact is unclear.
USD LIBOR Cases in MDL Court
The majority of the USD LIBOR cases, which have been filed in various US jurisdictions, have been consolidated for pre-trial purposes before
a single judge in the US District Court in the Southern District of New York (SDNY) (MDL Court).
The complaints are substantially similar and allege, amongst other things, that Barclays Bank PLC and the other banks 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) and various state laws by manipulating USD LIBOR rates.
The proposed class actions purported to be brought on behalf of (amongst others) plaintiffs that (i) engaged in USD LIBOR-linked over-the-
counter transactions (OTC Class); (ii) purchased USD LIBOR-linked financial instruments on an exchange (Exchange-Based Class); (iii) purchased
USD LIBOR-linked debt securities (Debt Securities Class); (iv) purchased adjustable-rate mortgages linked to USD LIBOR (Homeowner Class); or
(v) issued loans linked to USD LIBOR (Lender Class).
The lawsuits seek unspecified damages with the exception of five lawsuits, in which the plaintiffs are seeking a combined total in excess of
$1.25bn in actual damages against all defendants, including Barclays Bank PLC, plus punitive damages. Some of the lawsuits also seek trebling
of damages under the Antitrust Act and RICO.
Between 2013 and 2016, the MDL Court issued a series of decisions effectively dismissing the majority of claims, including antitrust claims,
against Barclays Bank PLC and other foreign defendants in both class actions and individual actions. In May 2016, the appeal court reversed the
MDL Court’s decision and remanded the antitrust claims to the MDL Court for further consideration. Following further consideration, the MDL
Court dismissed the majority of antitrust claims against foreign defendants, including Barclays Bank PLC, for lack of personal jurisdiction. Plaintiffs
in a number of individual actions and class actions are appealing the MDL Court’s personal jurisdiction ruling.
In 2014, the MDL Court granted preliminary approval for the settlement of the Exchange-Based Class claims for $20m, of which $5m was paid in
October 2014 and the remaining $15m in September 2017. The settlement remains subject to court approval and the right of class members to
opt out of the settlement and to seek to file their own claims.
In 2015, the OTC Class claims were settled for $120m which was paid in 2017. The settlement remains subject to final approval.
In November 2016, $7.1m was paid in settlement of the Debt Securities Class claims. The settlement has been preliminarily approved by the court
but remains subject to final approval and the right of class members to opt out of the settlement and seek to file their own claims.
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EURIBOR Case in the SDNY
In 2015, $94m was paid in settlement of a EURIBOR-related class action. The settlement has been preliminarily approved by the court but remains
subject to final approval and the right of class members to opt out of the settlement and to seek to file their own claims.
Additional USD LIBOR Case in the SDNY
In 2015, an individual action against Barclays Bank PLC and other panel bank defendants was dismissed by the SDNY. The plaintiff alleged that the
panel bank defendants conspired to increase USD LIBOR, which caused the value of bonds pledged as collateral for a loan to decrease, ultimately
resulting in the sale of the bonds at a low point in the market. The plaintiff ’s motion to file a further amended complaint is pending.
Sterling LIBOR Case in SDNY
In 2015, a putative class action was filed in the SDNY against Barclays Bank PLC and other Sterling LIBOR panel banks by a plaintiff involved in
exchange-traded and over-the-counter derivatives that were linked to Sterling LIBOR. The complaint alleges, among other things, that defendants
manipulated the Sterling LIBOR rate between 2005 and 2010 and, in so doing, committed CEA, Antitrust Act, and RICO violations. In early 2016,
this class action was consolidated with an additional putative class action making similar allegations against Barclays Bank PLC and BCI and other
Sterling LIBOR panel banks. Defendants have filed a motion to dismiss.
Japanese Yen LIBOR Cases in SDNY
In 2012, a putative class action was filed in the SDNY against Barclays Bank PLC and other Japanese Yen LIBOR panel banks by a plaintiff involved
in exchange-traded derivatives. The complaint also names members of the Japanese Bankers Association’s Euroyen Tokyo Interbank Offered Rate
(Euroyen TIBOR) panel, of which Barclays Bank PLC is not a member. The complaint alleges, amongst other things, manipulation of the Euroyen
TIBOR and Yen LIBOR rates and breaches of the CEA and Antitrust Act between 2006 and 2010. In 2014, the court dismissed the plaintiff ’s
antitrust claims in full, but the plaintiff ’s CEA claims remain pending. Discovery is ongoing.
In March 2017, a second putative class action concerning Yen LIBOR filed in the SDNY against Barclays PLC, Barclays Bank PLC and BCI was
dismissed in full. The complaint makes similar allegations to the 2012 class action. Plaintiffs have appealed the dismissal.
SIBOR/SOR Case in the SDNY
A putative class action 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) was dismissed by the court in relation to claims against Barclays
for failure to state a claim. Plaintiffs amended their complaint in September 2017, and defendants have filed a motion to dismiss.
Non-US Benchmarks Cases
In addition to US actions, legal proceedings have been brought or threatened against the Group in connection with alleged manipulation of LIBOR
and EURIBOR and other benchmarks in a number of jurisdictions in Europe and Argentina. Additional proceedings in non-US jurisdictions may be
brought in the future.
Claimed Amounts/Financial Impact
Aside from the settlements discussed above, it is not currently practicable to provide an estimate of any further financial impact of the actions
described on the Group or what effect that they might have upon the Group’s operating results, cash flows or financial position in any particular
period.
Foreign Exchange investigations
Various regulatory and enforcement authorities across multiple jurisdictions have been investigating a range of issues associated with Foreign
Exchange sales and trading, including electronic trading.
Background Information
In 2015 the Group reached settlements with the CFTC, the DOJ, the New York State Department of Financial Services (NYDFS), the Board of
Governors of the Federal Reserve System (Federal Reserve) and the FCA (together, the 2015 Resolving Authorities) in relation to investigations
into certain sales and trading practices in the Foreign Exchange market. In connection with these settlements, the Group paid total penalties
of approximately $2.38bn and agreed to undertake certain remedial actions.
Under the plea agreement with the DOJ, in addition to a criminal fine, Barclays PLC agreed to a term of probation of three years during which
Barclays PLC must, amongst other things, (i) commit no crime whatsoever in violation of the federal laws of the US, (ii) implement and continue
to implement a compliance program designed to prevent and detect the conduct that gave rise to the plea agreement, (iii) report credible evidence
of criminal violations of US antitrust or fraud laws to the relevant US authority, and (iv) strengthen its compliance and internal controls as required
by relevant regulatory or enforcement agencies. In January 2017, the US District Court for the District of Connecticut accepted the plea agreement
and in accordance with the agreement sentenced Barclays PLC to pay $650m as a fine and $60m for violating the NPA (which amounts are part of
the $2.38bn referred to above) and to serve three years of probation from the date of the sentencing order. The Group also continues to provide
relevant information to certain of the 2015 Resolving Authorities.
The full text of the DOJ plea agreement, the orders of the CFTC, NYDFS and Federal Reserve, and the Final Notice issued by the FCA related to the
settlements referred to above are publicly available on the 2015 Resolving Authorities’ respective websites.
The European Commission is one of several authorities conducting an investigation into certain trading practices in the Foreign Exchange market.
The DOJ is also conducting an investigation into conduct relating to certain trading activities in connection with certain transactions during 2011
and 2012. Barclays is providing information to the DOJ and other relevant authorities reviewing this conduct. In January 2018, a Barclays employee
currently under suspension was indicted in US federal court in connection with this matter.
In February 2017 the South African Competition Commission (SACC) referred Barclays Bank PLC, BCI and Absa Bank Limited, a subsidiary of
Barclays Africa Group Limited, which at the relevant time was a subsidiary of Barclays Bank PLC, among other banks, to the Competition Tribunal
to be prosecuted for breaches of South African antitrust law related to Foreign Exchange trading of South African Rand. Barclays was the first to
bring the conduct to the attention of the SACC under its leniency programme. The SACC is therefore not seeking an order from the Tribunal to
impose any fine on Barclays Bank PLC, BCI or Absa Bank Limited.
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Claimed Amounts/Financial Impact
Aside from the settlements discussed above, and a provision of £240m recognised in Q4 2017, it is not currently practicable to provide an estimate
of any further financial impact of the actions described on the Group or what effect they might have on the Group’s operating results, cash flows
or financial position in any particular period.
Civil actions in respect of Foreign Exchange
A number of individuals and corporates in a range of jurisdictions have threatened or brought civil actions against the Group and other banks in
relation to Foreign Exchange.
Background Information
Following settlement of certain investigations referred to above in ‘Foreign Exchange Investigations’ a number of individuals and corporates in a
range of jurisdictions have threatened or brought civil actions against the Group and other banks in relation to Foreign Exchange or may do so in
future. Certain of these cases have been dismissed or have been settled subject to final approval from the relevant court (and in the case of class
actions, the right of class members to opt out of the settlement and to seek to file their own claims).
Consolidated FX Action
In 2014, a number of civil actions filed in the SDNY on behalf of proposed classes of plaintiffs alleging manipulation of Foreign Exchange markets
under the Antitrust Act and New York state law and naming several international banks as defendants, including Barclays Bank PLC, were
combined into a single consolidated action (Consolidated FX Action). In 2015, Barclays Bank PLC and BCI settled the Consolidated FX Action and
paid $384m. Certain class members have opted out of the settlement to seek to file their own claims. The settlement is also subject to final court
approval.
ERISA FX Action
Since 2015, several civil actions have been filed in the SDNY on behalf of proposed classes of plaintiffs purporting to allege different legal theories
of injury (other than those alleged in the Consolidated FX Action) related to alleged manipulation of Foreign Exchange rates, including claims
under the US Employee Retirement Income Security Act (ERISA) statute (ERISA Claims), and naming several international banks as defendants,
including Barclays PLC, Barclays Bank PLC and BCI. The Court has dismissed the ERISA Claims, and the plaintiffs have appealed this decision.
Retail Basis Action
A putative action was filed in the Northern District of California (and subsequently transferred to the SDNY) against several international banks,
including Barclays PLC and BCI, on behalf of a putative class of individuals that exchanged currencies on a retail basis at bank branches (Retail
Basis Claims). The Court 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 Barclays and all other defendants. Plaintiffs amended their complaint and defendants
(including Barclays) have moved to dismiss the amended complaint.
Last Look Actions
In 2015, two putative class actions were filed in the SDNY on behalf of proposed classes of plaintiffs alleging injuries based on Barclays’ purported
improper rejection of customer trades through Barclays Last Look functionality in Barclays’ FX e-trading platforms In 2016, Barclays Bank PLC and
BCI paid $50m and settled one of the actions on a class-wide basis. (The other action was voluntarily dismissed.) The deadline for opting out of
the class has expired (a small number of class members have opted out), and the Court has granted final approval of the settlement.
State Law FX Action
In 2016, a putative class action was filed in the SDNY under federal, New York and California law on behalf of proposed classes of stockholders
of Exchange Traded Funds and others who supposedly were indirect investors in FX Instruments. The defendants (including Barclays) moved to
dismiss the action. Plaintiffs’ counsel then amended the complaint to bring claims on behalf of a proposed class of investors under federal and
various state laws who traded FX Instruments through FX dealers or brokers not alleged to have manipulated Foreign Exchange Rates. A different
group of plaintiffs subsequently filed another action based on the same theories and asserted substantively similar claims. These two actions have
been consolidated and a consolidated complaint was filed in June 2017. Defendants (including Barclays) have moved to dismiss the action.
Canadian FX Action
Civil actions similar to the Consolidated FX Action have been filed in Canadian courts on behalf of proposed classes of plaintiffs containing similar
factual allegations of manipulation of Foreign Exchange rates and of damages resulting from such manipulation, in violation of Canadian law.
The parties’ settlement for $14.8m has been approved by the court.
Claimed Amounts/Financial Impact
Aside from the settlements discussed above, it is not currently practicable to provide an estimate of any further financial impact of the actions
described above on the Group or what effect that they might have upon the Group’s operating results, cash flows or financial position in any
particular period.
Civil actions in respect of ISDAFIX
In 2014, a number of ISDAFIX related civil actions were filed in the SDNY on behalf of proposed class of plaintiffs, alleging that Barclays Bank PLC,
a number of other banks and one broker violated the Antitrust Act and several state laws by engaging in a conspiracy to manipulate the USD
ISDAFIX. In 2016, Barclays Bank PLC and BCI entered into a settlement agreement with plaintiffs to resolve the consolidated action and paid $30m,
fully resolving all ISDAFIX-related claims that were or could have been brought by the class. The court has preliminarily approved the settlement,
which remains subject to final approval and to the right of class members to opt out of the settlement and to seek to file their own claims.
Claimed Amounts/Financial Impact
The principal financial impact of the actions described on the Group is reflected in the settlement described above.
Metals investigations
Barclays Bank PLC has provided information to the DOJ, the CFTC and other authorities in connection with investigations into metals and
metals-based financial instruments.
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Claimed Amounts/Financial Impact
It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might
have upon the Group’s operating results, cash flows or financial position in any particular period.
Civil actions in respect of the gold and silver fix
Various civil actions have been filed against Barclays Bank PLC and others alleging manipulation of the prices of gold and silver.
Background Information
A number of 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 CEA, the Antitrust Act, and state antitrust and consumer protection laws. Also in the US, a proposed class of plaintiffs
has filed a complaint against a number of banks, including Barclays Bank PLC, BCI and Barclays Capital Services Ltd., alleging manipulation of the
price of silver in violation of the CEA and antitrust laws. Defendants have moved to dismiss these actions.
Civil actions have also been filed in Canadian courts against Barclays PLC, Barclays Bank PLC, Barclays Capital Canada Inc., BCI and Barclays Capital
PLC on behalf of proposed classes of plaintiffs alleging manipulation of gold and silver prices in violation of Canadian law.
Claimed Amounts/Financial Impact
It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might
have upon the Group’s operating results, cash flows or financial position in any particular period.
US residential and commercial mortgage-related activity and litigation
There have been various investigations and civil litigation relating to secondary market trading of US residential mortgage-backed securities
(RMBS) and US commercial mortgage-backed securities (CMBS).
Background Information
The Group’s activities within the US residential mortgage sector during the period from 2005 through 2008 included:
■■ sponsoring and underwriting of approximately $39bn of private-label securitisations;
■■ economic underwriting exposure of approximately $34bn for other private-label securitisations;
■■ sales of approximately $0.2bn of loans to government sponsored enterprises (GSEs);
■■ sales of approximately $3bn of loans to others; and
■■ sales of approximately $19.4bn of loans (net of approximately $500m of loans sold during this period and subsequently repurchased) that were
originated and sold to third parties by mortgage originator affiliates of an entity that the Group acquired in 2007 (Acquired Subsidiary).
DOJ Civil Action
In December 2016, the DOJ filed a civil complaint against Barclays Bank PLC, Barclays PLC, BCI, Barclays Group US Inc., Barclays US LLC, BCAP LLC,
Securitized Asset Backed Receivables LLC and Sutton Funding LLC, as well as two former employees, in the US District Court in the Eastern District
of New York (EDNY) containing a number of allegations, including mail and wire fraud, relating to mortgage-backed securities sold between 2005
and 2007. The DOJ complaint seeks, amongst other relief, unspecified monetary penalties. Barclays is defending the complaint and has filed a
motion to dismiss.
RMBS Repurchase Requests
The Group was the sole provider of various loan-level representations and warranties (R&Ws) with respect to:
■■ approximately $5bn of Group sponsored securitisations;
■■ approximately $0.2bn of sales of loans to GSEs; and
■■ approximately $3bn of loans sold to others.
In addition, the Acquired Subsidiary provided R&Ws on all of the $19.4bn of loans it sold to third parties.
R&Ws on the remaining Group sponsored securitisations were primarily provided by third-party originators directly to the securitisation trusts with
a Group subsidiary, such as the depositor for the securitisation, providing more limited R&Ws. There are no stated expiration provisions applicable
to most R&Ws made by the Group, the Acquired Subsidiary or these third parties.
Under certain circumstances, the Group and/or the Acquired Subsidiary may be required to repurchase the related loans or make other payments
related to such loans if the R&Ws are breached.
The unresolved repurchase requests received on or before 31 December 2017 associated with all R&Ws made by the Group or the Acquired
Subsidiary on loans sold to GSEs and others and private-label activities had an original unpaid principal balance of approximately $2.1bn at the
time of such sale.
The unresolved repurchase requests discussed above relate to civil actions that have been commenced by the trustees for certain RMBS
securitisations in which the trustees allege that the Group and/or the Acquired Subsidiary must repurchase loans that violated the operative
R&Ws. Such trustees and other parties making repurchase requests have also alleged that the operative R&Ws may have been violated with
respect to a greater (but unspecified) amount of loans than the amount of loans previously stated in specific repurchase requests made by such
trustees. Cumulative realised losses reported at 31 December 2017 on loans covered by R&Ws made by the Group or the Acquired Subsidiary are
approximately $1.3bn. This litigation is ongoing.
In addition, the Acquired Subsidiary is subject to a more advanced civil action seeking, among other things, indemnification for losses allegedly
suffered by a loan purchaser as a result of alleged breaches of R&Ws provided by the Acquired Subsidiary in connection with loan sales to the
purchaser during the period 1997 to 2007. This litigation is ongoing.
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RMBS Securities Claims
As a result of some of the RMBS activities described above, the Group has been party to a number of lawsuits filed by purchasers of RMBS
sponsored and/or underwritten by the Group between 2005 and 2008. As a general matter, these lawsuits alleged, among other things, that
the RMBS offering materials allegedly relied on by such purchasers contained materially false and misleading statements and/or omissions
and generally demanded rescission and recovery of the consideration paid for the RMBS and recovery of monetary losses arising out of their
ownership. The Group has resolved the majority of these claims, and only one action currently remains pending.
Approximately $0.1bn of the original face amount of RMBS related to the remaining pending action was outstanding as at 31 December 2017.
There were virtually no cumulative realised losses reported on these RMBS as at 31 December 2017. The Group does not expect that, if it were
to lose the remaining pending action, any such loss to be material.
Secondary Trading Investigation
The Group has received requests for information and subpoenas from the SEC, the US Attorney’s Office for the District of Connecticut and the
Special Inspector General for the US Troubled Asset Relief Program related to trading practices in the secondary market for both RMBS and CMBS.
A settlement was announced in May 2017 pursuant to which BCI agreed to resolve this matter for $16.56m.
Claimed Amounts/Financial Impact
Save for the remaining pending action described under ‘RMBS Securities Claims’ and the May 2017 settlement above, it is not currently practicable
to provide an estimate of any further financial impact of the actions described on the Group or what effect that they might have upon the Group’s
operating results, cash flows or financial position in any particular period. The cost of resolving these actions could individually or in aggregate
prove to be substantial.
Alternative trading systems and high-frequency trading
The SEC, the New York State Attorney General (NYAG) and regulators in certain other jurisdictions have been investigating a range of issues
associated with alternative trading systems (ATSs), including dark pools, and the activities of high-frequency traders.
Background Information
In 2014, the NYAG filed a complaint (NYAG Complaint) against Barclays PLC and BCI in the Supreme Court of the State of New York alleging,
amongst other things, that Barclays PLC and BCI engaged in fraud and deceptive practices in connection with LX, the Group’s SEC-registered ATS.
In February 2016, Barclays reached separate settlement agreements with the SEC and the NYAG to resolve those agencies’ claims against Barclays
PLC and BCI relating to the operation of LX and paid $35m to each.
Barclays PLC and BCI have been named in a purported class action by an institutional financial services firm under California law based on
allegations similar to those in the NYAG Complaint. In October 2016, the federal court in California granted the motion of Barclays PLC and BCI
to dismiss the entire complaint and plaintiffs have appealed the court’s decision.
Following the filing of the NYAG Complaint, Barclays PLC and BCI were also named in a putative shareholder securities class action along with
certain of its former CEOs, and its current and a former CFO, as well as an employee (Shareholder Class Action). The plaintiffs claim that holders
of Barclays American Depository Receipts (ADRs) suffered damages when the ADRs declined in value as a result of the allegations in the NYAG
Complaint. A motion to dismiss the complaint filed by the defendants (including Barclays PLC and BCI), was granted in part and denied in part by
the court. In February 2016, the court certified the action as a class action. In November 2017, the appellate court affirmed the class certification.
Barclays has petitioned the appellate court to stay the action pending review by the US Supreme Court of the class certification.
Claimed Amounts/Financial Impact
The class actions seek unspecified monetary damages and injunctive relief. It is not currently practicable to provide an estimate of the financial
impact of the actions described on the Group or what effect they might have upon the Group’s operating results, cash flows or financial position
in any particular period.
FERC and other civil actions
The US Federal Energy Regulatory Commission (FERC) filed a civil action against Barclays Bank PLC and certain of its former traders in connection
with allegations that Barclays Bank PLC manipulated the electricity markets in the Western US.
Background Information
In 2012, FERC issued an Order to Show Cause and Notice of Proposed Penalties (Order and Notice) against Barclays Bank PLC and four of its
former traders asserting that Barclays Bank PLC and its former traders violated FERC’s Anti-Manipulation Rule by manipulating the electricity
markets in and around California from 2006 to 2008, and proposed civil penalties and profit disgorgement to be paid by Barclays Bank PLC.
In 2013, FERC filed a civil action against Barclays Bank PLC and its former traders in the US District Court in California seeking to collect a $435m
civil penalty and disgorgement of $34.9m of profits, plus interest. The action was settled for $105m ($70m penalty and $35m disgorgement)
which was paid in 2017.
In 2015, a civil class action complaint seeking damages of $139.3m was filed in the US District Court for the SDNY against Barclays Bank PLC
by Merced Irrigation District, a California utility company, asserting antitrust allegations in connection with Barclays Bank PLC’s purported
manipulation of the electricity markets in and around California. The action has been settled in principle for $29m (subject to court approval
and to the right of class members to opt out of the settlement and to seek to file their own claims).
Claimed Amounts/Financial Impact
Apart from the settlement amounts referred to above, Barclays does not expect the financial impact of the actions described above to be material
to the Group’s operating results, cash flows or financial position.
Treasury auction securities civil actions and related matters
Various civil actions have been filed against Barclays Bank PLC, BCI and other financial institutions alleging violations of anti-trust and other laws
relating to the markets for US Treasury securities and Supranational, Sovereign and Agency securities. Certain governmental authorities are also
conducting investigations relating to trading of certain government securities in various markets.
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Background information
Numerous putative class action complaints have been filed in US Federal Court against Barclays Bank PLC, BCI and other financial institutions that
have served as primary dealers in US Treasury securities. Those actions have been consolidated and in November 2017, plaintiffs in the putative
class action filed a consolidated amended complaint in the US Federal Court in New York against the defendants as well as certain corporations
that operate electronic trading platforms on which US Treasury securities are traded. The complaint purports to assert claims under US federal
antitrust laws and state common law based on allegations that 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. Defendants intend to
move to dismiss the action.
In addition, certain plaintiffs have filed a related, direct action against BCI and certain other financial institutions that have served as primary
dealers in US Treasury securities. This complaint alleges that defendants conspired to fix and manipulate the US Treasury securities market in
violation of US federal antitrust laws, the CEA and state common law.
In 2017, Barclays PLC, Barclays Bank PLC, BCI, Barclays Services Limited, Barclays Capital Securities Limited and certain other financial institutions
were named as defendants in a civil anti-trust complaint that alleges that the defendants engaged in a conspiracy to fix prices and restrain
competition in the market for US Dollar-denominated Supranational, Sovereign and Agency bonds from 2005 through 2015. Defendants have
moved to dismiss the action.
Certain governmental authorities are conducting investigations into activities relating to the trading of certain government securities in various
markets and Barclays has been providing information to various authorities on an ongoing basis.
Claimed Amounts/Financial Impact
It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might
have upon the Group’s operating results, cash flows or financial position in any particular period.
American Depositary Shares
Barclays PLC, Barclays Bank PLC and various former members of Barclays Bank PLC’s Board of Directors have been named as defendants in
a securities class action consolidated in the SDNY.
Background Information
The securities class action against Barclays PLC, Barclays Bank PLC and various former members of Barclays Bank PLC’s Board of Directors alleges
misstatements and omissions in offering documents for certain American Depositary Shares issued by Barclays Bank PLC in April 2008 with an
original face amount of approximately $2.5bn (the April 2008 Offering). The plaintiffs assert claims under the Securities Act of 1933, alleging
misstatements and omissions concerning (amongst other things) Barclays Bank PLC’s portfolio of mortgage-related (including US subprime-
related) securities, Barclays Bank PLC’s exposure to mortgage and credit market risk, and Barclays Bank PLC’s financial condition. The plaintiffs
have not specifically alleged the amount of their damages. In June 2016, the SDNY certified the action as a class action. In September 2017, the
SDNY granted the defendants’ motion for summary judgment. Plaintiffs are appealing this decision.
Claimed Amounts/Financial Impact
It is not currently practicable to provide an estimate of the financial impact of the action described on the Group or what effect that it might have
upon the Group’s operating results, cash flows or financial position in any particular period.
BDC Finance L.L.C.
BDC Finance L.L.C. (BDC) has filed a complaint against Barclays Bank PLC alleging breach of contract in connection with a portfolio of total return
swaps governed by an ISDA Master Agreement (collectively, the Agreement).
Background Information
In 2008, BDC filed a complaint in the NY Supreme Court alleging that Barclays Bank PLC breached the Agreement when it failed to transfer
approximately $40m of alleged excess collateral in response to BDC’s 2008 demand (Demand).
BDC asserts that under the Agreement Barclays Bank PLC was not entitled to dispute the Demand before transferring the alleged excess collateral
and that even if the Agreement entitled Barclays Bank PLC to dispute the Demand before making the transfer, Barclays Bank PLC failed to dispute
the Demand. BDC demands damages totalling $298m plus attorneys’ fees, expenses, and pre-judgement interest. A trial on liability issues
concluded in April 2017 and the court’s decision is pending.
In 2011, BDC’s investment advisor, BDCM Fund Adviser, L.L.C. and its parent company, Black Diamond Capital Holdings, L.L.C. also sued Barclays
Bank PLC and BCI in Connecticut State Court for unspecified damages allegedly resulting from Barclays Bank PLC’s conduct relating to the
Agreement, asserting claims for violation of the Connecticut Unfair Trade Practices Act and tortious interference with business and prospective
business relations. The parties agreed to stay this case.
Claimed Amounts/Financial Impact
It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might
have upon the Group’s operating results, cash flows or financial position in any particular period. BDC has made claims against the Group totalling
$298m plus attorneys’ fees, expenses, and pre-judgement interest. This amount does not necessarily reflect the Group’s potential financial
exposure if a ruling were to be made against it.
Civil actions in respect of the US Anti-Terrorism Act
Civil complaints against Barclays Bank PLC and other banks allege engagement in a conspiracy and violation of the US Anti-Terrorism Act (ATA).
Background Information
In 2015, an amended civil complaint was filed in the US Federal Court in the EDNY by a group of approximately 250 plaintiffs, alleging that Barclays
Bank PLC and a number of other banks engaged in a conspiracy and violated the ATA by facilitating US Dollar-denominated transactions for the
Government of Iran and various Iranian banks, which in turn funded Hezbollah and other attacks that injured or killed the plaintiffs’ family
members. Plaintiffs seek to recover for pain, suffering and mental anguish pursuant to the provisions of the ATA, which allows for the tripling
292 Barclays PLC Annual Report 2017
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Notes to the financial statements 29 Legal, competition and regulatory matters continued
of any proven damages and attorneys’ fees. Plaintiffs filed a second amended complaint in July 2016 (the Second Amended Complaint), which,
among other things, added various plaintiffs, bringing the total number of plaintiffs to approximately 350. Defendants have moved to dismiss
the Second Amended Complaint. In November 2017, a separate civil complaint was filed in the US Federal Court in the SDNY by a group of
approximately 160 plaintiffs, alleging claims under the ATA against Barclays Bank PLC and a number of other banks substantially similar to
those in the Second Amended Complaint. Defendants intend to move to dismiss this complaint.
In November 2016, a civil complaint was filed alleging claims under the ATA against Barclays Bank PLC (and a number of other banks)
substantially similar to those in the Second Amended Complaint. In October 2017, plaintiffs voluntarily dismissed the case, without prejudice.
Claimed Amounts/Financial Impact
It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might
have upon the Group’s operating results, cash flows or financial position in any particular period.
Interest rate swap and credit default swap US civil actions
Barclays PLC, Barclays Bank PLC, and BCI, together with other financial institutions are defendants in interest rate swap and credit default swap
antitrust civil actions in the SDNY.
Background Information
Barclays PLC, Barclays Bank PLC, and BCI, together with other financial institutions that act as market makers for interest rate swaps (IRS), Trade
Web, and ICAP, are named as defendants in several antitrust class actions which were consolidated in the SDNY in 2016. The complaints allege
defendants conspired to prevent the development of exchanges for IRS and demand unspecified money damages, treble damages and legal fees.
Plaintiffs include certain swap execution facilities, as well as buy-side investors. The buy-side investors claim to represent a class that transacted in
fixed-for-floating IRS with defendants in the US from 2008 to the present, including, for example, US retirement and pension funds, municipalities,
university endowments, corporations, insurance companies and investment funds. The case is in discovery. In June 2017, a separate suit was filed
in the US District Court in the SDNY against the same financial institution defendants in the IRS cases, including Barclays PLC, Barclays Bank PLC,
and BCI, claiming that certain conduct alleged in the IRS cases also caused plaintiff to suffer harm with respect to the Credit Default Swaps
market. Defendants have moved to dismiss this action.
Claimed Amounts/Financial Impact
It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect they might have
upon the Group’s operating results, cash flows or financial position in any particular period.
CCUK Finance Limited and CIAC Corporation
In May 2017, Barclays Bank PLC was served with a civil claim by CCUK Finance Limited and CIAC Corporation issued in the English High Court
alleging breach of a contractual indemnity, fraudulent misrepresentation and breach of warranty arising out of the sale of a portfolio of credit
cards in 2007. Barclays Bank PLC has filed a defence and counterclaim.
Claimed Amounts/Financial Impact
The claim seeks damages of not less than £1bn plus interest and costs. The damages claimed do not necessarily reflect Barclays Bank PLC’s
potential financial exposure if a ruling were to be made against it. It is not currently practicable to provide an estimate of the financial impact
of the action described or what effect it might have upon operating results, cash flows or the Group’s financial position in any particular period.
Portuguese Competition Authority investigation
The Portuguese Competition Authority is investigating whether competition law was infringed by the exchange of information about retail credit
products amongst 15 banks in Portugal, including the Group, over a period of 11 years with particular reference to mortgages, consumer lending
and lending to small and medium enterprises. The Group is cooperating with the investigation.
Claimed Amounts/Financial Impact
It is not currently practicable to provide an estimate of the financial impact of the action described or what effect it might have upon operating
results, cash flows or the Group’s financial position in any particular period.
General
The Group is engaged in various other legal, competition and regulatory matters in the UK and US and a number of other overseas jurisdictions.
It is subject to legal proceedings by and against the Group which arise in the ordinary course of business from time to time, including (but not
limited to) disputes in relation to contracts, securities, debt collection, consumer credit, fraud, trusts, client assets, competition, data protection,
money laundering, financial crime, employment, environmental and other statutory and common law issues.
The Group is also subject to enquiries and examinations, requests for information, audits, investigations and legal and other proceedings by
regulators, governmental and other public bodies in connection with (but not limited to) consumer protection measures, compliance with
legislation and regulation, wholesale trading activity and other areas of banking and business activities in which the Group is or has been engaged.
The Group is 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, the Group does not expect the ultimate resolution of any of these other matters to have a material adverse effect on its
financial position. However, in light of the uncertainties involved in such matters and the matters specifically described in this note, there can be
no assurance that the outcome of a particular matter or matters will not be material to the Group’s results of operations or cash flow for a particular
period, depending on, amongst other things, the amount of the loss resulting from the matter(s) and the amount of income otherwise reported
for the reporting period.
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Barclays PLC Annual Report 2017 293
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance The notes included in this section focus on the Group’s loan capital and shareholders’ equity including issued share capital, retained earnings,
other equity balances and interests of minority shareholders in our subsidiary entities (non-controlling interests). For more information on
capital management and how the Group maintains sufficient capital to meet our regulatory requirements refer to page 130.
30 Subordinated liabilities
Accounting for subordinated debt
Subordinated debt is measured at amortised cost using the effective interest method under IAS 39.
Opening balance as at 1 January
Issuances
Redemptions
Other
Total subordinated liabilities
2017
£m
23,383
3,041
(1,378)
(1,220)
23,826
2016
£m
21,467
1,457
(1,143)
1,602
23,383
Issuances totalling £3,041m made up of $2,000m 4.836% Fixed Rate Subordinated Callable Notes (£1,547m), €1,500m 2% Fixed Rate
Subordinated Callable Notes (£1,384m) and SGD 200m 3.75% Fixed Rate Resetting Subordinated Callable Notes (£110m). Redemptions totalling
£1,378m include £133m 6.375% Undated Subordinated Notes, $1,556m 6.05% Fixed Rate Subordinated Notes (£1,151m), $117m 7.434% Step-up
Callable Perpetual Reserve Capital Instruments (£87m) and instruments issued by other subsidiaries (£7m). Other movements include a decrease
of £1,220m largely due to the depreciation of period end USD against GBP.
Subordinated liabilities include accrued interest and comprise undated and dated loan capital as follows:
Undated subordinated liabilities
Dated subordinated liabilities
Total subordinated liabilities
None of the Group’s loan capital is secured.
Undated subordinated liabilities
Barclays Bank PLC issued
Tier One Notes (TONs)
6% Callable Perpetual Core Tier One Notes
6.86% Callable Perpetual Core Tier One Notes (USD 179m)
Reserve Capital Instruments (RCIs)
7.434% Step-up Callable Perpetual Reserve Capital Instruments (USD 117m)
6.3688% Step-up Callable Perpetual Reserve Capital Instruments
14% Step-up Callable Perpetual Reserve Capital Instruments
5.3304% Step-up Callable Perpetual Reserve Capital Instruments
Undated Notes
6.375% Undated Subordinated Notes
7.7% Undated Subordinated Notes (USD 99m)
8.25% Undated Subordinated Notes
7.125% Undated Subordinated Notes
6.125% Undated Subordinated Notes
Junior Undated Floating Rate Notes (USD 38m)
Undated Floating Rate Primary Capital Notes Series 3
Bonds
9.25% Perpetual Subordinated Bonds (ex-Woolwich Plc)
9% Permanent Interest Bearing Capital Bonds
Loans
5.03% Reverse Dual Currency Undated Subordinated Loan (JPY 8,000m)
5% Reverse Dual Currency Undated Subordinated Loan (JPY 12,000m)
Total undated subordinated liabilities
2017
£m
4,191
19,635
23,826
2016
£m
4,495
18,888
23,383
2017
£m
16
197
–
36
3,142
52
–
74
144
182
43
28
21
87
45
2016
£m
17
232
100
37
3,124
54
140
84
148
193
45
31
21
91
47
Initial call date
2032
2032
2017
2019
2019
2036
2017
2018
2018
2020
2027
Any interest payment date
Any interest payment date
2021
At any time
2028
2028
51
73
4,191
54
77
4,495
294 Barclays PLC Annual Report 2017
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Capital instruments, equity and reservesNotes to the financial statements
30 Subordinated liabilities continued
Undated loan capital
Undated loan capital is issued by the Bank and its subsidiaries for the development and expansion of the business and to strengthen the capital
bases. The principal terms of the undated loan capital are described below:
Subordination
All undated loan capital ranks behind the claims against the bank of depositors and other unsecured unsubordinated creditors and holders of
dated loan capital in the following order: Junior Undated Floating Rate Notes; other issues of Undated Notes, Bonds and Loans ranking pari passu
with each other; followed by TONs and RCIs ranking pari passu with each other.
Interest
All undated loan capital bears a fixed rate of interest until the initial call date, with the exception of the 9% Bonds which are fixed for the life of
the issue, and the Junior and Series 3 Undated Notes which are floating rate.
After the initial call date, in the event that they are not redeemed, the 7.125%, 6.125% Undated Notes and the 9.25% Bonds will bear interest at
rates fixed periodically in advance for five-year periods based on market rates. All other undated loan capital except the two floating rate Undated
Notes will bear interest, and the two floating rate Undated Notes currently bear interest, at rates fixed periodically in advance based on London
interbank rates.
Payment of interest
The Bank is not obliged to make a payment of interest on its Undated Notes, Bonds and Loans excluding the 7.7% Undated Notes, 8.25%
Undated Notes and 9.25% Bonds if, in the preceding six months, a dividend has not been declared or paid on any class of shares of Barclays PLC
or, in certain cases, any class of preference shares of the Bank. The Bank is not obliged to make a payment of interest on its 9.25% Perpetual
Subordinated Bonds if, in the immediately preceding 12 month interest period, a dividend has not been paid on any class of its share capital.
Interest not so paid becomes payable in each case if such a dividend is subsequently paid or in certain other circumstances. During the year,
the Bank declared and paid dividends on its ordinary shares and on all classes of preference shares.
No payment of principal or any interest may be made unless the Bank satisfies a specified solvency test.
The Bank may elect to defer any payment of interest on the 7.7% Undated Notes and 8.25% Undated Notes. Until such time as any deferred
interest has been paid in full, neither the Bank nor Barclays PLC may declare or pay a dividend, subject to certain exceptions, on any of its ordinary
shares, preference shares, or other share capital or satisfy any payments of interest or coupons on certain other junior obligations.
The Bank may elect to defer any payment of interest on the RCIs. Any such deferred payment of interest must be paid on the earlier of: 1) the date
of redemption of the RCIs, 2) the coupon payment date falling on or nearest to the tenth anniversary of the date of deferral of such payment, and
3) in respect of the 14% RCIs only, substitution. While such deferral is continuing, neither the Bank nor Barclays PLC may declare or pay a dividend,
subject to certain exceptions, on any of its ordinary shares or preference shares.
The Bank may elect to defer any payment of interest on the TONs if it determines that it is, or such payment would result in it being, in non-
compliance with capital adequacy requirements and policies of the PRA. Any such deferred payment of interest will only be payable on a
redemption of the TONs. Until such time as the Bank next makes a payment of interest on the TONs, neither the Bank nor Barclays PLC may 1)
declare or pay a dividend, subject to certain exceptions, on any of their respective ordinary shares or preference shares, or make payments of
interest in respect of the Bank’s Reserve Capital Instruments and 2) certain restrictions on the redemption, purchase or reduction of their
respective share capital and certain other securities also apply.
Repayment
All undated loan capital is repayable at the option of the Bank, generally in whole, at the initial call date and on any subsequent coupon or interest
payment date or in the case of the 7.125%, 6.125% Undated Notes and the 9.25% Bonds on any fifth anniversary after the initial call date.
In addition, each issue of undated loan capital is repayable, at the option of the Bank in whole in the event of certain changes in the tax treatment
of the notes, either at any time, or on an interest payment date. There are no events of default except non-payment of principal or mandatory
interest. Any repayments require the prior approval of the PRA.
Other
All issues of undated subordinated liabilities are non-convertible.
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Barclays PLC Annual Report 2017 295
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 30 Subordinated liabilities continued
Dated subordinated liabilities
Barclays PLC issued
2.625% Fixed Rate Subordinated Callable Notes (EUR 1,250m)
2% Fixed Rate Subordinated Callable Notes (EUR 1,500m)
4.375% Fixed Rate Subordinated Notes (USD 1,250m)
3.75% Fixed Rate Resetting Subordinated Callable Notes (SGD 200m)
5.20% Fixed Rate Subordinated Notes (USD 2,050m)
4.836% Fixed Rate Subordinated Callable Notes (USD 2,000m)
Barclays Bank PLC issued
6.05% Fixed Rate Subordinated Notes (USD 1,556m)
Floating Rate Subordinated Notes (EUR 40m)
6% Fixed Rate Subordinated Notes (EUR 1,750m)
CMS-Linked Subordinated Notes (EUR 100m)
CMS-Linked Subordinated Notes (EUR 135m)
Fixed/Floating Rate Subordinated Callable Notes
7.75% Contingent Capital Notes (USD 1,000m)
Floating Rate Subordinated Notes (EUR 50m)
5.14% Lower Tier 2 Notes (USD 1,094m)
6% Fixed Rate Subordinated Notes (EUR 1,500m)
9.5% Subordinated Bonds (ex-Woolwich Plc)
Subordinated Floating Rate Notes (EUR 100m)
10% Fixed Rate Subordinated Notes
10.179% Fixed Rate Subordinated Notes (USD 1,521m)
Subordinated Floating Rate Notes (EUR 50m)
6.625% Fixed Rate Subordinated Notes (EUR 1,000m)
7.625% Contingent Capital Notes (USD 3,000m)
Subordinated Floating Rate Notes (EUR 50m)
5.75% Fixed Rate Subordinated Notes
5.4% Reverse Dual Currency Subordinated Loan (JPY 15,000m)
6.33% Subordinated Notes
Subordinated Floating Rate Notes (EUR 68m)
Issuances by other subsidiaries
Total dated subordinated liabilities
Initial
call date
Maturity
date
2020
2023
2025
2027
2018
2018
2025
2028
2024
2030
2026
2028
2017
2018
2018
2018
2018
2023
2023
2019
2020
2021
2021
2021
2021
2021
2022
2022
2022
2023
2026
2027
2032
2040
2018–2019
2017
£m
1,119
1,325
947
111
1,439
1,471
–
36
1,643
93
124
533
747
44
841
1,484
273
88
2,261
1,118
44
1,043
2,163
44
366
97
62
60
59
19,635
2016
£m
1,084
–
1,054
–
1,590
–
1,316
34
1,590
90
120
548
822
42
956
1,444
286
85
2,345
1,285
43
1,042
2,390
43
384
103
64
58
70
18,888
Dated loan capital
Dated loan capital is issued by the Company, the Bank and respective subsidiaries for the development and expansion of their business and
to strengthen their respective capital bases. The principal terms of the dated loan capital are described below:
Subordination
Dated loan capital issued by the Company ranks behind the claims against the Company of unsecured unsubordinated creditors but before the
claims of the holders of its equity.
All dated loan capital issued by the Bank ranks behind the claims against the Bank of depositors and other unsecured unsubordinated creditors
but before the claims of the undated loan capital and the holders of its equity. The dated loan capital issued by other subsidiaries is similarly
subordinated.
Interest
Interest on the Floating Rate Notes is fixed periodically in advance, based on the related interbank or local central bank rates.
Interest on the 7.75% Contingent Capital Notes, 2.625% Fixed Rate Subordinated Callable Notes, 4.836% Fixed Rate Subordinated Callable Notes,
2% Fixed Rate Subordinated Callable Notes and the 3.75% Fixed Rate Resetting Subordinated Callable Notes are fixed until the call date. After the
respective call dates, in the event that they are not redeemed, the interest rates will be reset and fixed until maturity based on a market rate.
Repayment
Those Notes with a call date are repayable at the option of the issuer, on conditions governing the respective debt obligations, some in whole
or in part, and some only in whole. The remaining dated loan capital outstanding at 31 December 2017 is redeemable only on maturity, subject
in particular cases to provisions allowing an early redemption in the event of certain changes in tax law, or to certain changes in legislation
or regulations.
Any repayments prior to maturity require, in the case of the Company and the Bank, the prior approval of the PRA, or in the case of the overseas
issues, the approval of the local regulator for that jurisdiction and of the PRA in certain circumstances.
There are no committed facilities in existence at the balance sheet date which permit the refinancing of debt beyond the date of maturity.
296 Barclays PLC Annual Report 2017
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Capital instruments, equity and reservesNotes to the financial statements 30 Subordinated liabilities continued
Other
The 7.625% Contingent Capital Notes will be automatically transferred from investors to Barclays PLC (or another entity within the Group) for
nil consideration in the event the Barclays PLC consolidated CRD IV CET1 ratio (FSA October 2012 transitional statement) falls below 7.0%.
The 7.75% Contingent Capital Notes will be automatically written-down and investors will lose their entire investment in the notes in the event
the Barclays PLC consolidated CRD IV CET1 ratio (FSA October 2012 transitional statement) falls below 7.0%.
31 Ordinary shares, share premium, and other equity
Called up share capital, allotted and fully paid
As at 1 January 2017
Issued to staff under share incentive plans
Issuances relating to Scrip Dividend Programme
AT1 securities issuance
Other movements
As at 31 December 2017
As at 1 January 2016
Issued to staff under share incentive plans
Issuances relating to Scrip Dividend Programme
AT1 securities issuance
Other movements
As at 31 December 2016
Number of
shares
m
16,963
46
51
–
–
17,060
16,805
116
42
–
–
16,963
Ordinary
shares
£m
4,241
12
12
–
–
4,265
4,201
30
10
–
–
4,241
Total share
capital and
share
premium
£m
21,842
86
117
–
–
22,045
Other
equity
instruments
£m
6,449
–
–
2,490
2
8,941
21,586
188
68
–
–
21,842
5,305
–
–
1,132
12
6,449
Share
premium
£m
17,601
74
105
–
–
17,780
17,385
158
58
–
–
17,601
Called up share capital
Called up share capital comprises 17,060m (2016: 16,963m) ordinary shares of 25p each.
Share repurchase
At the 2017 AGM on 10 May 2017, Barclays PLC was authorised to repurchase up to an aggregate of 1,696m of its ordinary shares of 25p.
The authorisation is effective until the AGM in 2018 or the close of business on 30 June 2018, whichever is the earlier. No share repurchases
were made during either 2017 or 2016.
Other equity instruments
Other equity instruments of £8,941m (2016: £6,449m) include AT1 securities issued by Barclays PLC. In 2017, there were two issuances of Fixed
Rate Resetting Perpetual Subordinated Contingent Convertible Securities (2016: one issuance), with principal amounts totalling £2.5bn (2016:
£1.1bn).
The AT1 securities are perpetual securities with no fixed maturity and are structured to qualify as AT1 instruments under CRD IV.
The principal terms of the AT1 securities are described below:
■■ AT1 securities rank behind the claims against Barclays PLC of 1) unsubordinated creditors; 2) claims which are expressed to be subordinated
to the claims of unsubordinated creditors of Barclays PLC but not further or otherwise; or 3) claims which are, or are expressed to be, junior to
the claims of other creditors of Barclays PLC, whether subordinated or unsubordinated, other than claims which rank, or are expressed to rank,
pari passu with, or junior to, the claims of holders of the AT1 securities.
■■ AT1 securities bear a fixed rate of interest until the initial call date. After the initial call date, in the event that they are not redeemed, the AT1
securities will bear interest at rates fixed periodically in advance for five-year periods based on market rates.
■■ Interest on the AT1 securities will be due and payable only at the sole discretion of Barclays PLC, and Barclays PLC has sole and absolute
discretion at all times and for any reason to cancel (in whole or in part) any interest payment that would otherwise be payable on any interest
payment date.
■■ AT1 securities are undated and are repayable, at the option of Barclays PLC, in whole at the initial call date, or on any fifth anniversary after the
initial call date. In addition, the AT1 securities are repayable, at the option of Barclays PLC, in whole in the event of certain changes in the tax
or regulatory treatment of the securities. Any repayments require the prior consent of the PRA.
All AT1 securities will be converted into ordinary shares of Barclays PLC, at a pre-determined price, should the fully loaded CET1 ratio of the
Barclays PLC Group fall below 7.0%.
32 Reserves
Currency translation reserve
The currency translation reserve represents the cumulative gains and losses on the retranslation of the Group’s net investment in foreign
operations, net of the effects of hedging.
Available for sale reserve
The available for sale reserve represents the unrealised change in the fair value of available for sale investments since initial recognition.
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.
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Barclays PLC Annual Report 2017 297
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 32 Reserves continued
Own credit reserve
As a result of the early adoption of the own credit provisions of IFRS 9 on 1 January 2017, own credit on financial liabilities designated at fair
value through profit and loss which was previously recorded in the income statement is now recognised within other comprehensive income.
Amounts in the own credit reserve is not recycled to profit or loss in future periods.
Other reserves and treasury shares
Other reserves relate to redeemed ordinary and preference shares issued by the Group.
Treasury shares relate to Barclays PLC shares held in relation to the Group’s various share schemes. These schemes are described in Note 34.
Treasury shares are deducted from shareholders’ equity within other reserves. A transfer is made to retained earnings in line with the vesting
of treasury shares held for the purposes of share-based payments.
Currency translation reserve
Available for sale reserve
Cash flow hedging reserve
Own credit reservea
Other reserves and treasury shares
Total
2017
£m
3,054
364
1,161
(179)
983
5,383
2016
£m
3,051
(74)
2,105
–
969
6,051
Note
a As at 31 December 2017, the amount of own credit recognised in the Group’s other comprehensive income was a debit balance of £179m. Upon adoption of IFRS 9, an opening
debit balance of £175m was recognised, with a further £4m loss (net of tax) recorded during 2017.
33 Non-controlling interests
Barclays Bank PLC issued:
– Preference shares
– Upper Tier 2 instruments
Barclays Africa Group Limited
Other non-controlling interests
Total
Profit attributable to
non-controlling interest
Equity attributable to
non-controlling interest
Dividends paid to
non-controlling interest
2017
£m
242
3
140
4
389
2016
£m
340
3
402
3
748
2017
£m
1,838
272
–
1
2,111
2016
£m
2,698
272
3,507
15
6,492
2017
£m
242
–
173
–
415
2016
£m
340
–
235
–
575
Barclays Bank PLC
Barclays PLC holds 100% of the voting rights of Barclays Bank PLC. As at 31 December 2017, Barclays Bank PLC has in issue preference shares and
Upper Tier 2 instruments, representing 11% (2016: 11%) of its equity. Preference share dividends and redemption are typically at the discretion of
Barclays Bank PLC. The payment of Upper Tier 2 instrument coupons and principal are typically at the discretion of Barclays Bank PLC, except for
coupon payments that become compulsory where Barclays PLC has declared or paid a dividend on ordinary shares in the preceding six-month
period. Preference share and Upper Tier 2 instrument holders typically only have rights to redeem in the event of insolvency.
Instrument
Preference Shares:
6.00% non-cumulative callable preference shares
6.278% non-cumulative callable preference shares
4.75% non-cumulative callable preference shares
7.1% non-cumulative callable preference shares
8.125% non-cumulative callable preference shares
Total Barclays Bank PLC Preference Shares
Barclays Africa Group Limited
Total
Upper Tier 2 Instruments:
Undated Floating Rate Primary Capital Notes Series 1
Undated Floating Rate Primary Capital Notes Series 2
Total Upper Tier 2 Instruments
2017
£m
–
318
211
–
1,309
1,838
–
1,838
93
179
272
2016
£m
203
318
211
657
1,309
2,698
277
2,975
93
179
272
Protective rights of non-controlling interests
Barclays Africa Group Limited
Barclays’ shareholding in BAGL has reduced from 50.1% in 2016 to 14.9% in 2017. Following the disposal BAGL is not considered as a subsidiary
of the Group and has been deconsolidated for accounting purposes and is accounted for as an available for sale asset.
Barclays Bank PLC
Barclays Bank PLC also has in issue preference shares which are non-controlling interests to the Group. Under the terms of these instruments,
Barclays PLC may not pay dividends on ordinary shares until a dividend is next paid on these instruments or the instruments are redeemed or
purchased by Barclays Bank PLC. There are no restrictions on Barclays Bank PLC’s ability to remit capital to the Parent as a result of these issued
instruments.
298 Barclays PLC Annual Report 2017
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Capital instruments, equity and reservesNotes to the financial statements Notes to the financial statements
Employee benefits
The notes included in this section focus on the costs and commitments associated with employing our staff.
34 Share-based payments
Accounting for share-based payments
The Group applies IFRS 2 Share-based Payments in accounting for employee remuneration in the form of shares.
Employee incentives include awards in the form of shares and share options, as well as offering employees the opportunity to purchase shares
on favourable terms. The cost of the employee services received in respect of the shares or share options granted is recognised in the income
statement over the period that employees provide services. 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:
Share Value Plan
Deferred Share Value Plan
Others
Total equity settled
Cash settled
Total share-based payments
The terms of the main current plans are as follows:
Charge for the year
2017
£m
153
166
186
505
3
508
2016
£m
473
–
192
665
1
666
2015
£m
442
–
86
528
4
532
Share Value Plan (SVP)
The SVP was introduced in March 2010 and approved by shareholders (for executive Director participation and use of new issue shares) at
the AGM in April 2011. SVP awards are granted to participants in the form of a conditional right to receive Barclays PLC shares or provisional
allocations of Barclays PLC shares which vest or are considered for release over a period of three, five or seven years. Participants do not pay
to receive an award or to receive a release of shares. The grantor may also make a dividend equivalent payment to participants on release of
a SVP award. SVP awards are also made to eligible employees for recruitment purposes. All awards are subject to potential forfeiture in certain
leaver scenarios.
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. The accounting policies
for employee benefits are included in Note 8.
Other schemes
In addition to the SVP and DSVP, the Group operates a number of other schemes including schemes operated by, and settled in, the shares
of subsidiary undertakings, none of which is individually or in aggregate material in relation to the charge for the year or the dilutive effect
of outstanding share options. Included within other schemes are Sharesave (both UK and overseas), Sharepurchase (both UK and overseas),
the Barclays’ Long Term Incentive Plan, the Share Incentive Award and the Executive Share Award Scheme.
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 are as follows:
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Barclays PLC Annual Report 2017 299
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 34 Share-based payments continued
SVPa,b
DSVPa,b
Othersa
2017
2016
Weighted
average fair
value per
award
granted
in year
£
2.30
2.26
Weighted
average
share price
at exercise/
release
during year
£
2.29
2.06
0.41-2.30 1.99-2.30
Weighted
average
remaining
contractual
life
years
1
1
0–3
Weighted
average fair
Number of
value per
options/
award
awards
granted
outstanding
in year
(000s)
£
1.66
191,610
125,399
–
210,160 0.61-1.67
Weighted
average
share price
at exercise/
release
during year
£
1.66
–
1.65-1.88
Weighted
average
remaining
contractual
life
years
1
–
0–3
Number of
options/
awards
outstanding
(000s)
406,016
–
205,129
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:
SVPa,b
DSVPa,b
Othersa,c
Number (000s)
Number (000s)
Number (000s)
2017
2016
2017
2016
2017
2016
Weighted average
ex. price (£)
2017
2016
Outstanding at beginning of
year/acquisition date
Granted in the year
Exercised/released in the year
Less: forfeited in the year
Less: expired in the year
Outstanding at end of year
Of which exercisable:
406,016
943
386,470
229,371
(200,350) (191,623)
(18,202)
–
406,016
–
(14,999)
–
191,610
18
–
132,316
(2,275)
(4,642)
–
125,399
–
–
–
–
–
–
–
–
205,129
118,222
(90,324)
(17,733)
(5,134)
210,160
24,569
166,975
154,069
(60,912)
(47,342)
(7,661)
205,129
24,435
1.38
1.66
1.52
1.42
2.03
1.41
1.59
1.75
1.20
1.39
1.95
1.83
1.38
1.78
Notes
a Options/award granted over Barclays PLC shares.
b Nil cost award and therefore the weighted average exercise price was nil.
c The number of awards within Others at the end of the year principally relates to Sharesave (number of awards exercisable at end of year was 10,121,109). The weighted average
exercise price relates to Sharesave.
Certain of the Group’s share option plans enable certain Directors and employees to subscribe for new ordinary shares of Barclays PLC. For
accounting for treasury shares refer to Note 32.
There were no significant modifications to the share-based payments arrangements in 2017 and 2016.
As at 31 December 2017, the total liability arising from cash-settled share-based payments transactions was £2m (2016: £nil).
Holdings of Barclays PLC shares
Various employee benefit trusts established by the Group hold shares in Barclays PLC to meet obligations under the Barclays share-based payment
schemes. The total number of Barclays shares held in these employee benefit trusts at 31 December 2017 was 9.9 million (2016: 6.6 million).
Dividend rights have been waived on all these shares. The total market value of the shares held in trust based on the year end share price of
£2.03 (2016: £2.23) was £20.1m (2016: £14.7m).
300 Barclays PLC Annual Report 2017
home.barclays/annualreport
Employee benefitsNotes to the financial statements 35 Pensions and post-retirement benefits
Accounting for pensions and post-retirement benefits
The Group operates a number of pension schemes and post-employment benefit schemes.
Defined contribution schemes – the Group recognises contributions due in respect of the accounting period in the income statement.
Any contributions unpaid at the balance sheet date are included as a liability.
Defined benefit schemes – the Group recognises its obligations to members of each scheme at the period end, less the fair value of the scheme
assets after applying the asset ceiling test. The Group will keep the developments on the proposed amendments to IFRIC 14 under review.
Each scheme’s obligations are calculated using the projected unit credit method. Scheme assets are stated at fair value as at the period end.
Changes in pension scheme liabilities or assets (remeasurements) that do not arise from regular pension cost, net interest on net defined
benefit liabilities or assets, past service costs, settlements or contributions to the scheme, are recognised in other comprehensive income.
Remeasurements comprise experience adjustments (differences between previous actuarial assumptions and what has actually occurred),
the effects of changes in actuarial assumptions, return on scheme assets (excluding amounts included in the interest on the assets) and any
changes in the effect of the asset ceiling restriction (excluding amounts included in the interest on the restriction).
Post-employment benefit schemes – the cost of providing healthcare benefits to retired employees is accrued as a liability in the financial
statements over the period that the employees provide services to the Group, using a methodology similar to that for defined benefit pension
schemes.
Pension schemes
UK Retirement Fund (UKRF)
The UKRF is the Group’s main scheme, representing 96% of the Group’s total retirement benefit obligations. The UKRF was closed to new entrants
on 1 October 2012, and comprises 10 sections, the two most significant of which are:
■■ Afterwork, which comprises a contributory cash balance defined benefit element, and a voluntary defined contribution element. The cash
balance element is accrued each year and revalued until Normal Retirement Age in line with the increase in Retail Price Index (RPI) (up to a
maximum of 5% p.a.). An increase of up to 2% a year may also be added at Barclays’ discretion. Between 1 October 2003 and 1 October 2012
the majority of new UK employees (except for the employees of the investment banking business within Barclays International) were eligible to
join this section. The costs of ill-health retirements and death in service benefits for Afterwork members are borne by the UKRF. The main risks
that Barclays runs in relation to Afterwork are limited although additional contributions are required if pre-retirement investment returns are not
sufficient to provide for the benefits.
■■ The 1964 Pension Scheme. Most employees recruited before July 1997 built up benefits in this non-contributory defined benefit scheme in
respect of service up to 31 March 2010. Pensions were calculated by reference to service and pensionable salary. From 1 April 2010, members
became eligible to accrue future service benefits in either Afterwork or the Pension Investment Plan (PIP), a historic defined contribution section
which is now closed to future contributions. The risks that Barclays runs in relation to the 1964 section are typical of final salary pension
schemes, principally that investment returns fall short of expectations, that inflation exceeds expectations, and that retirees live longer than
expected.
Barclays Pension Savings Plan (BPSP)
From 1 October 2012, a new UK pension scheme, the BPSP, was established to satisfy Auto Enrolment legislation. The BPSP is a defined
contribution scheme (Group Personal Pension) providing benefits for all new Barclays UK hires from 1 October 2012, employees of the investment
banking business within Barclays International who were in PIP as at 1 October 2012, and also all UK employees who were not members of a
pension scheme at that date. As a defined contribution scheme, BPSP is not subject to the same investment return, inflation or life expectancy
risks for Barclays that defined benefit schemes are. Members’ benefits reflect contributions paid and the level of investment returns achieved.
Other
Apart from the UKRF and the BPSP, Barclays operates a number of smaller pension and long-term employee benefits and post-retirement
healthcare 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
Group.
The Trustee Board comprises six Management Directors selected by Barclays, of whom three are independent Directors with no relationship with
Barclays (and who are not members of the UKRF), plus three Member Nominated Directors selected from eligible active staff and pensioner
members who apply for the role.
The BPSP is a Group Personal Pension arrangement which operates as a collection of personal pension plans. Each personal pension plan
is a direct contract between the employee and the BPSP provider (Legal & General Assurance Society Limited), and is regulated by the FCA.
Similar principles of pension governance apply to the Group’s other pension schemes, depending on local legislation.
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Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 35 Pensions and post-retirement benefits continued
Amounts recognised
The following tables include amounts recognised in the income statement and an analysis of benefit obligations and scheme assets for all Group
defined benefit schemes. The net position is reconciled to the assets and liabilities recognised on the balance sheet. The tables include funded
and unfunded post-retirement benefits.
Income statement charge
Current service cost
Net finance cost
Past service cost
Other movements
Total
2017
£m
265
(12)
(3)
–
250
2016
£m
243
(32)
–
2
213
2015
£m
255
41
(432)
1
(135)
Past service costs includes a £3m (2016: £nil; 2015: £429m) gain on valuation of a component of the defined retirement benefit liability.
Balance sheet reconciliation
2017
2016
Benefit obligation at beginning of the year
Current service cost
Interest costs on scheme liabilities
Past service cost
Remeasurement loss – financial
Remeasurement (loss)/gain – demographic
Remeasurement (loss)/gain – experience
Employee contributions
Benefits paid
Exchange and other movements
Benefit obligation at end of the year
Fair value of scheme assets at beginning of the year
Interest income on scheme assets
Employer contribution
Remeasurement – return on scheme assets greater than discount rate
Employee contributions
Benefits paid
Exchange and other movements
Fair value of scheme assets at the end of the year
Net surplus/(deficit)
Retirement benefit assets
Retirement benefit liabilities
Net retirement benefit assets/(liabilities)
Of which
relates to
UKRF
£m
(31,847)
(245)
(810)
–
(330)
(240)
(614)
(1)
4,927
–
(29,160)
31,820
831
1,124
1,263
1
(4,927)
–
30,112
952
952
–
952
Total
£m
(33,033)
(265)
(843)
3
(387)
(228)
(612)
(5)
4,970
132
(30,268)
32,657
855
1,152
1,333
5
(4,970)
(110)
30,922
654
966
(312)
654
Of which
relates to
UKRF
£m
(26,027)
(220)
(980)
–
(7,170)
390
490
(1)
1,800
(129)
(31,847)
26,829
1,023
634
5,002
1
(1,800)
131
31,820
(27)
–
(27)
(27)
Total
£m
(28,279)
(243)
(1,016)
–
(7,214)
413
525
(4)
1,852
933
(33,033)
28,752
1,048
720
5,009
4
(1,852)
(1,024)
32,657
(376)
14
(390)
(376)
Included within the benefit obligation was £895m (2016: £979m) relating to overseas pensions and £213m (2016: £207m) relating to other
post-employment benefits.
As at 31 December 2017, the UKRF’s scheme assets were in surplus versus IAS 19 obligations by £952m (2016: deficit of £27m). The movement
for the UKRF is mainly due to payment of deficit contributions, higher than assumed asset returns, updated mortality assumptions, and lower
expected future price inflation, offset by a decrease in discount rate, transfers out of the scheme, and the introduction of an assumption for future
transfers out. Of the £4,927m (2016: £1,800m) UKRF benefits paid out, £4,151m (2016: £1,029m) 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, Barclays expects to be able to recover any surplus. The Trustee does not have a substantive right to augment benefits, nor do
they have the right to wind up the plan except in the dissolution of the Group or termination of contributions by the Group. The application of the
asset ceiling to other plans is considered on an individual plan basis.
302 Barclays PLC Annual Report 2017
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Employee benefitsNotes to the financial statements
35 Pensions and post-retirement benefits continued
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
Discount rate
Inflation rate (RPI)
2017
% p.a.
2.46
3.22
2016
% p.a.
2.62
3.35
The UKRF discount rate assumption for 2017 was based on a variant of the standard Willis Towers Watson RATE Link model. This variant includes
all bonds rated AA by at least one of the four major ratings agencies, and assumes that yields after year 30 are flat. The RPI inflation assumption
for 2017 was set by reference to the Bank of England’s implied inflation spot curve, assuming the spot curve remains flat after 30 years. The
inflation assumption incorporates a deduction of 20 basis points as an allowance for an inflation risk premium. The methodology used to derive
the discount rate and price inflation assumptions is consistent with that used at the prior year end, except the inflation spot curve was held flat
after 25 years at 2016.
The UKRF’s post-retirement mortality assumptions are based on a best estimate assumption derived from an analysis in 2016 of Barclays 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 2016 core projection model published by the Continuous Mortality Investigation Bureau subject to
a long-term trend of 1.25% per annum in future improvements. The methodology used is consistent with the prior year end, except that the
2015 core projection model was used at 2016. 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
Life expectancy at 60 for current pensioners (years)
– Males
– Females
Life expectancy at 60 for future pensioners currently aged 40 (years)
– Males
– Females
2017
2016
2015
27.8
29.4
29.3
31.0
27.9
29.7
29.7
31.7
28.4
30.0
30.2
32.0
An assumption for future transfers out has been introduced at 2017, increasing the benefit obligation by about 2%, as numbers of deferred
members transferring out were at higher levels in 2017 than previously experienced. The assumption introduced is that 20% of the benefit
obligations in respect of deferred members will transfer out during 2018, 15% in 2019, 10% in 2020, 5% in 2021, tapering down to 0% from
2022 onwards. The assumption used at 2016 was nil transfers out.
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 expressing any specific view of the probability of such movements
happening.
Change in key assumptions
Discount rate
0.5% p.a. increase
0.25% p.a. increase
0.25% p.a. decrease
0.5% p.a. decrease
Assumed RPI
0.5% p.a. increase
0.25% p.a. increase
0.25% p.a. decrease
0.5% p.a. decrease
Life expectancy at 60
One year increase
One year decrease
2017
(Decrease)/
Increase in
UKRF
defined
benefit
obligation
£bn
2016
(Decrease)/
Increase in
UKRF
defined
benefit
obligation
£bn
(2.4)
(1.2)
1.3
2.8
1.6
0.8
(0.7)
(1.5)
1.0
(1.0)
(2.8)
(1.4)
1.5
3.2
1.9
0.9
(0.9)
(2.0)
1.1
(1.1)
The weighted average duration of the benefit payments reflected in the defined benefit obligation for the UKRF is 20 years.
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Barclays PLC Annual Report 2017 303
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 35 Pensions and post-retirement benefits continued
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. Asset
managers are permitted some flexibility to vary the asset allocation from the long-term investment strategy within control ranges agreed with
the Trustee from time to time.
The UKRF also employs derivative instruments, where appropriate, to achieve a desired exposure or return, or to match assets more closely
to liabilities. The value of assets shown reflects the assets held by the scheme, with any derivative holdings reflected on a fair value basis.
The value of the assets of the schemes and their percentage in relation to total scheme assets were as follows:
Analysis of scheme assets
As at 31 December 2017
Equities – quoted
Equities – non-quoted
Bonds – fixed governmenta
Bonds – index-linked governmenta
Bonds – corporate and othera
Property – commercialb
Derivativesb
Otherc
Fair value of scheme assets
As at 31 December 2016
Equities – quoted
Equities – non-quoted
Bonds – fixed governmenta
Bonds – index-linked governmenta
Bonds – corporate and othera
Property – commercialb
Derivativesb
Otherc
Fair value of scheme assets
Notes
a Assets held are predominantly quoted.
b Assets held are predominantly non-quoted.
c Assets held are predominantly in Infrastructure Funds.
Total
Of which relates to UKRF
% of total
fair value of
scheme
assets
%
14.1
6.5
7.9
42.3
16.8
6.2
2.6
3.6
100.0
24.9
6.3
4.1
40.3
16.0
5.0
2.7
0.7
100.0
Value
£m
4,377
2,001
2,433
13,089
5,195
1,911
816
1,100
30,922
8,123
2,043
1,330
13,173
5,222
1,630
870
266
32,657
% of total
fair value of
scheme
assets
%
13.8
6.6
7.3
43.4
16.6
6.3
2.7
3.3
100.0
24.6
6.4
3.4
41.4
15.9
5.1
2.7
0.5
100.0
Value
£m
4,151
2,001
2,184
13,078
4,999
1,902
816
981
30,112
7,840
2,042
1,072
13,165
5,054
1,622
870
155
31,820
Included within the fair value of scheme assets were: £0.1m (2016: £0.2m) relating to shares in Barclays PLC and £0.6m (2016: £0.1m) relating
to bonds issued by Barclays PLC. The UKRF also invests in pooled investment vehicles which may hold shares or debt issued by Barclays PLC.
The UKRF scheme assets also include £15m (2016: £32m) relating to UK private equity investments and £1,986m (2016: £2,009m) relating
to overseas private equity investments. These are disclosed above within Equities – non-quoted.
Approximately 48% 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.
Funding
The Scheme Actuary prepares an annual update of the UKRF funding position in addition to the full triennial actuarial valuation. The latest annual
update was carried out as at 30 September 2017 and showed a deficit of £4.8bn and a funding level of 86.8%.
The last triennial actuarial valuation of the UKRF had an effective date of 30 September 2016 and was completed in July 2017. This valuation
showed a funding deficit of £7.9bn and a funding level of 81.5%, versus £6.0bn funding deficit at the 30 September 2015 update.
The improvement in funding position between 30 September 2016 and 30 September 2017 was largely due to payment of deficit contributions,
higher than assumed asset returns, higher Government bond yields, and transfers out of the scheme.
304 Barclays PLC Annual Report 2017
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Employee benefitsNotes to the financial statements 35 Pensions and post-retirement benefits continued
At the 2016 triennial actuarial valuation the Group and UKRF Trustee agreed a revised scheme-specific funding target, statement of funding
principles, schedule of contributions, a recovery plan to seek to eliminate the deficit relative to the funding target and some additional support
measures. The agreement with the UKRF Trustee also takes into account the changes to the Group structure that will be implemented as a result
of ring-fencinga. Barclays Bank PLC will remain as the principal employer of the UKRF.
The main differences between the funding and IAS 19 assumptions were 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 2016 valuation recovery plan are shown alongside
the deficit recovery contributions agreed in 2014 for the prior 30 September 2013 valuation.
Year
2017
2018
2019
2020
2021
2022 to 2026
Deficit
contributions
30 September 2016
valuation
£m
740
500
500
500
1,000
1,000 each year
Deficit
contributions
30 September 2013
valuation
£m
1,240b
740
740
740
240b
–
Note
a Refer to page 204 of the Annual Report for further information on structural reform (unaudited).
b The 2017 deficit contributions from the 30 September 2013 valuation included up to £500m payable if the deficit in 2017 exceeded a certain level. Of this £500m, £250m was paid
during the first half of 2017. Following the agreement of the 30 September 2016 valuation recovery plan, in July 2017, the remaining payments were no longer required.
The deficit reduction contributions are in addition to the regular contributions to meet the 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 2020 with an effective date of 30 September 2019.
Other support measures agreed at the same time as the valuation
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, and associated deficit recovery contributions. The collateral pool is
currently made up of government securities and high-quality securitisations of credit cards, mortgages and corporate loans. Agreement has been
made with the Trustee to increase the proportion of the deficit covered from 88.5% to 100% effective from 26 March 2018 with an overall cap
remaining of £9.0bn, at which date the collateral pool will consist of government securities only (the Trustee and Barclays Bank PLC may agree
alternative eligible collateral in the future). 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 40.
Support from Barclays PLC – In the event of Barclays Bank PLC not paying a deficit reduction contribution payment required under the 2016
valuation recovery plan 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
2017
2016
2015
£m
1,124
634
586
Included within the Group’s contributions paid were £153m (2016: £112m; 2015: £nil) Section 75 contributions.
The Group’s expected contribution to the UKRF in respect of defined benefits in 2018 is £716m (2017: £1,585m). In addition, the expected
contributions to UK defined contribution schemes in 2018 is £35m (2017: £36m) to the UKRF and £146m (2017: £124m) to the BPSP.
home.barclays/annualreport
Barclays PLC Annual Report 2017 305
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance The section presents information on the Group’s investments in subsidiaries, joint ventures and associates and its interests in structured
entities. Detail is also given on securitisation transactions the Group has entered into and arrangements that are held off-balance sheet.
36 Principal subsidiaries
Barclays applies IFRS 10 Consolidated Financial Statements. The consolidated financial statements combine the financial statements of
Barclays PLC and all its subsidiaries. Subsidiaries are entities over which the Group has control. Under IFRS 10, this is when the Group is exposed
or has rights to variable returns from its involvement in the entity and has the ability to affect those returns through its power over the entity.
The Group reassesses whether it controls an entity if facts and circumstances indicate that there have been changes to its power, its rights
to variable returns or its ability to use its power to affect the amount of its returns.
Intra-group transactions and balances are eliminated on consolidation and consistent accounting policies are used throughout the Group for
the purposes of the consolidation. Changes in ownership interests in subsidiaries are accounted for as equity transactions if they occur after
control has been obtained and they do not result in loss of control.
The significant judgements used in applying this policy are set out below.
Accounting for investment in subsidiaries
In the individual financial statements of Barclays PLC, investments in subsidiaries are stated at cost less impairment.
Principal subsidiaries for the Group are set out below. This includes those subsidiaries that are most significant in the context of the Group’s
business, results or financial position.
Company name
Barclays Bank PLC
Barclays Capital Securities Limited
Barclays Securities Japan Limited
Barclays Capital Inc
Barclays Services Limited
Barclays Bank Delaware
Principal place of business
or incorporation
England
England
Japan
United States
England
United States
Nature of business
Banking, holding Company
Securities dealing
Securities dealing
Securities dealing
Service Company
Credit card issuer
Non-controlling
interests –
proportion of
ownership
interests
%
11
–
–
–
–
–
Non-controlling
interests –
proportion of
voting interests
%
–
–
–
–
–
–
Percentage of
voting rights held
%
100
100
100
100
100
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.
Refer to Note 33 for more information.
Barclays Africa Group Limited was considered a principal subsidiary in 2016. During 2017 Barclays reduced its shareholding in BAGL. This resulted
in the deconsolidation of BAGL from the Group as of 1 June 2017, with the residual holding recognised as an available for sale investment.
Determining whether the Group has control of an entity is generally straightforward based on ownership of the majority of the voting capital.
However, in certain instances, this determination will involve judgement, particularly in the case of structured entities where voting rights are often
not the determining factor in decisions over the relevant activities. This judgement may involve assessing the purpose and design of the entity.
It will also often be necessary to consider whether the Group, or another involved party with power over the relevant activities, is acting as
a principal in its own right or as an agent on behalf of others.
There is also often considerable judgement involved in the ongoing assessment of control over structured entities. In this regard, where market
conditions have deteriorated such that the other investors’ exposures to the structure’s variable returns have been substantively eliminated, the
Group may conclude that the managers of the structured entity are acting as its agent and therefore will consolidate the structured entity.
An interest in equity voting rights exceeding 50% would typically indicate that the Group has control of an entity. However, the entity set out
below is excluded from consolidation because the Group does not have exposure to its variable returns.
Country of registration or incorporation
Cayman Islands
Company name
Palomino Limited
Percentage of
voting rights held
%
100
Equity
shareholders’
funds
£m
9
Retained profit
for the year
£m
7
This entity is managed by an external counterparty and consequently is not controlled by the Group. Interests relating to this entity are included in
Note 37.
306 Barclays PLC Annual Report 2017
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Scope of consolidationNotes to the financial statements 36 Principal subsidiaries continued
Significant restrictions
As is typical for a Group of its size and international scope, there are restrictions on the ability of Barclays PLC to obtain distributions of capital,
access the assets or repay the liabilities of members of its Group due to the statutory, regulatory and contractual requirements of its subsidiaries
and due to the protective rights of non-controlling interests. These are considered below.
Regulatory requirements
Barclays’ principal subsidiary companies have assets and liabilities before intercompany eliminations of £1,407bn (2016: £1,553bn) and £1,341bn
(2016: £1,480bn) respectively. The assets and liabilities are subject to prudential regulation and regulatory capital requirements in the countries in
which they are regulated. These require entities to maintain minimum capital levels which cannot be returned to the Parent company, Barclays PLC
on a going concern basis.
In order to meet capital requirements, subsidiaries may hold certain equity-accounted and debt-accounted issued financial instruments and
non-equity instruments such as Tier 1 and Tier 2 capital instruments and other forms of subordinated liabilities. Refer to Note 33 and Note 30 for
particulars of these instruments. These instruments may be subject to cancellation clauses or preference share restrictions that would limit the
ability of the entity to repatriate the capital on a timely basis.
Liquidity requirements
Regulated subsidiaries of the Group are required to meet PRA and local regulatory requirements pertaining to liquidity. Some of the subsidiaries
affected are Barclays Bank PLC and Barclays Capital Inc which must maintain daily compliance with the regulatory minimum. See pages 166 to
178 for further details of liquidity requirements, including those of our significant subsidiaries.
Statutory requirements
The Group’s subsidiaries are subject to statutory requirements not to make distributions of capital and unrealised profits and generally to maintain
solvency. These requirements restrict the ability of subsidiaries to make remittances of dividends to Barclays PLC, the ultimate parent, except in the
event of a legal capital reduction or liquidation. In most cases, the regulatory restrictions referred to above exceed the statutory restrictions.
Contractual requirements
Asset encumbrance
The Group uses its financial assets to raise finance in the form of securitisations and through the liquidity schemes of central banks.
Once encumbered, the assets are not available for transfer around the Group. The assets typically affected are disclosed in Note 40.
Assets held by consolidated structured entities
None of the assets (2016: £99m) included in the Group’s balance sheet relate to consolidated investment funds, held to pay return and principal
to the holders of units in the funds. Any assets held in these funds cannot be transferred to other members of the Group. The decrease since
2016 is due to the sale of the French Funds Business.
Other restrictions
The Group is required to maintain balances with central banks and other regulatory authorities, and these amounted to £3,360m (2016: £4,254m).
37 Structured entities
A structured entity is an entity in which voting or similar rights are not the dominant factor in deciding control. Structured entities are generally
created to achieve a narrow and well-defined objective with restrictions around their ongoing activities.
Depending on the Group’s power over the activities of the entity and its exposure to and ability to influence its own returns, it may consolidate
the entity. In other cases, it may sponsor or have exposure to such an entity but not consolidate it.
Consolidated structured entities
The Group has contractual arrangements which may require it to provide financial support to the following types of consolidated structured
entities:
Securitisation vehicles
The Group uses securitisation as a source of financing and a means of risk transfer. Refer to Note 39 for further detail.
The Group, in previous periods, has provided liquidity facilities to certain securitisation vehicles. At 31 December 2017, there were no outstanding
loan commitments to these entities (2016: £152m).
Commercial paper (CP) and medium-term note conduits
The Group provided £10.2bn (2016: £9bn) in undrawn contractual backstop liquidity facilities to CP conduits.
Fund management entities
In previous periods, Barclays had contractually guaranteed the performance of certain cash investments in a number of managed investment
funds which resulted in their consolidation. As at 31 December 2017, the notional value of the guarantees were £nil (2016: £99m) as the
European Wealth Funds associated with these guarantees were either closed or ownership has been transferred outside the Group and they
are no longer consolidated.
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Barclays PLC Annual Report 2017 307
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 37 Structured entities continued
Employee benefit and other trusts
The Group provides capital contributions to employee share trusts to enable them to meet their obligations to employees under share-based
payment plans. During 2017, the Group provided undrawn liquidity facilities of £1.8bn (2016: £0.4bn) to certain trusts.
Unconsolidated structured entities in which the 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 Group. Such interests include holdings of debt or equity securities, derivatives that transfer financial risks from
the entity to the Group, lending, loan commitments, financial guarantees and investment management agreements.
Interest rate swaps, foreign exchange derivatives that are not complex and which expose the Group to insignificant credit risk by being senior
in the payment waterfall of a securitisation and derivatives that are determined to introduce risk or variability to a structured entity are not
considered to be an interest in an entity and have been excluded from the disclosures below.
The nature and extent of the Group’s interests in structured entities is summarised below:
Summary of interests in unconsolidated structured entities
As at 31 December 2017
Assets
Trading portfolio assets
Financial assets designated at fair value
Derivative financial instruments
Loans and advances to banks
Loans and advances to customers
Reverse repurchase agreements and other similar secured lending
Other assets
Total assets
Liabilities
Derivative financial instruments
As at 31 December 2016
Assets
Trading portfolio assets
Financial assets designated at fair value
Derivative financial instruments
Loans and advances to banks
Loans and advances to customers
Reverse repurchase agreements and other similar secured lending
Other assets
Total assets
Liabilities
Derivative financial instruments
Secured
financing
£m
Short-term
traded
interests
£m
Traded
derivatives
£m
Other
interests
£m
Total
£m
–
31,520
–
–
5,481
753
–
37,754
10,788
–
–
–
–
–
–
10,788
–
–
4,380
–
–
–
–
4,380
699
2,721
–
–
17,386
–
509
21,315
11,487
34,241
4,380
–
22,867
753
509
74,237
–
–
5,193
3,356
8,549
–
22,706
–
–
–
6,338
–
29,044
8,436
–
–
–
–
–
–
8,436
–
–
4,731
–
–
–
–
4,731
516
367
2,130
4,915
24,142
–
919
32,989
8,952
23,073
6,861
4,915
24,142
6,338
919
75,200
–
–
3,567
2,130
5,697
Secured financing arrangements, short-term traded interests and traded derivatives are typically managed under market risk management policies
described on page 129 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 Group routinely enters into reverse repurchase contracts, stock borrowing and similar arrangements on normal commercial terms where the
counterparty to the arrangement is a structured entity. Due to the nature of these arrangements, especially the transfer of collateral and ongoing
margining, the Group has minimal exposure to the performance of the structured entity counterparty. This includes margin lending which is
presented under Loans and advances to customers in 2017 to align to the balance sheet presentation. In 2016 margin lending was presented
in Reverse repurchase agreements and other similar secured lending within Note 37. A description of these transactions is included in Note 22.
Short-term traded interests
The 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 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 2017, £9,645m (2016: £6,568m) of the Group’s £10,788m (2016: £8,436m) short-term traded interests were comprised of
debt securities issued by asset securitisation vehicles.
308 Barclays PLC Annual Report 2017
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Scope of consolidationNotes to the financial statements 37 Structured entities continued
Traded derivatives
The Group enters into a variety of derivative contracts with structured entities which reference market risk variables such as interest rates, foreign
exchange rates and credit indices 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 15. The risk of loss may be mitigated through
ongoing margining requirements as well as a right to cash flows from the structured entity which are senior in the payment waterfall. Such
margining requirements are consistent with market practice for many derivative arrangements and in line with the Group’s normal credit policies.
Derivative transactions require the counterparty to provide cash or other collateral under margining agreements to mitigate counterparty credit
risk. The Group is mainly exposed to settlement risk on these derivatives which is mitigated through daily margining. Total notionals amounted
to £1,680,615m (2016: £1,183,215m).
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 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 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
As at 31 December 2017
Trading portfolio assets
– Debt securities
Financial assets designated at fair value
– Loans and advances
Loans and advances to banks
Loans and advances to customers
Other assets
Total on-balance sheet exposures
Total off-balance sheet notional amounts
Maximum exposure to loss
Total assets of the entity
As at 31 December 2016
Trading portfolio assets
– Debt securities
– Equity securities
Financial assets designated at fair value
– Loans and advances
– Debt securities
– Equity securities
Derivative financial instruments
Loans and advances to banks
Loans and advances to customers
Other assets
Total on-balance sheet exposures
Total off-balance sheet notional amounts
Maximum exposure to loss
Total assets of the entity
Multi-seller
conduit
programmes
£m
Investment
funds and
trusts
£m
Lending
£m
Others
£m
Total
£m
–
–
–
699
699
–
–
5,424
468
5,892
6,270
12,162
103,057
–
–
11,497
11
11,508
6,337
17,845
179,994
–
–
–
8
8
–
8
11,137
2,721
–
465
22
3,907
446
4,353
22,669
2,721
–
17,386
509
21,315
13,053
34,368
316,857
–
–
–
–
–
–
–
–
–
–
–
6,016
5
6,021
2,734
8,755
75,535
260
50
–
–
4,890
16,754
7
21,961
9,873
31,834
492,950
–
–
–
–
–
–
13
13
–
13
18,550
441
75
4
48
5
2,130
25
1,372
894
4,994
1,739
6,733
39,342
441
75
264
98
5
2,130
4,915
24,142
919
32,989
14,346
47,335
626,377
Maximum exposure to loss
Unless specified otherwise below, the 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 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 Group is protected from loss through over-collateralisation, seller guarantees,
or other credit enhancements provided to the conduit.
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Barclays PLC Annual Report 2017 309
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 37 Structured entities continued
Lending
The portfolio includes lending provided by the Group to unconsolidated structured entities in the normal course of its lending business to earn
income in the form of interest and lending fees and includes loans to structured entities that are generally collateralised by property, equipment or
other assets. All loans are subject to the Group’s credit sanctioning process. Collateral arrangements are specific to the circumstances of each loan
with additional guarantees and collateral sought from the sponsor of the structured entity for certain arrangements. During the period the Group
incurred an impairment of £11m (2016: £24m) against such facilities.
Investment funds and trusts
In the course of its fund management activities, the Group establishes pooled investment funds that comprise investments of various kinds,
tailored to meet certain investors’ requirements. The Group’s interest in funds is generally restricted to a fund management fee, the value of which
is typically based on the performance of the fund.
The Group acts as trustee to a number of trusts established by or on behalf of its clients. The purpose of the trusts, which meet the definition of
structured entities, is to hold assets on behalf of beneficiaries. The Group’s interest in trusts is generally restricted to unpaid fees which, depending
on the trust, may be fixed or based on the value of the trust assets. Barclays has no other risk exposure to the trusts.
Other
This includes fair value loans with structured entities where the market risk is materially hedged with corresponding derivative contracts, interests
in debt securities issued by securitisation vehicles and drawn and undrawn loan facilities to these entities.
Assets transferred to sponsored unconsolidated structured entities
Assets transferred to sponsored unconsolidated structured entities were immaterial.
38 Investments in associates and joint ventures
Accounting for associates and joint ventures
Barclays applies IAS 28 Investments in Associates and IFRS 11 Joint Arrangements. Associates are entities in which the Group has significant
influence, but not control, over the operating and financial policies. Generally the Group holds more than 20%, but less than 50%, of their
voting shares. Joint ventures are arrangements where the Group has joint control and rights to the net assets of the entity.
The Group’s investments in associates and joint ventures are initially recorded at cost and increased (or decreased) each year by the Group’s
share of the post acquisition profit/(loss). The Group ceases to recognise its share of the losses of equity accounted associates when its share
of the net assets and amounts due from the entity have been written off in full, unless it has a contractual or constructive obligation to make
good its share of the losses. In some cases, investments in these entities may be held at fair value through profit or loss, for example, those held
by private equity businesses.
There are no individually significant investments in joint ventures or associates held by Barclays.
Equity accounted
Held at fair value through profit or loss
Total
Associates
£m
402
–
402
2017
Joint ventures
£m
316
447
763
Total
£m
718
447
1,165
Associates
£m
321
–
321
2016
Joint ventures
£m
363
484
847
Total
£m
684
484
1,168
Summarised financial information for the Group’s equity accounted associates and joint ventures is set out below. The amounts shown are the net
income of the investees, not just the Group’s share for the year ended 31 December 2017, 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.
Profit from continuing operations
Other comprehensive expense
Total comprehensive income from continuing operations
Associates
2017
£m
117
–
117
2016
£m
33
–
33
Joint ventures
2017
£m
77
(15)
62
2016
£m
64
19
83
Unrecognised shares of the losses of individually immaterial associates and joint ventures were £nil (2016: £nil).
The Group’s associates and joint ventures are subject to statutory or contractual requirements such that they cannot make remittances
of dividends or make loan repayments to Barclays PLC without agreement from the external parties.
The Group’s share of commitments and contingencies of its associates and joint ventures comprised unutilised credit facilities provided to
customers of £1,712m (2016: £1,755m). In addition, the Group has made commitments to finance or otherwise provide resources to its joint
ventures and associates of £246m (2016: £263m).
310 Barclays PLC Annual Report 2017
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Scope of consolidationNotes to the financial statements 39 Securitisations
Accounting for securitisations
The Group uses securitisations as a source of finance and a means of risk transfer. Such transactions generally result in the transfer
of contractual cash flows from portfolios of financial assets to holders of issued debt securities.
Securitisations may, depending on the individual arrangement, result in continued recognition of the securitised assets and the recognition
of the debt securities issued in the transaction; lead to partial continued recognition of the assets to the extent of the Group’s continuing
involvement in those assets or to derecognition of the assets and the separate recognition, as assets or liabilities, of any rights and obligations
created or retained in the transfer. Full derecognition only occurs when the Group transfers both its contractual right to receive cash flows from
the financial assets, or retains the contractual rights to receive the cash flows, but assumes a contractual obligation to pay the cash flows to
another party without material delay or reinvestment, and also transfers substantially all the risks and rewards of ownership, including credit
risk, prepayment risk and interest rate risk.
In the course of its normal banking activities, the 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 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
The Group was party to securitisation transactions involving its residential mortgage loans and credit card balances.
In these transactions, the assets, interests in the assets, or beneficial interests in the cash flows arising from the assets, are transferred to a special
purpose entity, which then issues interest bearing debt securities to third party investors.
Securitisations may, depending on the individual arrangement, result in continued recognition of the securitised assets and the recognition of the
debt securities issued in the transaction. Partial continued recognition of the assets to the extent of the Group’s continuing involvement in those
assets can also occur or derecognition of the assets and the separate recognition, as assets or liabilities, of any rights and obligations created or
retained in the transfer.
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:
Loans and advances to customers
Residential mortgage loans
Credit cards, unsecured and other
retail lending
Total
2017
2016
Assets
Liabilities
Assets
Liabilities
Carrying
amount
£m
Fair value
£m
Carrying
amount
£m
Fair value
£m
Carrying
amount
£m
Fair value
£m
Carrying
amount
£m
Fair value
£m
–
–
–
–
125
120
(107)
(107)
3,772
3,772
3,757
3,757
(3,635)
(3,635)
(3,626)
(3,626)
5,094
5,219
5,084
5,204
(4,926)
(5,033)
(4,931)
(5,038)
Balances included within loans and advances to customers represent securitisations where substantially all the risks and rewards of the asset have
been retained by the Group.
The relationship between the transferred assets and the associated liabilities is that holders of notes may only look to cash flows from the
securitised assets for payments of principal and interest due to them under the terms of their notes, although the contractual terms of their notes
may be different to the maturity and interest of the transferred assets.
For transfers of assets in relation to repurchase agreements, refer to Note 22 and Note 40.
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Barclays PLC Annual Report 2017 311
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 39 Securitisations continued
Continuing involvement in financial assets that have been derecognised
In some cases, the Group may have transferred a financial asset in its entirety but may have continuing involvement in it. This arises in asset
securitisations where loans and asset backed securities were derecognised as a result of the Group’s involvement, mainly with CLOs and CMBS.
Continuing involvement largely arises from providing financing into these structures in the form of retained notes, which do not bear first losses.
The table below shows the potential financial implications of such continuing involvement:
Type of transfer
2017
CLO and other assets
Commercial mortgage backed securities
Total
2016
CLO and other assets
Commercial mortgage backed securities
Total
Continuing involvementa
Carrying
amount
£m
Fair value
£m
Maximum
exposure to
loss
£m
Gain/(loss) from continuing
involvement
For the
year ended
£m
Cumulative to
31 December
£m
–
94
94
10
–
10
–
94
94
10
–
10
–
94
94
10
–
10
–
1
1
–
–
–
–
1
1
(3)
–
(3)
Note
a Assets which represent the Group’s continuing involvement in derecognised assets are recorded in Loans and advances and Trading portfolio assets.
40 Assets pledged
Assets are pledged as collateral to secure liabilities under repurchase agreements, securitisations and stock lending agreements or as security
deposits relating to derivatives. Assets pledged as collateral include all assets categorised as encumbered in the disclosure on page 171
(unaudited), other than those held in commercial paper conduits. In these transactions, Barclays will be required to step in to provide financing
itself under a liquidity facility if the vehicle cannot access the commercial paper market. The following table summarises the nature and carrying
amount of the assets pledged as security against these liabilities:
Trading portfolio assets
Financial assets at fair value
Loans and advances to customers
Cash collateral
Financial investments
Non current assets held for sale
Assets pledged
2017
£m
73,899
4,798
41,772
56,351
15,058
–
191,878
2016
£m
51,241
3,195
30,414
68,797
13,053
117
166,817
Barclays has an additional £9bn (2016: £14bn) of loans and advances within its asset backed funding programmes that can readily be used to
raise additional secured funding and are available to support future issuance.
Total assets pledged includes a collateral pool put in place to provide security for the UKRF funding deficit. Refer to Note 35 for further details.
Collateral held as security for assets
Under certain transactions, including reverse repurchase agreements and stock borrowing transactions, the 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:
Fair value of securities accepted as collateral
Of which fair value of securities re-pledged/transferred to others
Additional disclosure has been included in collateral and other credit enhancements (see pages 140 and 141).
2017
£m
608,412
547,637
2016
£m
466,975
405,582
312 Barclays PLC Annual Report 2017
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Scope of consolidationNotes to the financial statements Notes to the financial statements
Other disclosure matters
The notes included in this section focus on related party transactions, Auditors’ remuneration and Directors’ remuneration. Related parties
include any subsidiaries, associates, joint ventures, entities under common directorships and Key Management Personnel.
41 Related party transactions and Directors’ remuneration
Related party transactions
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party
in making financial or operational decisions, or one other party controls both. The definition includes subsidiaries, associates, joint ventures and
the Group’s pension schemes.
Subsidiaries
Transactions between Barclays PLC and its subsidiaries also meet the definition of related party transactions. Where these are eliminated on
consolidation, they are not disclosed in the Group Financial Statements. Transactions between Barclays PLC and its subsidiary, Barclays Bank PLC,
are fully disclosed in Barclays PLC’s balance sheet and income statement. A list of the Group’s principal subsidiaries is shown in Note 36.
Associates, joint ventures and other entities
The Group provides banking services to its associates, joint ventures, the Group pension funds (principally the UK Retirement Fund) and to entities
under common directorships, providing loans, overdrafts, interest and non-interest bearing deposits and current accounts to these entities as well
as other services. Group companies also provide investment management and custodian services to the Group pension schemes. The Group also
provides banking services for unit trusts and investment funds managed by Group companies, which are not individually material. All of these
transactions are conducted on the same terms as third party transactions. Summarised financial information for the Group’s investments in
associates and joint ventures is set out in Note 38.
Amounts included in the Group’s financial statements, in aggregate, by category of related party entity are as follows:
For the year ended and as at 31 December 2017
Income/(expense)
Impairment releases
Total assets
Total liabilities
For the year ended and as at 31 December 2016
Income/(expense)
Impairment charges
Total assets
Total liabilities
For the year ended and as at 31 December 2015
Income/(expense)
Impairment charges
Total assets
Total liabilities
Associates
£m
Joint ventures
£m
Pension funds,
unit trusts and
investment
funds
£m
(20)
2
2
75
(20)
(13)
72
94
(19)
(4)
36
158
38
–
1,048
2
7
–
2,244
95
40
(2)
1,578
133
4
–
2
162
4
–
–
260
4
–
–
184
Guarantees, pledges or commitments given in respect of these transactions in the year were £27m (2016: £940m) predominantly relating to joint
ventures. No guarantees, pledges or commitments were received in the year. Derivatives transacted on behalf of the pensions funds, unit trusts
and investment funds were £3m (2016: £3m).
Key Management Personnel
The Group’s Key Management Personnel, and persons connected with them, are also considered to be related parties for disclosure purposes.
Key Management Personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities
of Barclays PLC (directly or indirectly) and comprise the Directors of Barclays PLC and the Officers of the Group, certain direct reports of the
Group Chief Executive and the heads of major business units and functions.
There were no material related party transactions with entities under common directorship where a Director or other member of Key Management
Personnel (or any connected person) is also a Director or other member of Key Management Personnel (or any connected person) of Barclays.
The Group provides banking services to Directors and other Key Management Personnel and persons connected to them. Transactions during the
year and the balances outstanding were as follows:
Loans outstanding
As at 1 January
Loans issued during the year
Loan repayments during the year/change of key management personnel
As at 31 December
2017
£m
9.2
0.5
(4.9)
4.8
2016
£m
9.8
0.6
(1.2)
9.2
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Barclays PLC Annual Report 2017 313
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 41 Related party transactions and Directors’ remuneration continued
No allowances for impairment were recognised in respect of loans to Directors or other members of Key Management Personnel (or any
connected person).
Deposits outstanding
As at 1 January
Deposits received during the year
Deposits repaid during the year/change of key management personnel
As at 31 December
2017
£m
7.3
25.7
(26.1)
6.9
2016
£m
116.5
18.9
(128.1)
7.3
Total commitments outstanding
Total commitments outstanding refers to the total of any undrawn amounts on credit cards and/or overdraft facilities provided to Key
Management Personnel. Total commitments outstanding as at 31 December 2017 were £0.3m (2016: £0.2m).
All loans to Directors and other Key Management Personnel (and persons connected to them), (a) were made in the ordinary course of business,
(b) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the same time for comparable
transactions with other persons and (c) did not involve more than a normal risk of collectability or present other unfavourable features.
Remuneration of Directors and other Key Management Personnel
Total remuneration awarded to Directors and other Key Management Personnel below represents the awards made to individuals that have been
approved by the Board Remuneration Committee as part of the latest remuneration decisions, and is consistent with the approach adopted for
disclosures set out on pages 93 to 116. 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 Directors and other Key
Management Personnel.
Salaries and other short-term benefits
Pension costs
Other long-term benefits
Share-based payments
Employer social security charges on emoluments
Costs recognised for accounting purposes
Employer social security charges on emoluments
Other long-term benefits – difference between awards granted and costs recognised
Share-based payments – difference between awards granted and costs recognised
Total remuneration awarded
Disclosure required by the Companies Act 2006
The following information regarding Directors is presented in accordance with the Companies Act 2006:
Aggregate emolumentsa
Amounts paid under LTIPsb
2017
£m
33.9
0.1
18.4
26.8
9.6
88.8
(9.6)
(9.8)
(11.7)
57.7
2017
£m
8.5
1.1
9.6
2016
£m
31.9
0.2
11.0
21.9
6.2
71.2
(6.2)
(2.5)
(8.9)
53.6
2016
£m
8.1
–
8.1
Notes
a The aggregate emoluments include amounts paid for the 2017 year. In addition, deferred share awards for 2017 will be made to James E Staley and Tushar Morzaria which will
only vest subject to meeting certain conditions. The total of the deferred share awards is £1m (2016: £1.4m).
b The figure above for ‘Amounts paid under LTIPs’ relates to an LTIP award that was released to Tushar Morzaria in 2017. Dividend shares released on the award are excluded.
The LTIP figure in the single total figure table for executive Directors’ 2017 remuneration in the Directors’ Remuneration report relates to the award that is scheduled to be
released in 2018 in respect of the 2015-2017 LTIP cycle.
There were no pension contributions paid to defined contribution schemes on behalf of Directors (2016: £nil). There were no notional pension
contributions to defined contribution schemes.
As at 31 December 2017, there were no Directors accruing benefits under a defined benefit scheme (2016: nil).
Directors’ and Officers’ shareholdings and options
The beneficial ownership of ordinary share capital of Barclays PLC by all Directors and Officers of Barclays PLC (involving 22 persons) at
31 December 2017 amounted to 12,460,877 (2016: 11,464,580) ordinary shares of 25p each (0.07% of the ordinary share capital outstanding).
At 31 December 2017, executive Directors and Officers of Barclays PLC (involving 11 persons) held options to purchase a total of 6,000
(2016: 22,527) Barclays PLC ordinary shares of 25p each at a price of 120p under Sharesave.
Advances and credit to Directors and guarantees on behalf of Directors
In accordance with Section 413 of the Companies Act 2006, the total amount of advances and credits made available in 2017 to persons who
served as Directors during the year was £0.2m (2016: £0.2m). The total value of guarantees entered into on behalf of Directors during 2017 was
£nil (2016: £nil).
314 Barclays PLC Annual Report 2017
home.barclays/annualreport
Other disclosure mattersNotes to the financial statements 42 Auditors’ remuneration
Auditors’ remuneration is included within consultancy, legal and professional fees in administration and general expenses and comprises:
Audit of the Group’s annual accounts
Other services:
Audit of the Company’s subsidiariesa
Other audit related feesb
Other servicesc
Total Auditors’ remuneration
2017
£m
11
27
8
2
48
2016
£m
14
27
4
4
49
2015
£m
13
21
7
2
43
Notes
a Comprises the fees for the statutory audit of subsidiaries both inside and outside the UK and fees for work performed by associates of KPMG or PwC in respect of the
consolidated financial statements of the Company.
b Comprises services in relation to statutory and regulatory filings. These include audit services for the review of the interim financial information under the Listing Rules of the UK
listing authority.
c Includes consultation on tax matters, tax advice relating to transactions and other tax planning and advice.
KPMG became the Group’s principal Auditor in 2017. PwC was the principal Auditor in 2016 and 2015.
The figures shown in the above table relate to fees paid to KPMG or PwC as principal Auditor. In addition, fees paid to KPMG in relation to
discontinued operations were £4m (PwC 2016: £12m, PwC 2015: £10m).
43 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 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.
Assets included in disposal groups classified as held for sale
Cash and balances at central banks
Items in the course of collection from other banks
Trading portfolio assets
Financial assets designated at fair value
Derivative financial instruments
Financial investments
Loans and advances to banks
Loans and advances to customers
Prepayments, accrued income and other assets
Investments in associates and joint ventures
Property, plant and equipment
Goodwill
Intangible assets
Current and deferred tax assets
Retirement benefit assets
Total
Balance of impairment unallocated under IFRS 5
Total assets classified as held for sale
Total
2017
£m
–
–
–
3
–
–
–
1,164
–
–
26
–
–
–
–
1,193
–
1,193
Total
2016
£m
2,930
570
3,084
6,984
1,992
7,737
1,666
43,504
696
87
954
997
570
149
33
71,953
(499)
71,454
home.barclays/annualreport
Barclays PLC Annual Report 2017 315
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 43 Assets included in disposal groups classified as held for sale and associated liabilities continued
Liabilities included in disposal groups classified as held for sale
Deposits from banks
Items in the course of collection due to banks
Customer accounts
Repurchase agreements and other similar secured borrowing
Trading portfolio liabilities
Financial liabilities designated at fair value
Derivative financial instruments
Debt securities in issue
Subordinated liabilities
Accruals, deferred income and other liabilities
Provisions
Current and deferred tax liabilities
Retirement benefit liabilities
Total liabilities classified as held for sale
Net assets classified as held for sale
Expected contribution to BAGL
Disposal group post-contribution
Total
2017
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,193
–
1,193
Total
2016
£m
2,149
373
42,431
597
388
7,325
1,611
7,997
934
1,180
103
162
42
65,292
6,162
866
7,028
During the year, a number of disposal groups classified as held for sale have been disposed of. The £70bn decrease in assets is driven by the
disposals of BAGL (£65bn), the French retail business (£4bn), the Egypt business (£1bn), Barclays Vida Pensiones (£0.7bn) and the Zimbabwe
business (£0.4bn). The associated liabilities of the above disposal groups have also been sold in the year.
Discontinued Operations
On 1 March 2016, Barclays announced its intention to reduce the Group’s 62.3% interest in BAGL to a level which would permit Barclays to
deconsolidate BAGL from a regulatory perspective and, prior to that, from an accounting perspective. From this date, BAGL was treated as a
discontinued operation. On 5 May 2016, Barclays sold 12.2% of the Group’s interest in BAGL and on 1 June 2017 Barclays sold a further 33.7%
of BAGL’s issued share capital, resulting in the accounting deconsolidation of BAGL from the Barclays Group. As a result, as of 1 June 2017 BAGL
was consequently no longer reported as a discontinued operation. At this time, Barclays’ holding in BAGL technically met the requirements to
be treated as an Associate. However, following a revision of its governance rights in July 2017 and the difference being immaterial, the holding
was treated as an available for sale asset from the transaction date. In Q317 Barclays contributed 1.5% of BAGL’s ordinary shares to a Black
Economic Empowerment scheme, resulting in Barclays accounting for 126 million ordinary shares in BAGL, representing 14.9% of BAGL’s issued
share capital. The retained investment is reported as an available for sale asset, in the Head Office segment, with Barclays’ share of BAGL’s dividend
recognised in the Head Office income statement.
Prior to the disposal of shares on 1 June 2017, BAGL met the requirements for presentation as a discontinued operation. As such, the results,
which have been presented as the profit after tax and non-controlling interest in respect of the discontinued operation on the face of the Group
income statement, are analysed in the income statement below. The income statement, statement of other comprehensive income and cash flow
statement below represent five months of results as a discontinued operation to 31 May 2017, compared to the full year ended 31 December 2016.
Barclays Africa disposal group income statement
For the year ended 31 December
Net interest income
Net fee and commission income
Net trading income
Net investment income
Net premiums from insurance contracts
Other income
Total income
Net claims and benefits incurred on insurance contracts
Total income net of insurance claims
Credit impairment charges and other provisions
Net operating income
Staff costs
Administration and general expensesa
Operating expenses
Share of post-tax results of associates and joint ventures
(Loss)/profit before tax
Taxation
(Loss)/profit after taxb
Attributable to:
Equity holders of the parent
Non-controlling interests
(Loss)/profit after taxb
2017
£m
1,024
522
149
30
161
(16)
1,870
(84)
1,786
(177)
1,609
(586)
(1,634)
(2,220)
5
(606)
(154)
(760)
2016
£m
2,169
1,072
281
45
362
8
3,937
(191)
3,746
(445)
3,301
(1,186)
(1,224)
(2,410)
6
897
(306)
591
(900)
140
(760)
189
402
591
Notes
a Includes impairment of £1,090m (2016: £nil).
b Total loss in respect of the discontinued operation was £2,195m which included the £60m loss on sale and £1,375m loss on recycling of other comprehensive loss on reserves.
316 Barclays PLC Annual Report 2017
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Other disclosure mattersNotes to the financial statements 43 Assets included in disposal groups classified as held for sale and associated liabilities continued
Other comprehensive income relating to discontinued operations is as follows:
For the year ended 31 December
Available for sale assets
Currency translation reserves
Cash flow hedge reserves
Other comprehensive (loss)/income, net of tax from discontinued operations
The cash flows attributed to the discontinued operation are as follows:
For the year ended 31 December
Net cash flows from operating activities
Net cash flows from investing activities
Net cash flows from financing activities
Effect of exchange rates on cash and cash equivalents
Net increase in cash and cash equivalents
2017
£m
(3)
(38)
19
(22)
2017
£m
540
(245)
(165)
(29)
101
2016
£m
(9)
1,451
89
1,531
2016
£m
1,164
(691)
(105)
37
405
44 Barclays PLC (the Parent company)
Other income
Other income of £690m (2016: £334m) includes £639m (2016: £457m) of income received from gross coupon payments on Barclays Bank PLC
issued AT1 securities.
Non-Current Assets and Liabilities
Investment in subsidiaries
The investment in subsidiaries of £39,354m (2016: £36,553m) predominantly represents investments made into Barclays Bank PLC, including
£8,986m (2016: £6,486m) of AT1 securities. The increase of £2,801m during the year was driven by AT1 issuances of £2,500m during the period,
as well as a £300m investment in Barclays Services Limited (the ‘Group Service Company’).
The Group Service Company was established in September 2017 as a direct subsidiary of Barclays PLC to deliver operational continuity and to
drive operational efficiencies across the Group. In September 2017, Barclays transferred c.£3.8bn of assets and liabilities from Barclays Bank PLC
and its subsidiaries to the Group Service Company.
Loans and advances to subsidiaries, subordinated liabilities and debt securities in issue
During the period, Barclays PLC issued $2bn of Fixed Rate Subordinated Notes, €1.5bn of Fixed Rate Subordinated Notes and SGD 0.2bn Fixed
Rate Subordinated Notes included within the subordinated liabilities balance of £6,501m (2016: £3,789m), $5bn of Fixed and Floating Rate Senior
Notes, £1.95bn of Fixed Rate Senior Notes and €0.5bn Fixed Rate Senior Notes included within the debt securities in issue balance of £22,110m
(2016: £16,893m). The proceeds raised through these transactions were used to invest in Barclays Bank PLC in each case with a ranking
corresponding to the notes issued by Barclays PLC and included within the loans and advances to subsidiaries balance of £23,970m (2016:
£19,421m).
Financial investments
The financial investment assets relate to loans made to subsidiaries of the Group accounted for as available for sale instruments. These include a
feature that allows for the loan to be written down in whole or in part by the borrower only in the event that the liabilities of the subsidiary would
otherwise exceed its assets.
Derivative financial instrument
The derivative financial instrument of £161m (2016: £268m) held by the Parent company represents Barclays PLC’s right to receive a Capital Note
for no additional consideration, in the event the Barclays PLC consolidated CRD IV CET1 ratio (FSA October 2012 transitional statement) falls
below 7% at which point the notes are automatically assigned by the holders to Barclays PLC.
Management of internal investments, loans and advances
Barclays PLC retains the discretion to manage the nature of its internal investments in subsidiaries according to their regulatory and business
needs. As we implement our structural reform programme, Barclays PLC expects to invest capital and funding in Barclays Bank PLC and other
Group subsidiaries such as the Group Service Company, the US IHC and the UK ring-fenced bank. In October 2017, the Bank of England published
a consultation on ‘Internal MREL’ and following that consultation a final statement of policy is expected to be published in H1 2018. Accordingly,
during the course of 2018 Barclays expects to restructure certain of its investments in subsidiaries, including to subordinate internal MREL beneath
operating liabilities, to the extent required to achieve compliance with internal MREL requirements which are expected to be in effect from
1 January 2019.
Total equity
Called up share capital and share premium of Barclays PLC was £22,045m (2016: £21,842m). Other equity instruments of £8,943m
(2016: £6,453m) comprises of AT1 securities. For further details please refer to Note 31.
Structural reform
Barclays’ plans for UK ring-fencing remain on track. The relevant court processes began in November 2017 with the Sanction hearing to be held
on 26 and 27 February 2018 at which the Court will be requested to sanction Barclays’ ring-fencing transfer scheme. We intend to complete the
reorganisation and establish the UK ring-fenced bank in April 2018, ahead of the 1 January 2019 legislative deadline for implementation.
home.barclays/annualreport
Barclays PLC Annual Report 2017 317
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 45 Related undertakings
The Group’s corporate structure consists of
a number of related undertakings, comprising
subsidiaries, joint ventures, associates and
significant other interests. A full list of these
undertakings, the country of incorporation
and the ownership of each share class is set
out below. The information is provided as at
31 December 2017.
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’ 2017
Country Snapshot provides details of where
the Group carries on its business, where its
profits are subject to tax and the taxes it pays
in each country it operates in.
Wholly owned subsidiaries
Unless otherwise stated the undertakings
below are wholly owned and consolidated
by Barclays and the share capital disclosed
comprises ordinary and/or common shares,
100% of the nominal value of which is held
by Group subsidiaries.
Notes
A Directly held by Barclays PLC
B
Partnership Interest
C Membership Interest
D Trust Interest
E
F
Guarantor
Preference Shares
G A Preference Shares
H B Preference Shares
I
J
K
L
Ordinary/Common Shares in addition to other
shares
A Ordinary Shares
B Ordinary Shares
C Ordinary Shares
M F Ordinary Shares
N O Ordinary Shares
O W Ordinary Shares
V
Class A Ordinary Shares, Class A Preference
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, Class F Preference Shares, Class
H 2012 Ordinary Shares, Class H 2012 Preference
Shares, Class H Ordinary Shares, Class H
Preference Shares, Class I Preference Shares, Class
J Preference Shares
W First Class Common Shares, Second Class
X
Y
Common Shares
PEF Carry Shares
EUR Tracker 1 Shares, GBP Tracker 1 Shares,
USD Tracker 1 Shares, USD Tracker 2 Shares,
USD Tracker 3 shares
Z
Not Consolidated (refer to Note 37)
AA USD Linked Ordinary Shares
BB Redeemable Class B Shares
CC A Ordinary, Y Ordinary, Z Ordinary
P
Redeemable Ordinary Shares
DD Nominal Shares
Q Core Shares, Insurance (Classified) Shares
EE A Ordinary, D Ordinary, ZI Ordinary
R
S
T
B, C, D, E (94.36%), F (94.36%), G (94.36%),
H (94.36%), I (94.36%), J (95.23%) and K Class
Shares
A Unit Shares, B Unit Shares
Class A Residual Shares, Class B Residual Shares
U A Voting Shares, B Non-Voting Shares
FF Z Ordinary
GG Class A1 Ordinary Shares, Class A2 Ordinary
Shares
HH Class A Unit Shares
II
A Shares – Tranche I, Premium – Tranche I,
C Shares – Tranche II, Premium – Tranche II
Wholly owned subsidiaries
United Kingdom
– 1 Churchill Place, London, E14 5HP
Aequor Investments Limited
Ardencroft Investments Limited
B D & B Investments Limited
B.P.B. (Holdings) Limited
Barafor Limited
Barclay Leasing Limited
Barclays (Security Realisation) Limited
Barclays Aegis Trust
Barclays Africa Group Holdings Limited
Barclays Aldersgate Investments Limited
Barclays Asset Management Limited
Barclays Bank PLC
Barclays Bank UK PLC
Barclays Cantal Investments Trust
Barclays Capital Asia Holdings Limited
Barclays Capital Finance Limited
Barclays Capital Japan Securities Holdings
Limited
Barclays Capital Luxembourg S.à.r.l. Trust
Barclays Capital Margin Financing Limited
Barclays Capital Nominees (No.2) Limited
Barclays Capital Nominees (No.3) Limited
Barclays Capital Nominees Limited
Barclays Capital Principal Investments Limited
Barclays Capital Securities Client Nominee
Limited
Barclays Capital Securities Limited
Barclays CCP Funding LLP
Barclays Converted Investments (No.2) Limited
Barclays Converted Investments Limited
Barclays Direct Investing Nominees Limited
Barclays Directors Limited
Barclays Equity Holdings Limited
Barclays Equity Index Investments Bare Trust
Barclays Executive Schemes Trustees Limited
Barclays Financial Planning Nominee Company
Limited
Barclays Funds Investments Limited
Barclays Global Shareplans Nominee Limited
Barclays Group Holdings Limited
Barclays Group Operations Limited
Barclays Industrial Development Limited
Note
D
J, K
A, F, I
D
D
F, I
B
D
Wholly owned subsidiaries
Barclays Industrial Investments Limited
Barclays Insurance Services Company Limited
Barclays Investment Management Limited
Barclays Investment Solutions Limited
Barclays Lamorak Trust
Barclays Leasing (No.9) Limited
Barclays Long Island Limited
Barclays Luxembourg USD Holdings Trust
Barclays Marlist Limited
Barclays Mercantile Business Finance Limited
Barclays Mercantile Limited
Barclays Nominees (Branches) Limited
Barclays Nominees (George Yard) Limited
Barclays Nominees (K.W.S.) Limited
Barclays Nominees (Provincial) Limited
Barclays Pension Funds Trustees Limited
Barclays Private Bank
Barclays Private Banking Services Limited
Barclays SAMS Limited
Barclays Security Trustee Limited
Barclays Services Limited
Barclays Services (Japan) Limited
Barclays Shea Limited
Barclays Singapore Global Shareplans Nominee
Limited
Barclays Stockbrokers Limited
Barclays Unquoted Investments Limited
Barclays Unquoted Property Investments
Limited
Barclays USD Funding LLP
Barclays Wealth Nominees Limited
Barclayshare Nominees Limited
Barcosec Limited
Barclays (Barley) Limited
Barometers Limited
Barsec Nominees Limited
BB Client Nominees Limited
BMBF (No.21) Limited
BMBF (No.24) Limited
BMBF (No.3) Limited
BMBF (No.6) Limited
BMBF (No.9) Limited
BMI (No.9) Limited
BNRI ENG 2013 Limited Partnership
Note
B
B
B
B
B
I, J, K
B
E
J, K
B
B
B
B
B
G, H, I
Note
D
D
A
A
B
I, J, K
B
Wholly owned subsidiaries
BNRI ENG 2014 Limited Partnership
BNRI ENG GP LLP
BNRI England 2010 Limited Partnership
BNRI England 2011 Limited Partnership
BNRI England 2012 Limited Partnership
Carnegie Holdings Limited
Chapelcrest Investments Limited
Clydesdale Financial Services Limited
Cobalt Investments Limited
Condor No.1 Limited Partnership
CP Flower Guaranteeco (UK) Limited
CP Propco 1 Limited
CP Propco 2 Limited
CP Topco Limited
CPIA England 2008 Limited Partnership
CPIA England 2009 Limited Partnership
CPIA England No.2 Limited Partnership
DMW Realty Limited
Durlacher Nominees Limited
Eagle Financial and Leasing Services (UK)
Limited
Equity Value Investments Limited Liability
Partnership
Equity Value Investments No.1 Limited
Equity Value Investments No.2 Limited
Finpart Nominees Limited
FIRSTPLUS Financial Group PLC
Foltus Investments Limited
Gerrard Financial Planning Limited
Gerrard Management Services Limited
Gerrard Nominees Limited
Global Dynasty Natural Resource Private Equity
Limited Partnership
Globe Nominees Limited
Greig, Middleton Nominees Limited
Hawkins Funding Limited
Heraldglen Limited
Investors In Infrastructure Limited
J.V. Estates Limited
Keepier Investments
Kirsche Investments Limited
Lombard Street Nominees Limited
Long Island Assets Limited
Maloney Investments Limited
318 Barclays PLC Annual Report 2017
home.barclays/annualreport
Other disclosure mattersNotes to the financial statements
45 Related undertakings continued
Wholly owned subsidiaries
Menlo Investments Limited
Mercantile Credit Company Limited
Mercantile Leasing Company (No.132) Limited
MK Opportunities LP
Murray House Investment Management
Limited
Naxos Investments Limited
North Colonnade Investments Limited
Northwharf Investments Limited
Northwharf Nominees Limited
PIA England No.2 Limited Partnership
Real Estate Participation Management
Limited
Real Estate Participation Services Limited
Relative Value Investments UK Limited
Liability Partnership
Relative Value Trading Limited
Roder Investments No.1 Limited
Roder Investments No.2 Limited
Ruthenium Investments Limited
RVT CLO Investments LLP
Solution Personal Finance Limited
Surety Trust Limited
Swan Lane Investments Limited
US Real Estate Holdings No.1 Limited
US Real Estate Holdings No.2 Limited
US Real Estate Holdings No.3 Limited
W.D. Pension Fund Limited
Wedd Jefferson (Nominees) Limited
Westferry Investments Limited
Woolwich Homes Limited
Woolwich Plan Managers Limited
Woolwich Qualifying Employee Share
Ownership Trustee Limited
Woolwich Surveying Services Limited
Zeban Nominees Limited
– Hill House, 1 Little New Street,
London, EC4A 3TR
Barclays BPT (in liquidation)
Barclays Mercantile Highland Finance Limited
(in liquidation)
Boudeuse Limited (in liquidation)
Denham Investments Limited (in liquidation)
Exshelfco (DZBC) (in liquidation)
Greig Middleton Holdings Limited
(in liquidation)
Scotlife Home Loans (No.3) Limited
(in liquidation)
Woolwich Assured Homes Limited
(in liquidation)
Woolwich Homes (1987) Limited
(in liquidation)
Woolwich Limited (in liquidation)
– 5 The North Colonnade, Canary Wharf,
London, E14 4BB
BBR Holdings Trust
Barclays Capital Trading Luxembourg Trust
CPIA Canada Holdings
Leonis Investments LLP
Preferred Liquidity Limited Partnership
– Aurora Building, 120 Bothwell Street,
Glasgow, G2 7JS
R.C. Grieg Nominees Limited
– 50 Lothian Road, Festival Square,
Edinburgh, EH3 9WJ
BNRI PIA Scot GP Limited
BNRI Scots GP, LLP
Pecan Aggregator LP
– Logic House, Waterfront Business Park,
Fleet Road, Fleet, GU51 3SB
The Logic Group Enterprises Limited
The Logic Group Holdings Limited
Note
B
I, X
B
B
I, Y
I, Y
B
E
D
D
B
B
B
B
B
J
Wholly owned subsidiaries
Argentina
– 855 Leandro N.Alem Avenue, 8th Floor,
Buenos Aires
Compañía Sudamerica S.A.
– Marval, O’Farrell & Mairal, Av. Leandro N.
Alem 882, Buenos
Compañia Regional del Sur S.A.
Brazil
– Av. Brigadeiro Faria Lima, No. 4.440, 12th
Floor, Bairro Itaim, Bibi, Sao Paulo, CEP,
04538-132
BNC Brazil Consultoria Empresarial Ltda
Barclays Brasil Assessoria Financeira Ltda.
Canada
– 333 Bay Street, Suite 4910,
Toronto ON M5H 2R2
Barclays Capital Canada Inc.
– Stikeman Elliott LLP, 199 Bay Street, 5300
Commerce Court, West, Toronto ON M5L 1B9
Barclays Corporation Limited
Cayman Islands
– Maples Corporate Services Limited,
PO Box 309GT, Ugland House, South Church
Street, Grand Cayman, KY1-1104
Alymere Investments Limited
Analytical Trade UK Limited
Barclays Capital (Cayman) Limited
Braven Investments No.1 Limited
Capton Investments Limited
Claudas Investments Limited
Claudas Investments Two Limited
CPIA Investments No.1 Limited
CPIA Investments No.2 Limited
Furbridge Investments Limited (in liquidation)
Hurley Investments No.1 Limited
Iris Investments 1 Limited
Mintaka Investments No. 4 Limited
OGP Leasing Limited
Pelleas Investments Limited
Pelleas Investments Two Limited
Pippin Island Investments Limited
Razzoli Investments Limited
RVH Limited
– PO Box 1093, Queensgate House, Grand
Cayman, KY1-1102
Blaytell Limited
Coskwo Limited
Godler Limited
Harflane Limited
Hentock Limited
Hollygrice Limited
Pilkbull Limited
Strickyard Limited
Winhall Limited
– 190 Elgin Avenue, George Town, Grand
Cayman, KY1-9005
Calthorpe Investments Limited
Gallen Investments Limited
JV Assets Limited
Palomino Limited
Wessex Investments Limited
– Walkers Corporate Limited, Cayman
Corporate Centre, 27 Hospital Road,
George Town, KY1– 9008
Long Island Holding B Limited
Note
Wholly owned subsidiaries
China
– Room 213, Building 1, No. 1000 Chenhui
Road, Zhangjiang Hi-Tech Park, Shanghai
Barclays Technology Centre (Shanghai)
Company Limited
Note
France
– 34/36 avenue de Friedland, Paris, 75008
BBAIL SAS
Germany
– TaunusTurm, Taunustor 1, 60310, Frankfurt
Barclays Capital Effekten GmbH
– c/o SFM Deutschland GmbH, Gruneburgweg
58-62, 60322 , Frankfurt am Main
Baubecon Holding 1 GmbH (in liquidation)
– Stuttgarter Straße 55-57, 73033 Göppingen
Adler Toy Beteiligungs GmbH
Holding Stuttgarter Straße GmbH
Guernsey
– P.O. Box 33, Maison Trinity, Trinity Square,
St. Peter Port, GY1 4AT
Barclays Insurance Guernsey PCC Limited
– PO BOX 41, Floor 2, Le Marchant House,
Le Truchot, St Peter Port, GY1 3BE
Barclays Nominees (Guernsey) Limited
Hong Kong
– 42nd floor Citibank Tower, Citibank Plaza,
3 Garden Road
Barclays Bank (Hong Kong Nominees) Limited
(in liquidation)
Barclays Capital Asia Nominees Limited
(in liquidation)
– Level 41, Cheung Kong Center, 2 Queen's
Road Central
Barclays Asia Limited
Barclays Capital Asia Limited
India
– 208 Ceejay House, Shivsagar Estate,
Dr A Beasant Road, Worli, Mumbai, 400 018
Barclays Securities (India) Private Limited
Barclays Wealth Trustees (India) Private Limited
– 67, Maker Tower ‘F’ 6th Floor, Cuffe Parade,
Mumbai, 400 005
Barclays Holdings India Private Limited (in
liquidation)
– Ground to Fourth Floor, Wing 3 – Cluster A,
Eon Free Zone, MIDC Knowledge Park, Pune,
411014
Barclays Global Service Centre Private Limited
– Level 10, Block B6, Nirlon Knowledge Park,
Off Western Express Highway, Goregaon
(East), Mumbai, 40063
Barclays Investments & Loans (India) Limited
Q
F, I
G, H, I
G, H, I
V
F, I
G, H, I
F, I
F, I
Indonesia
– Barclays House, 12th Floor, Jl. Jend Sudirman
Kav. 22-23, Jakarta, 12920
PT Bank Barclays Indonesia (in liquidation)
– Plaza Lippo, 10th Floor, Jalan Jend, Sudirman
Kav 25, Jakarta, 12920
PT Bhadra Buana Persada (in liquidation)
L
Z
Ireland
– Two Park Place, Hatch Street, Dublin 2
Barclaycard International Payments Limited
Barclays Bank Ireland Public Limited Company
home.barclays/annualreport
Barclays PLC Annual Report 2017 319
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance 45 Related undertakings continued
Wholly owned subsidiaries
Isle of Man
– Barclays House, Victoria Street, Douglas
Barclays Nominees (Manx) Limited
– P O Box 9, Victoria Street, Douglas, IM99 1AJ
Barclays Private Clients International Limited
– 2nd Floor, St Georges Court, Upper Church
Street, Douglas, IM1 1EE
Barclays Holdings (Isle of Man) Limited
(in liquidation)
Japan
– 10-1, Roppongi 6-chome, Minato-ku, Tokyo
Barclays Funds and Advisory Japan Limited
Barclays Securities Japan Limited
Barclays Wealth Services Limited
Jersey
– Third Floor, 37 Esplanade, St. Helier, JE2 3QA
CP Newco 1 Limited
CP Newco 2 Limited
CP Newco 3 Limited
– La Motte Chambers, St Helier, JE1 1BJ
Barclays Services Jersey Limited
– 39-41 Broad Street, St Helier, JE2 3RR
Barclays Wealth Management Jersey Limited
BIFML PTC Limited
– 13 Castle Street, St. Helier, JE4 5UT
Barclays Index Finance Trust
– Lime Grove House, Green Street,
St Helier, JE1 2ST
Barbridge Limited
– 13 Library Place, St Helier, JE4 8NE
Barclays Nominees (Jersey) Limited
Barclaytrust Channel Islands Limited
– Appleby Trust (Jersey) Limited, PO Box 207,
13-14 Esplanade, St Helier, JE1 1BD
MK Opportunities GP Ltd
Korea, Republic of
– A-1705 Yeouido Park Centre,
28-3 Yeouido-dong, Yeongdeungpo-gu, Seoul
Barclays Korea GP Limited
Luxembourg
– 9, allée Scheffer, L-2520
Barclays Aegis Investments S.à r.l.
Barclays Alzin Investments S.à r.l.
Barclays Bayard Investments S.à r.l.
Barclays Bedivere Investments S.à r.l.
Barclays Bordang Investments S.à r.l.
Barclays BR Holdings S.à r.l.
Barclays BR Investments S.à r.l.
Barclays Cantal Investments S.à r.l.
Barclays Capital Luxembourg S.à r.l.
Barclays Capital Trading Luxembourg S.à r.l.
Barclays Claudas Investments Partnership
Barclays Equity Index Investments S.à r.l.
Barclays Lamorak Investments S.à r.l.
Barclays Leto Investments S.à r.l.
Barclays Luxembourg EUR Holdings S.à r.l
Barclays Luxembourg Finance S.à r.l.
Barclays Luxembourg GBP Holdings S.à r.l.
Barclays Luxembourg Holdings S.à r.l.
Barclays Luxembourg Holdings SSC
Barclays Luxembourg USD Holdings S.à r.l.
Barclays Pelleas Investments Limited
Partnership
Barclays Pelleas Investments S.à r.l.
Blossom Finance General Partnership
– 68-70 Boulevard de la Petrusse, L-2320
Adler Toy Holding Sarl
Note
J, K
Wholly owned subsidiaries
Malaysia
– Unit 30-01, Level 30, Tower A, Vertical
Business Suite, Avenue 3, Bangsar South,
No.8, Jalan Kerinchi, Kuala Lumpur, 59200
Barclays Capital Markets Malaysia Sdn Bhd.
(in liquidation)
Note
F, I
Mauritius
– C/O Rogers Capital Corporate Services, St.
Louis Business Centre, Cnr Desroches & St. Louis
Streets, Port Louis
Barclays Capital Mauritius Limited
Barclays Capital Securities Mauritius Limited
– Fifth Floor, Ebene Esplanade, 24 Cybercity,
Ebene
Barclays (H&B) Mauritius Limited
Barclays Mauritius Overseas Holdings Limited
Mexico
– Paseo de la Reforma 505, 41 Floor, Torre
Mayor, Col. Cuauhtemoc, CP 06500
Barclays Bank Mexico, S.A.
Barclays Capital Casa de Bolsa, S.A. de C.V.
Grupo Financiero Barclays Mexico, S.A. de C.V.
Servicios Barclays, S.A. de C.V.
K, M
K, M
K, M
Monaco
– 31 Avenue de la Costa, BP 339
Barclays Wealth Asset Management
(Monaco) S.A.M
Netherlands
– Strawinskylaan 3105, 1077 ZX, Amsterdam
Barclays SLCSM Funding B.V. (in liquidation)
– De Boelelaan 7, 1083 Hj Amsterdam
Chewdef BidCo BV. (in liquidation)
Nigeria
– Southgate House, Udi Street, Osborne
Estate, Ikoyi, Lagos
Barclays Group Representative Office (NIG)
Limited
Philippines
– 21/F, Philamlife Tower, 8767 Paseo de
Roxas, Makati City, 1226
Meridian (SPV-AMC) Corporation
Russian Federation
– Four Winds Plaza, 1st Tverskaya-Yamskaya
Str, Moscow 21, 125047
Limited Liability Company Barclays Capital
(in liquidation)
Saudi Arabia
– 18th Floor Al Faisaliah Tower, Riyadh, 11311
Barclays Saudi Arabia (in liquidation)
Singapore
– 10 Marina Boulevard, #24-01 Marina Bay
Financial Centre, Tower 2, 018983
Barclays Bank (Singapore Nominees) Pte Ltd
Barclays Bank (South East Asia) Nominees Pte Ltd
Barclays Capital Futures (Singapore) Private
Limited
Barclays Capital Holdings (Singapore) Private
Limited
Barclays Merchant Bank (Singapore) Ltd.
J, K
S
I, DD
J, K
GG
J, K
B
I, AA
B
J, K
B
B
Wholly owned subsidiaries
Spain
– Plaza De Colon 1, 28046, Madrid
Barclays Tenedora De Immuebles SL.
BVP Galvani Global, S.A.U.
Note
Z
Switzerland
– Chemin de Grange Canal 18-20, PO Box
3941, 1211, Geneva
Barclays Bank (Suisse) S.A.
BPB Holdings SA
Barclays Switzerland Services SA
United States
– Corporation Trust Company, Corporation
Trust Center, 1209 Orange Street, Wilmington
DE 19801
Archstone Equity Holdings Inc
Barclays BWA, Inc.
Barclays Capital Commodities Corporation
Barclays Capital Derivatives Funding LLC
Barclays Capital Energy Inc.
Barclays Capital Real Estate Finance Inc.
Barclays Capital Real Estate Holdings Inc.
Barclays Capital Real Estate Inc.
Barclays Commercial Mortgage Securities LLC
Barclays Electronic Commerce Holdings Inc.
Barclays Financial LLC
Barclays Group US Inc.
Barclays Oversight Management Inc.
Barclays Receivables LLC
Barclays Services Corporation
Barclays US CCP Funding LLC
Barclays US Funding LLC
Barclays US LLC
Barclays US Investments LLC
BCAP LLC
CPIA Equity No. 1 Inc.
Crescent Real Estate Member LLC
Gracechurch Services Corporation
Long Island Holding A LLC
LTDL Holdings LLC
Marbury Holdings LLC
Protium Finance I LLC
Protium Master Mortgage LP
Protium REO I LP
Securitized Asset Backed Receivables LLC
Sutton Funding LLC
TPLL LLC
TPProperty LLC
US Secured Investments LLC
– 1201 North Market Street, P.O. Box 1347
Wilmington, DE19801
Barclays Bank Delaware
Procella Investments LLC
Procella Investments No.1 LLC
Procella Investments No.2 LLC
Procella Investments No.3 LLC
Procella Swaps LLC
Verain Investments LLC
– 2711 Centerville Road, Suite 400,
Wilmington DE 19808
Analog Analytics Inc
Protium Master Grantor Trust
– 251 Little Falls Drive, New Castle County,
Wilmington DE 19808
Barclays Capital Equities Trading GP
Barclays Capital Holdings Inc.
Lagalla Investments LLC
Relative Value Holdings, LLC
C
C
C
C
C
C
G, I
K, GG
C
C
C
C
C
B
B
C
C
C
C
C
F, I
C
C
C
C
C
D
B
G, H, I
320 Barclays PLC Annual Report 2017
home.barclays/annualreport
Other disclosure mattersNotes to the financial statements
45 Related undertakings continued
Wholly owned subsidiaries
– 745 Seventh Avenue, New York NY 10019
Alynore Investments Limited Partnership
Curve Investments GP
HYMF, Inc.
Preferred Liquidity, LLC
– CT Corporation System, One Corporate
Center, Floor 11, Hartford CT 06103-3220
Barclays Capital Inc.
– c/o RL&F Service Corp, One Rodney Square,
10th Floor, Tenth and King Streets,
Wilmington DE 19801
Analytical Trade Holdings LLC
Analytical Trade Investments LLC
– 100 South West Street, Wilmington DE 19801
Barclays Dryrock Funding LLC
Wilmington Riverfront Receivables LLC
– 15 East North Street, Dover DE 19801
Barclays Services LLC
– CT Corporation System, 225 Hillsborough
Street, Raleigh, NC 27603
Barclays US GPF Inc.
– CT Corporation System, 350 North St. Paul
Street, Dallas TX 75201
La Torretta Beverages LLC
La Torretta Hospitality LLC
La Torretta Operations LLC
– 500 Forest Point Circle, Charlotte, North
Carolina 28273
Equifirst Corporation (in liquidation)
– Aon Insurance Managers (USA) Inc.,
76 St. Paul Street, Suite 500, Burlington,
VT05401-4477
Barclays Insurance U.S. Inc.
Zimbabwe
– 2 Premium Close, Mount Pleasant Business
Park, Mount Pleasant , Harare
Branchcall Computers (Pvt) Limited
Note
B
B
J
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
Group. The Group’s overall ownership
percentage is provided for each undertaking.
BB
C
J, K
C
C
C
C
37.41% EE, Z
65.47% CC, Z
19.50%
25.00%
59.94%
20.00%
Percentage
75.00%
51.00%
20.00%
35.00%
50.00%
50.00%
Other related undertakings
United Kingdom
– 1 Churchill Place, London, E14 5HP
Barclaycard Funding PLC
Claas Finance Limited
PSA Credit Company Limited
(in liquidation)
Barclays Covered Bond Funding LLP
– 1 Poultry, London,
England, EC2R 8EJ
Igloo Regeneration (General Partner)
Limited
– 1 Robeson Way, Sharston Green
Business Park, Manchester, M22 4SW
KDC Holdings Limited
– 3-5 London Road, Rainham,
Kent, ME8 7RG
Trade Ideas Limited
– Derby Training Centre, Ascot Drive,
Derby, DE24 8GW
Develop Training Group Limited
– 50 Lothian Road, Festival Square,
Edinburgh, EH3 9BY
Equistone Founder Partner II L.P.
Equistone Founder Partner III L.P.
– Building 6 Chiswick Park,
566 Chiswick High Road,
London W4 5HR
Intelligent Processing Solutions
Limited
– Oak House, Ellesmere Port,
Cheshire, CH65 9HQ
Elan Homes Holdings Limited
– 16 Palace Street, London, SW1E 5JD
Barclays Alma Mater Management
Limited Partnership
– 20-22 Bedford Row, London, WC1R 4JS
Cyber Defence Alliance Limited
– 30 Gresham Street, London, EC2V 7PG
Gresham Leasing March (3) Limited
– 80 New Bond Street, London, W1S 1SB
GN Tower Limited
GW City Ventures Limited
– 5th Floor, 70 Gracechurch Street,
London, EC3V 0XL
Camperdown UK Limited
– 5 North Colonnade, Canary Wharf,
London, E14 4BB
BEIF Management Limited Partnership 30.00%
– 2nd Floor, 110 Cannon Street,
London, EC4N 6EU
Vectorcommand Limited
(in liquidation)
– 55 Baker Street, London, W1U 7EU
Formerly H Limited (in liquidation)
– Countryside House, The Warley Hill
Business Park, The Drive, Brentwood,
Essex, CM13 3AT
Woolwich Countryside Limited
– Haberfield Old Moor Road,
Wennington, Lancaster, LA2 8PD
Full House Holdings Limited
– 6th Floor 60 Gracechurch Street,
London, EC3V 0HR
BMC (UK) Limited
– Central House, 124 High Street,
Hampton Hill, Middlesex TW12 1NS
Rio Laranja Holdings Limited
– 13-15 York Buildings,
London, WC2N 6JU
BGF Group Limited
50.00%
50.00%
50.00%
30.00%
30.00%
25.00%
45.00%
70.32%
74.00%
24.40%
67.43%
Note
J
K
J, L
B
L, Z
Z
B, Z
B, Z
Z
J, Z
B, Z
E, Z
Z
Z
K, Z
J
B, Z
J, Z
O, Z
J, Z
J, Z
Z
30.39% J, K, Z
40.18% J, F, Z
Other related undertakings
Cayman Islands
– Maples Corporate Services Limited,
PO Box 309GT, Ugland House,
South Church Street,
Grand Cayman, KY1-1104
Cupric Canyon Capital LP
Southern Peaks Mining LP
Third Energy Holdings Limited
Percentage
Note
40.19% HH, Z
55.76% HH, Z
78.94% F, J, K, Z
Germany
– Schopenhauerstraße 10, D-90409,
Nurnberg
Eschenbach Holding GmbH
21.70%
Z
Indonesia
– Wisma GKBI 39th Floor, Suite 3906,
Jl. Jend. Sudirman No.28,
Jakarta, 10210
PT Barclays Capital Securities
Indonesia (in liquidation)
99.00%
Korea, Republic of
– 18th Floor, Daishin Finance Centre,
343, Samil-daero, Jung-go, Seoul
Woori BC Pegasus Securitization
Specialty Co., Limited
Luxembourg
– 9, allée Scheffer, L-2520
BNRI Limehouse No.1 Sarl
Partnership Investments S.à r.l.
Preferred Funding S.à r.l.
Preferred Investments S.à r.l.
Malta
– RS2 Buildings, Fort Road,
Mosta MST 1859
RS2 Software PLC
70.00%
W
R
96.30%
33.40% I, J ,K ,L
H
33.33%
H, I
33.33%
18.25%
Z
Monaco
– 31 Avenue de la Costa, Monte Carlo
Societe Civile Immobiliere 31 Avenue
de la Costa
75.00%
Netherlands
– Alexanderstraat 18, 2514 JM,
The Hague
Tulip Oil Holding BV
South Africa
– 9 Elektron Road, Techno Park,
Stellenbosch 7600
Imalivest Mineral Resources LP
Sweden
– c/o ForeningsSparbanken AB,
105 34 Stockholm
EnterCard Group AB
30.26%
II, Z
69.88%
J, Z
40.00%
K, Z
80.00%
United States of America
– 777 Main Street, Fort Worth TX 76102
CRE Diversified Holdings LLC
Crescent Crown Greenway Plaza SPV
LLC
80.00%
Crescent Crown Land Holding SPV LLC 80.00%
80.00%
Crescent Plaza Residential LP, LLC
80.00%
Crescent Plaza Residential, L.P.
80.00%
Crescent Plaza Residential, LLC
80.00%
Crescent Resort Development LLC
80.00%
Crescent Tower Residences GP, LLC
80.00%
Crescent Tower Residences, L.P.
80.00%
Crescent TRS Holdings LLC
80.00%
CREW Tahoe Holdings LLC
80.00%
DBL Texas Holdings LLC
80.00%
Desert Mountain Development LLC
C, Z
C, Z
C, Z
C, Z
B, Z
C, Z
C, Z
C, Z
B, Z
C, Z
C, Z
C, Z
C, Z
home.barclays/annualreport
Barclays PLC Annual Report 2017 321
Risk reviewFinancial reviewShareholder informationStrategic reportFinancial statementsGovernance
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.
Percentage
Subsidiaries by virtue of control
United Kingdom
– 1 Churchill Place, London, E14 5HP
Oak Pension Asset Management
Limited
Water Street Investments Limited
Cayman Islands
– PO Box 309GT, Ugland House,
South Church Street, Grand Cayman,
KY1-1104
Hornbeam Limited
Barclays US Holdings Limited
Note
Z
Z
Z
J
00.00%
00.00%
00.00%
10.00%
Joint Ventures
The related undertakings below are Joint
Ventures in accordance with s.18, Schedule 4,
The Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations
2008 and are proportionally consolidated.
Note
Percentage
Joint Ventures
United Kingdom
– All Saints Triangle, Caledonian
Road, London, N1 9UT
Vaultex UK Limited
Joint management factors
The Joint Venture Board comprises two Barclays
representative directors, two JV partner directors and
three non-JV partner directors. The Board are responsible
for setting the company strategy and budgets.
50.00%
45 Related undertakings continued
71.11%
71.11%
39.55%
60.80%
Percentage
33.52%
79.57%
79.10%
74.75%
56.96%
60.82%
60.82%
60.82%
56.93%
60.80%
60.80%
60.80%
60.82%
60.82%
Other related undertakings
Desert Mountain Properties Limited
74.40%
Partnership
East West Resort Development VII LLC 80.00%
78.40%
Mira Vista Development LLC
Mountainside Partners LLC
80.00%
– 126 Riverfront Lane , 5th Floor,
Drawer 2770, Avon CO 81620
Blue River Land Company, LLC
East West Resort Development IV, L.P.,
L.L.L.P.
East West Resort Development VIII,
L.P., L.L.L.P.
East West Resort Development XIV,
L.P., L.L.L.P.
EWRD Summit Holding, L.P., L.L.L.P.
EWRD Summit, LLC
– 3001 Northstar Drive, C200,
Truckee CA 96161
CREW Tahoe LLC
East West Resort Development V, L.P.,
L.L.L.P.
Gray’s Station, LLC
Home Run Tahoe, LLC
Northstar Mountain Properties, LLC
Northstar Trailside Townhomes, LLC
Northstar Village Townhomes, LLC
Old Greenwood Realty, Inc.
Old Greenwood, LLC
Tahoe Club Company, LLC
Tahoe Mountain Resorts, LLC
The Glades Tahoe, LLC
– Corporation Service Company,
2711 Centreville Road, Suite 400,
Wilmington DE 19808
Crescent Fresh Series B Hold Co.
Mountainside Boulders, LLC
MVWP Development LLC
MVWP Investors LLC
Stellar Residences, LLC
Stellar Townhomes, LLC
– 1701 Wynkoop Street, Suite 140,
Box 47, Denver, CO 80202
Central Platte Valley Management, LLC 51.78%
47.63%
St. Charles Place, LLC
47.63%
The Park at One Riverfront, LLC
Union Center LLC
51.78%
– Corporation Trust Company,
Corporation Trust Center, 1209
Orange Street, Wilmington DE 19801
DG Solar Lessee II, LLC
DG Solar Lessee, LLC
VS BC Solar Lessee I LLC
– East West Partners, Inc.,
126 Riverfront Lane, 5th Floor,
Avon CO 81620
Tahoe Club Employee Company
– 6600 Mira Vista Blvd., Fort Worth
TX 76132
Mira Vista Golf Club, L.C.
– 251 Little Falls Drive, New Castle
County, Wilmington DE 19808
Crescent Legacy LLC
Surrey Funding Corporation
Sussex Purchasing Corporation
– 1415 Louisiana Street, Suite 1600,
Houston, Texas, 77002
Sabine Oil & Gas Holdings, Inc.
80.00%
60.82%
30.40%
60.80%
60.82%
60.82%
50.00%
50.00%
50.00%
80.00%
99.45%
99.45%
60.80%
23.25%
76.83%
Note
B, Z
C, Z
C, Z
C, Z
C, Z
B, Z
B, Z
B, Z
B, Z
C, Z
C, Z
B, Z
C, Z
C, Z
C, Z
C, Z
C, Z
Z
C, Z
C, Z
C, Z
C, Z
Z
C, Z
C, Z
C, Z
C, Z
C, Z
C, Z
C, Z
C, Z
C, Z
C, Z
C, Z
C, Z
Z
Z
C, Z
Z
322 Barclays PLC Annual Report 2017
home.barclays/annualreport
Other disclosure mattersNotes to the financial statements Shareholder information
Barclays shareholding
Key dates
5 April 2018
Final dividend payment date
26 April 2018
Q1 Results Announcement
1 May 2018
Annual General Meeting, at 10.00am
17 September 2018
Interim dividend payment date
Green Park
all
P all M
all
h e M
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St. James’s Park
St. James’s Park
QEII
Centre
Broad Sanctuary
Victoria Street
Victoria
Horseferry Road
Donations to charity
We launched a Share Dealing Service in
October 2017 aimed at shareholders with
relatively small shareholdings for whom it
might otherwise be uneconomical to deal.
One option open to shareholders was to
donate their sale proceeds to ShareGift.
As a result of this initiative, more than
£61,000 was donated in 2017, taking the
total donated since 2015 to over £299,000.
Returning funds to shareholders
Over 60,000 shareholders did not cash
their Shares Not Taken Up (SNTU) cheque
following the Rights Issue in September
2013. In 2017, we continued the tracing
process to reunite these shareholders with
their SNTU monies and any unclaimed
dividends. By the end of the year, we had
returned over £4.5m to our shareholders.
Annual General Meeting (AGM)
This year’s AGM will be held at the QEII Centre,
Westminster, London SW1P 3EE, on Tuesday,
1 May 2018 at 10.00am.
The Chairman and Chief Executive will update
shareholders on our performance in 2017 and
our goals for 2018. Shareholders will also have
the opportunity to ask the Board questions at
the meeting.
Youcanfindoutmoreat
home.barclays/agm
C haring
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Keep your personal details up to date
Please remember to tell Equiniti if:
■■ you move
■■ you need to update your bank or building
society details.
If you are a Shareview member, you can
update your bank or building society account
or address details online. If you hold 2,500
shares or less, you can update details quickly
and easily over the telephone using the
Equiniti contact details overleaf. If you hold
more than 2,500 shares you will need to write
to Equiniti. You must provide a copy of your
sharecertificate,Sharestorestatementor
mostrecentdividendconfirmation.Ifthese
are not available, you will need to provide a
copy of a utility bill or bank statement dated
in the last three months.
Dividends
Thefinaldividendfortheyearended
31 December 2017 will be 2.0p per share,
making the 2017 total dividend 3.0p.
Barclays understands the importance of the
ordinary dividend for our shareholders. Barclays
is therefore committed to maintaining an
appropriate balance between total cash returns
to shareholders, investment in the business,
and maintaining a strong capital position.
Going forward, Barclays intends to pay an
annual ordinary dividend that takes into
account these objectives and the medium-term
earnings outlook of the Group. It is also the
Board’s intention to supplement the ordinary
dividends with additional returns to
shareholders as and when appropriate.
The Board notes that in determining any
proposed distributions to shareholders, the
Board will consider the expectation of servicing
more senior securities.
For 2018, Barclays anticipates resuming a total
cash dividend of 6.5p, subject to regulatory
approvals.
How do Barclays shareholders receive
their dividends?
As at 31 December 2017, Barclays shareholders
received their dividends in the following ways:
56.1%
Direct to bank account
21.4%
Cheque
22.5%
Scrip Dividend Programme
(new shares)
Save time and receive your dividends faster
by choosing to have them paid directly into
your bank or building society account
It is easy to set up and your money will be in
your bank account on the dividend payment
date. If you hold 2,500 shares or less, you can
provide your bank or building society details
quickly and easily over the telephone using
the Equiniti contact details overleaf. If you
hold more than 2,500 shares, please contact
Equiniti for details of how to change your
payment instruction.
Scrip Dividend Programme
Shareholders can choose to have their
dividends reinvested in new ordinary Barclays
shares through the Scrip Dividend Programme.
More information, including the terms and
conditions and application form, are available
on our website.
Tofindoutmore,contactEquinitior
visit home.barclays/dividends
home.barclays/annualreport
Barclays PLC Annual Report 2017 323
Strategic reportGovernanceRisk reviewFinancial reviewFinancial statementsShareholder information
Shareholder information
Barclays shareholding
Useful contact details
Equiniti
The Barclays share register is
maintained by Equiniti. If you have any
questions about your Barclays shares, please
contact Equiniti by visiting shareview.co.uk
Equiniti
0371 384 2055a
(in the UK)
+44 121 415 7004
(from overseas)
0371 384 2255a
(for the hearing impaired in the UK)
+44 121 415 7028
(for the hearing impaired
from overseas)
Aspect House, Spencer Road,
Lancing, West Sussex BN99 6DA
American Depositary Receipts (ADRs)
ADRs represent the ownership of Barclays PLC
shares which are traded on the New York
Stock Exchange. ADRs carry prices, and pay
dividends, in US Dollars.
If you have any questions about
ADRs, please contact J.P.Morgan:
jpmorgan.adr@wellsfargo.com or visit
adr.com
J.P.Morgan Shareholder Services
+1 800 990 1135
(toll free in US and Canada)
+1 651 453 2128
(outside the US and Canada)
JPMorgan Chase Bank N.A.
PO Box 64504
St Paul
MN 55164-0504
USA
Shareholder Relations
To give us your feedback or if you
have any questions, please contact:
privateshareholderrelations@barclays.com
Shareholder Relations
Barclays PLC
1 Churchill Place
London E14 5HP
Share price
Information on the Barclays share
price and other share price tools are
available at: home.barclays/investorrelations
Managing your shares online
Shareview
Barclays shareholders can go online to
managetheirshareholdingandfindoutabout
Barclays performance by joining Shareview.
Through Shareview, you:
■■ will receive the latest updates from Barclays
direct to your email
■■ can update your address and bank details
online
■■ can vote in advance of general meetings.
Shareholder security
Shareholders should be wary of any cold
calls with an offer to buy or sell shares.
Fraudsters use persuasive and high-pressure
techniques to lure shareholders into
high-risk investments or scams. You should
treat any unsolicited calls with caution.
Pleasekeepinmindthatfirmsauthorised
by the Financial Conduct Authority (FCA)
are unlikely to contact you out of the blue.
You should consider getting independent
financialorprofessionaladvicefrom
someone unconnected to the respective
firmbeforeyouhandoveranymoney.
Report a scam
If you suspect that you have been
approached by fraudsters please tell the
FCA using the share fraud reporting form
at fca.org.uk/scams. You can also call the
FCA Helpline on 0800 111 6768 or through
Action Fraud on 0300 123 2040.
To join Shareview, please follow these three
easy steps:
Step 1 Go to portfolio.shareview.co.uk
Step 2 Register for electronic
communications by following the
instructions on screen
Step 3
You will be sent an activation code in
the post the next working day
Alternative formats
Shareholder documents can
be provided in large print,
audio CD or Braille free of
charge by calling Equiniti.
0371 384 2055a (in the UK)
+44 121 415 7004 (from
overseas)
Audio versions of the
Strategic Report will also be
available at the AGM
Note
a Lines open 8.30am to 5.30pm (UK time) Monday to Friday, excluding public holidays.
324 Barclays PLC Annual Report 2017
home.barclays/annualreport
Notes
The terms Barclays or Group refer to Barclays PLC together
with its subsidiaries. Unless otherwise stated, the income
statement analysis compares the year ended 31 December
2017 to the corresponding 12 months of 2016 and balance
sheet analysis as at 31 December 2017 with comparatives
relating to 31 December 2016. 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.
There are a number of key judgement areas, for example
impairment calculations, which are based on models and
which are subject to ongoing adjustment and modifications.
Reported numbers reflect best estimates and judgements at
the given point in time.
Relevant terms that are used in this document but are not
defined under applicable regulatory guidance or International
Financial Reporting Standards (IFRS) are explained in the
results glossary that can be accessed at home.barclays/results.
The information in this announcement, which was approved by
the Board of Directors on 21 February 2018, does not comprise
statutory accounts within the meaning of Section 434 of the
Companies Act 2006. Statutory accounts for the year ended
31 December 2017, which includes certain information required
for the Joint Annual Report on Form 20-F of Barclays PLC and
Barclays Bank PLC to the US Securities and Exchange
Commission (SEC) and which contain an unqualified audit
report under Section 495 of the Companies Act 2006 (which
does not make any statements under Section 498 of the
Companies Act 2006) will be delivered to the Registrar
of Companies in accordance with Section 441 of the
Companies Act 2006.
These results will be furnished as a Form 20-F to the SEC as
soon as practicable following their publication. Once furnished
with the SEC, copies of the Form 20-F will also be available
from the Barclays Investor Relations website at home.barclays/
results and from the SEC’s website at www.sec.gov
Barclays is a frequent issuer in the debt capital markets and
regularly meets with investors via formal road-shows and other
ad hoc meetings. Consistent with its usual practice, Barclays
expects that from time to time over the coming quarter it will
meet with investors globally to discuss these results and other
matters relating to the Group.
Non-IFRS performance measures
Barclays’ management believes that the non-IFRS performance
measures included in this document provide valuable
information to the readers of the financial statements as they
enable the reader to identify a more consistent basis for
comparing the business’ performance between financial
periods, and provide more detail concerning the elements of
performance which the managers of these businesses are most
directly able to influence or are relevant for an assessment of
the Group. They also reflect an important aspect of the way in
which operating targets are defined and performance is
monitored by Barclays’ management. However, any non-IFRS
performance measures in this document are not a substitute
for IFRS measures and readers should consider the IFRS
measures as well. Refer to the pages 223 to 225 of the Barclays
PLC Annual Report 2017 for further information and
calculations of non-IFRS performance measures included
throughout this document, and the most directly comparable
IFRS measures.
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 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. Examples of forward-looking
statements include, among others, statements or guidance
regarding or relating to the Group’s future financial position,
income growth, assets, impairment charges, provisions, business
strategy, structural reform, capital, leverage and other regulatory
ratios, payment of dividends (including dividend payout ratios
and expected payment strategies), projected levels of growth in
the banking and financial markets, projected costs or savings,
any commitments and targets and the impact of any regulatory
deconsolidation resulting from the sell down of the Group’s
interest in Barclays Africa Group Limited, estimates of capital
expenditures and plans and objectives for future operations,
projected employee numbers, IFRS 9 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. These may be
affected by changes in legislation, the development of standards
and interpretations under International Financial Reporting
Standards including the implementation of IFRS 9, 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, 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 (including with regard to the future
structure of the Group) applicable to past, current and future
periods; UK, US, Africa, Eurozone and global macroeconomic and
business conditions; the effects of continued 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 entities within the Group or any securities issued by such
entities; the potential for one or more countries exiting the
Eurozone; the implications of the exercise by the United Kingdom
of Article 50 of the Treaty of Lisbon and the disruption that may
result in the UK and globally from the withdrawal of the United
Kingdom from the European Union and the success of future
acquisitions, disposals and other strategic transactions. A
number of these influences and factors are beyond the Group’s
control. As a result, the Group’s actual future results, dividend
payments, and capital and leverage ratios may differ materially
from the plans, goals, expectations and guidance set forth in the
Group’s forward-looking statements. Additional risks and factors
which may impact the Group’s future financial condition and
performance are identified in our filings with the SEC (including,
without limitation, our Annual Report on form 20-F for the fiscal
year ended 31 December 2017), which will be available on the
SEC’s website at www.sec.gov
Subject to our obligations under the applicable laws and
regulations of the United Kingdom and the United States 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.
This report is printed on Cocoon Preprint made from
100% FSC® Recycled certified fibre sourced from de-inked
post-consumer waste. The printer and the manufacturing mill
are both credited with ISO14001 Environmental Management
Systems Standard and both are FSC® certified. By printing this
publication on Cocoon Preprint, the environmental impact was
reduced by: 5,865 kg of landfill, 867 kg CO2 and greenhouse
gases, 171,542 litres of water, 10,078 kWh of energy and
9,530 kg of wood.
Source: Carbon footprint data evaluated by Labelia Conseil in
accordance with the Bilan Carbone methodology. Calculations
are based on a comparison between the recycled paper used
versus a virgin fibre paper according to the latest European
BREF data (virgin fibre paper) available.
Positioned for growth,
sharing and success
Barclays PLC
Annual Report 2017
Front cover image
Out of Africa, into new territory
After more than 150 years on the continent, the decision to
sell down Barclays’ investment in Africa was not an easy one.
But with people like Win Chung and Sophia Aluko working
hard to ensure a thoughtful separation, we broke new ground
for Barclays in 2017.
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Registered office: 1 Churchill Place, London E14 5HP
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