Delivering for
our stakeholders
Barclays PLC
Annual Report 2019
Barclays is a British universal bank
Our purpose is creating opportunities to rise
We support sustainable and inclusive growth by connecting
the ideas, innovations and aspirations of our customers
and clients to the capital that can bring them to life.
For over 325 years we have funded progress, and today
we remain committed to helping to make our world more
sustainable, more inclusive and more connected.
Our values underpin everything we do: Respect, Integrity,
Service, Excellence and Stewardship.
FOR OUR CUSTOMERS AND CLIENTS
FOR OUR COLLEAGUES
We will help them to realise their financial
aspirations in line with our values.
We will empower them to be themselves, motivate
and engage them to do their best work, develop
them and build their career and support their health
and well-being.
FOR SOCIETY
FOR OUR INVESTORS
Our success over the long term is tied inextricably
to the progress of our communities and the
preservation of our environment.
We will build a strong, diversified and sustainable
business that can deliver consistent returns in a
way society expects.
Diversified and resilient for long-term success
Our business model
Our strategy
Our diversified business model is core to our strategy.
We are a British universal bank with a diversified
The resilience this brings means we can deliver value
and connected portfolio of businesses, serving retail
to all our stakeholders.
and wholesale customers and clients globally.
See pages 8 to 11
See pages 12 and 13
CONTENTS
What’s inside this report
Strategic report
Business profile
Chairman’s introduction
Chief Executive’s introduction
Purpose and strategy
Business model
Stakeholder engagement
Key performance indicators
Governance
02
04
06
08
12
14
18
CUSTOMERS AND CLIENTS
COLLEAGUES
SOCIETY
INVESTORS
20
28
32
36
Risk, viability and non-financial information 37
Governance contents
Directors’ report
Remuneration report
Risk review
Risk review contents
Risk management
Material existing and emerging risks
Climate change risk management
Principal risk management
Risk performance
Supervision and regulation
43
44
85
125
127
129
138
139
147
204
Financial review
Financial review contents
Key performance indicators
Consolidated summary
214
income statement
Income statement commentary
215
Consolidated summary balance sheet 216
211
212
Balance sheet commentary
Analysis of results by business
Non-IFRS performance measures
217
218
226
Financial statements
Financial statements contents
Consolidated financial statements
Notes to the financial statements
231
241
248
Shareholder information
Key dates, Annual General Meeting,
dividends, and other useful information
338
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BUSINESS PROFILE
Understanding Barclays
Barclays is a British universal bank. We are diversified by business,
by different types of customer and client, and by geography.
Our businesses include consumer banking and payments
operations around the world, as well as a top-tier, full service,
global corporate and investment bank.
Our structure
Barclays operates as two divisions, Barclays UK
and Barclays International, supported by our service
company, Barclays Execution Services – or BX as we call it.
Barclays UK
Barclays
International
Global consumer banking and payments
UK Retail and
Business Banking
Consumer, Cards
and Payments
Corporate and
Investment Bank
Barclays Execution Services
Barclays UK is our UK ring-fenced bank, comprised largely of our UK Personal & Business Banking and Barclaycard Consumer UK businesses. Barclays International consists
of the Corporate and Investment Bank (CIB) and international Consumer, Cards & Payments (CC&P) businesses. Barclays Execution Services (BX) is the Group-wide service company
providing technology, operations and functional services to businesses across the Group.
In March 2019, Barclays announced certain leadership changes, including the appointment of a new Group Head of Consumer Banking & Payments, whose role is to oversee the
execution of plans for the Group’s consumer banking and cards and payments businesses in the UK and internationally.
02 Barclays PLC Annual Report 2019
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Highlights
Where relevant, metrics on this page are presented excluding litigation and conduct
Group income
£bn
Group profit before tax
£bn
Group return on tangible equity
%
2019
2018
2017
21.6
2019
21.1
21.1
2018
2017
6.2
2019
5.7
2018
4.7
2017
(1.2)
9.0
8.5
Group profit before tax including litigation and
conduct was £4.4bn (2018: £3.5bn, 2017: £3.5bn).
Group return on tangible equity including litigation
and conduct was 5.3% (2018: 3.6%, 2017: (3.6)%).
Earnings per share
p
Dividend per share
p
Common Equity Tier 1 ratio
%
2019
2018
2017
(3.5)
24.4
2019
21.9
2018
2017
6.5
3.0
9.0
2019
2018
2017
13.8
13.2
13.3
Earnings per share including litigation and conduct
was 14.3p (2018: 9.4p, 2017: (10.3)p).
Operating expenses
£bn
Cost: income ratio
%
2019
2018
2017
13.6
13.9
14.2
2019
2018
2017
Number of colleagues by region
000s
2.8
63
2019
47.8
9.8
20.4
66
68
Operating expenses including litigation and conduct
was £15.4bn. 2018: £16.2bn including litigation and
conduct and a charge of £140m for Guaranteed
Minimum Pensions (GMP). 2017: £15.5bn including
litigation and conduct.
Cost: income ratio including litigation and conduct
was 71% (2018: 77%, 2017: 73%).
United Kingdom
Americas
Asia Pacific
Europe
Return on tangible equity
by business
%
BUK
BI
9.3
Profit before tax by business
£bn
Risk weighted assets by business
£bn
17.5
2.6
BUK
4.2
BI
74.9
209.2
BUK
BI
BUK and BI return on tangible equity including
litigation and conduct was 2.7% and 9.0%
respectively.
BUK and BI profit before tax including litigation
and conduct was £1.0bn and £4.1bn respectively.
BUK and BI risk weighted assets for 2018 were
£75.2bn and £210.7bn respectively.
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Barclays PLC Annual Report 2019 03
Financial reviewFinancial statementsShareholder informationRisk reviewGovernanceStrategic report CHAIRMAN’S INTRODUCTION
Building a stronger, better
and more valuable company
Barclays has a real purpose, a clear strategy,
strong values and improving performance.
Barclays is one of the major banks of the
world. It has a long history, sufficient scale
and significant potential. The last 10 years
have, however, been fairly troubled in the
world of finance, including for Barclays. Much
of this has been self-inflicted but the external
environment has also been challenging, and
indeed remains so. It is a tribute to the current
management team, supported by tens of
thousands of hard-working and dedicated
colleagues, and by the Board, that Barclays
is now in a much stronger position than a
few years ago to face the challenges ahead.
I would like to start by thanking them for all
of their hard work and also to compliment
my predecessor, John McFarlane, who played
a key role in overseeing the transition from the
troubles of the past towards what we believe
will be a more prosperous and safer future.
The Board and I will do our best to continue
that work.
Barclays now has a real purpose, a clear
strategy, strong values, and improving
performance.
Purpose
Our purpose is expressed in the phrase
‘creating opportunities to rise’. We want
to use finance and our broader financing,
savings and advisory capabilities to help
customers and clients in our chosen markets;
to empower our colleagues to play meaningful
roles in meeting those objectives; and to make
a real contribution to society in the round.
Over time, these ambitions will enable us to
build a stronger, better and more valuable
company for our shareholders. It may be
unfashionable to talk about banks doing good,
but something which has struck me as much
as anything else since arriving at Barclays has
been the extraordinary breadth and depth of
activity undertaken by colleagues to help the
communities in which we work. I also cannot
but commend the ‘tone from the top’. There
is a real commitment to make finance simpler
and more accessible for the vulnerable in
society. In 2019, we helped 2.3 million
individuals improve their skills through our
LifeSkills programme and we helped place
66,000 individuals into work through our
Connect with Work partnerships. More
than in the past, the bank is embracing its
environmental responsibilities and seeking
to be one of the leaders in the transition to
a low-carbon economy. I, and my colleagues,
are committed to helping Barclays be a force
for good in society; the pursuit of that goal is
one of the reasons why I was so enthusiastic
about assuming this new role.
Strategy
Our results indicate that our strategy is
working. It is of course, to a degree, shaped by
our history and by the choices available to us,
but we can, and constantly think about how
to, refine it. It is important to focus on where
we can be strong and effective, but also
different. We are a British universal bank,
serving retail and wholesale customers in
many markets. There are plenty of revenue
and cost sharing opportunities available
across our retail, corporate and investment
banking platforms and activities. Recent
results, with an improving Corporate and
Investment Bank and the UK retail market
under pressure, demonstrate that we benefit
from this diversification. Furthermore, we are
a committed Europe headquartered universal
bank and a leading European player in the US.
In today’s world that has real benefit.
Performance
That is not to say of course, that we have
yet got everything right. Performance over
the last few years has seen a step change in
its trajectory, consistency and transparency
to all of our stakeholders. The Group has
transformed. Underlying returns and cost
efficiency have improved and the capital
position is now secure. Group return on
tangible equity has improved year on year
to 9.0%, in line with the 2019 target, yet our
target is to perform consistently above 10%.
The global macroeconomic environment and
current low interest rates mean it has become
more challenging to achieve this and the
Board and the management team recognise
that there is still work to do. The
underperforming areas have been clearly
identified and are, we believe, receiving the
appropriate strategic attention and indeed
investment where that makes sense.
Nigel Higgins
Chairman
Barclays is now
in a much stronger
position than a few
years ago to face
the challenges ahead.
04 Barclays PLC Annual Report 2019
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This is not a short journey. Business is never
easy but we, like many of our peers, have
the real challenge of ensuring that all our
businesses, whether addressing family
finance, derivatives trading or SME lending
to name but a few, stand up with the best in
a digital world. This has to be achieved while
the ‘factory’ keeps operating, with minimal
customer inconvenience and within the
parameters for investment returns which
we and our shareholders deem appropriate.
Over the last three or four years, the current
management team has strengthened the
control environment of the bank and dealt
with our major legacy conduct issues. At the
same time we are ensuring the operational
resilience of the organisation, including our
ability to deal with cyberthreats, which have
unfortunately become part of daily life. We
are not satisfied however that we are yet at
‘best-in-class’ status across the board. Nor
have we reduced customer complaints, in
particular in the retail business, as far as we
think should be possible. All this remains to
be done.
In assessing our performance, including
how far we have gone in hitting not just our
financial targets but our ambitions around
resilience and customer satisfaction, we look
at multiple measures. In the rest of this report
you will find a balanced assessment of where
we stand in our major business areas when
it comes to business performance, colleague
engagement and customer or client
satisfaction and feedback. We also stand
back and look at our contribution to society,
including what more we can do.
We stand back and look
at our contribution to
society, including what
more we can do.
That includes how we are thinking about the
environment and tackling climate change.
We are committed to a positive, thoughtful
and authentic role in the transition to a
low-carbon economy and are, and will
continue to be, working closely with all of
our stakeholders to ensure that we make
a real difference.
Culture
I would like to add a word about the culture of
the organisation. At an individual level I have
been very impressed with the way in which
colleagues clearly live our values. This is
equally true in places as diverse as London,
New York, Whippany, Northampton, Glasgow,
Manchester, Pune and Chennai. Concern for
the individual is broad at Barclays and we
strive to lead the way in providing
opportunities for colleagues with disabilities
and in supporting those with mental health
issues. Finding ways to help talent progress,
inside and outside the firm, and respecting
the diversity of all of our communities are
again deep rooted characteristics of the
organisation. There is also a deep sense of
loyalty to Barclays, whether in the UK retail
business, in the more international Corporate
and Investment Bank or in Consumer, Cards
and Payments, which today houses much of
the old Barclaycard business. In BX, the service
centre for the worldwide Group, there is a real
fixation with professional excellence and
teamwork. The firm overall, however, remains
quite complex and occasionally still operates
in silos, too slowly or with too many layers.
This is another management challenge for
the future: how to take all of our culture and
processes into the 21st-century, moving the
organisation completely from product focus
to customer or client focus, and embracing
the fact that the acceptable speed of delivery
is today often measured in seconds or
minutes rather than weeks.
The Board
The process of simplification has started
with the Board. The Board is a little bit smaller
than it was; we are grateful for the dedicated
service of those who left in 2019. We are
delighted to have added Dawn Fitzpatrick,
Mohamed El-Erian and Brian Gilvary to
the Board, all of whom bring considerable
experience in our end markets. We have also
simplified the structure at the top of the
organisation, increasing the overlap between
members of the Board of Barclays PLC and
that of Barclays Bank PLC, the company which
houses our Barclays International businesses
(Corporate and Investment Bank and
Consumer, Cards and Payments). For the next
phase, we aim to add more new faces to the
Board, increasing relevant domain knowledge
and bringing a greater diversity of background
and opinion. We aspire to a Board that
challenges management in a constructive
way, knows its subject matter, understands
its governance responsibilities and adds real
value to the senior management team.
The future
What to expect for the future? We are
committed to our target of generating returns
over time of over 10%. The macroeconomic
environment, with low interest rates and a flat
yield curve, makes it harder to achieve that
than we had hoped. Nonetheless, we strive
to more than cover the cost of capital on a
sustainable basis. We have started to increase
cash returns to shareholders and we plan to
continue in that vein. We will keep costs under
control and BX will prove an active engine to
drive cost efficiency and create capacity for
targeted investments. We will grow certain
businesses, with a bias towards those which
are less capital intensive, and continue to
invest in our differentiated strengths as an
incredibly strong financing, advisory and
servicing bank for retail and wholesale
customers around the world. I believe that
we are fortunate in having a management
team which is focused relentlessly on
delivering the improvements ahead.
Nigel Higgins
Chairman
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Barclays PLC Annual Report 2019 05
Financial reviewFinancial statementsShareholder informationRisk reviewGovernanceStrategic report CHIEF EXECUTIVE’S INTRODUCTION
Looking to
the future
2019 has seen Barclays emerge from its
transformation of recent years as a stronger,
leaner, higher-performing organisation.
I’m very proud of the way the management
team and our colleagues around the world
have maintained their focus on making a
tangible difference every day to the customers
and clients we are here to serve. In delivering
for them, we continue to demonstrate that
the strategic path we are on is the right one
for our organisation.
Continuing to deliver
The choices we have made about the shape
and scale of Barclays are being validated by
our performance. We know that we have more
to do, but today we are a well-capitalised,
British universal bank that is consistently
profitable.
The diversity of the Group, both
geographically and by business, remains a
source of real strength. It provides us with
exposure to growth in different economies,
balance across currency fluctuations, and
resilience through the economic cycle.
BX, our service company, continues to be
a powerful force in continuously improving
the efficiency, effectiveness and control of our
core operating platform. It will also help create
the capacity to invest in our future as the right
opportunities present themselves.
These defining features of our business have
meant our financial performance has again
improved on the previous year, and the
momentum in Barclays continues to build.
We are in a strong capital position, with a
Common Equity Tier 1 ratio of 13.8%. We
have delivered return on tangible equity of
9%, in line with our 2019 target, with income
up 2% and costs down 2%.
Our financial strength has enabled us to
return capital to shareholders, which we will
continue to do through a progressive ordinary
dividend supplemented with additional cash
returns, including share buy-backs, as and
when appropriate. But, more than that, it’s a
performance that means we can make choices
about our future from a position of stability.
Guided by our purpose
As we write the next chapter of Barclays’
story, those choices are guided by our purpose.
The profession of banking has a unique role
in society and it is our fundamental belief
that we can and must do business in a way
that does good. Through the work we do
with our customers and clients, we can have
a meaningful impact on the progress of our
communities and the preservation of our
environment, as well as making a positive
difference to the health and well-being of
our employees.
We take that duty seriously, and it shapes
our view of the professional culture we want
to be known for and the business we want
to become.
James E. Staley
Group Chief Executive
We are today a
well-capitalised,
British universal bank
that is consistently
profitable.
06 Barclays PLC Annual Report 2019
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The challenges ahead
Our future is not entirely within our own
hands, however, and we must recognise the
role that factors outside of our control will
always play in our continued success.
The global economic environment will be
markedly different in the medium term than
it has been in recent decades. Despite very
low levels of unemployment across the
developed world, persistently low wage
inflation and a related lack of inflationary
pressure will likely cause central banks to
hold interest rates at low levels for longer
than otherwise expected. This in turn could
raise concerns that the valuation of financial
assets will become inflated.
We also see further regulatory change,
and continued uncertainty related to Brexit,
creating additional headwinds.
That is the reality of the context in which we
will operate next year, but we are confident
that Barclays is well-positioned and will
further improve returns meaningfully in 2020.
Growing our business
The profitability and cost efficiency of our
model mean that we are also sustainably
creating the capacity to grow.
We are focused on growth in areas where
we have a significant customer base and
believe we can differentiate Barclays over
the next three to five years. In particular,
growth in fee-based, technology-led, annuity
businesses with lower capital intensity will
further diversify the organisation, without
limiting our commitment to the businesses
we already have.
We will accelerate our digital journey, and
continue to play a leading role in capturing
innovation and bringing it to life, at scale,
for millions of customers and clients.
I am very grateful for the generous support
and guidance the management team and I
enjoy from our Chairman and the Board. We
know that we must stay focused and maintain
our pace, but we believe that Barclays is well
placed to continue the momentum we have
built through our transformation.
We look forward to delivering for all of our
stakeholders in 2020 and beyond.
James E. Staley
Group Chief Executive
Return on tangible equitya
9.0%
2018: 8.5%
Common Equity Tier 1 ratio
13.8%
2018: 13.2%
Income
£21.6bn
2018: £21.1bn
Operating expensesa
£13.6bn
2018: £13.9bn excluding litigation and conduct
and a GMP charge of £140m.
We will continue to
play a leading role in
capturing innovation
and bringing it to life,
at scale, for millions of
customers and clients.
Note
a Excluding litigation and conduct
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Barclays PLC Annual Report 2019 07
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Our strategy
We have a proud history and deep roots in
the UK, with the scale and diversity to serve
customers and clients around the world
across a broad range of their financial needs.
Our strategy
As a purpose-driven organisation,
we aspire to create opportunities
to rise for all of our stakeholders.
Our strategy has been developed to
balance the needs of our customers
and clients, our colleagues, our
investors and wider society.
We have transformed Barclays
over the last four years, responding
to changes in the economic and
regulatory environment, and to the
changing needs of our customers
and clients.
There are only a handful of banks
in the world that can now do what
we do. We have domestic strength;
diversification of customers and
clients, and of products; scale and
geographic reach; an efficient and
stable operating model; and a strong
and positive culture.
We know we need to keep up the pace
of evolution and delivery, and that we
have more to do. Our customers and
clients expect us to play a leading
role in making banking work better
tomorrow than today. Regulation
continues to develop. The economic
backdrop, particularly low interest
rates, will present challenges for all
banks for the foreseeable future.
Our strategy builds on our strengths
and will steer us through those
challenges. We must deliver for all of
our stakeholders by understanding
and balancing their different
expectations of our business.
We will do that via our
4 strategic pillars.
Creating opportunities to rise
Our aim is to connect the ideas, innovations
and aspirations of our customers and clients to the
capital that can bring them to life.
4 STRATEGIC PILLARS
1
Focusing
on customers
and clients
Putting them at the heart
of decision making about
how to manage our
business today, and how
to shape it for the future.
2
Becoming
more digital
Because that’s
increasingly how our
customers and clients
prefer to deal with us,
and because it makes our
business more efficient.
3
Protecting and
strengthening
our culture
Drawing on our purpose
and values to guide our
choices as individuals and
as an organisation.
4
Maintaining and
increasing our
diversification
Looking for opportunities
within and outside our
organisation that build
on our current strengths and
make us resilient in different
economic conditions.
08 Barclays PLC Annual Report 2019
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1. Focusing on customers
and clients
We do more business with our customers and
clients when we make it easy for them to deal
with us. We believe the best way to do that is
to listen to what people are trying to achieve,
and how they would like to achieve it.
Our Barclays UK customers told us, for
example, that using one app to manage
their Barclaycard and another to manage
everything else wasn’t as easy as it should be.
So we changed it, and now they can access
everything in the same award-winning
Barclays Appa.
They also told us that buying a new house
was stressful enough, so they really wanted
getting a mortgage to be as easy as possible.
We looked again at the process and made it
simpler, and introduced a video chat service to
help guide people through it. As a result, many
of our customers can now get a mortgage
approved on the same day.
New clients signing up to our payments
business told us that it took too long to get on
board. So we worked to simplify and speed up
the process, meaning that we now have same
day on-boarding for most of our customers
– and with less paperwork too.
We’re making small changes right across
Barclays every day to make things better. And
because all of our businesses share a common
core operating platform in BX, we can often
make improvements once, but get the benefit
everywhere.
We’re in the distinctive position of enabling
consumers to make payments digitally, while
also supporting the companies who receive
those payments. Because we can see all
sides of a transaction we have the data about
how payments work. And we’re using our
investment in technology to give us actionable
insights into the payment process that make
life quicker and simpler for our customers
and clients. For example, we’ve helped one
large UK insurance client realise millions of
pounds’ worth of additional online customer
transactions, simply as a result of the
improvements we made in their
payment routes.
We track things like Net Promoter Scores
(NPS) and what people think of our brand, as
well as the number of complaints we receive
when we haven’t got things right.
We believe that designing our business
around what people want is the best way to
do more business. And when we look for new
opportunities in the future, we believe that’s
also the best place to start.
There’s more to do in reshaping Barclays to
make the most of the connections between
our businesses. We’ll continue to do that by
starting with a real customer or client need
and working back from there.
Note
a Best use of mobile at FStech Awards 2019.
We do more business
with our customers
and clients when we
make it easy for them
to deal with us.
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Barclays PLC Annual Report 2019 09
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Our strategy
2. Becoming more digital
The world is becoming more digital. For lots
of our retail, corporate and institutional
customers, it’s how they prefer to do
their banking.
So we’re investing more than ever in building
the Barclays of the future.
In Corporate Banking, we have been building
a single digital platform, which over 80% of
our corporate clients are now using.
In our Markets business, we have been
investing to stay at the forefront of the
industry-wide shift to greater electronic
execution.
In our retail businesses we now have
significant expertise in delivering digital
services.
More of our customers are choosing to
bank with us online and on their phones.
In Barclays UK we currently have over
11 million digitally-active customers and
nearly 8.5 million active mobile banking users.
And we’re seeing better customer
engagement as a result.
However, we recognise that more complex
needs still need to be dealt with in person,
with technology helping wherever it can.
So our investment in the future is also going
towards making our branches more digital,
which means they’re quicker and easier to
use for everyone. In fact, 91% of our customer
transactions are now automated across all
our channels.
In a digital world, data is what joins everything
together. Banking has always been about
making connections and we’re using the
diverse data from across our business to
make new connections.
We are focused on making our business
more resilient, better controlled, and more
efficient. Being more digital also allows us to
significantly reduce our costs, which creates
the financial capacity to invest in growth.
We’re helping our retail customers to manage
their household budgets by using data to
understand where their money’s going,
and bringing them a more personalised
experience; we’re helping merchants improve
their customer payment and e-commerce
experience by using data to understand and
simplify their checkout process. We’re helping
corporate clients use data to manage their
supply chain better.
Data is a valuable asset and we know that
people care deeply about their privacy and
security. We’ve been protecting both for
years and we are not going to stop now.
We continue to invest in our infrastructure
to ensure it is resilient to cybercrime and
we have deployed a number of cybercrime
detection tools to protect customer data.
We have also released a range of products
and services to help keep customers safe,
ranging from algorithm-based fraud detection
to card freezing capabilities in the mobile
banking app.
We have centralised the core operating
functions of Barclays into BX, the digital heart
of our organisation. Over the past two years
that’s enabled us to reduce duplication,
simplify our operating environment and
re-engineer our processes.
As we become more digital, we want to play
a leading role in capturing innovation and
bringing it to life – at scale.
We’ll do that through partnerships with
entrepreneurs building the future from
the ground up, through our global Rise
community of FinTech innovators, and our
Eagle Labs community in the UK. And we’ll
do it by working closely with innovators
inside and outside our organisation, through
Barclays Ventures and innovation-focused
teams across Barclays, to accelerate the
growth of new business lines and build new
customer propositions around disruptive
technology.
Safe and secure in a digital age
Building resilience
Our customers have trusted us to
keep their money safe and secure
for over 325 years. As banking has
become more digital, so have the
threats, which means that protecting
our customers, and ourselves, has
become more digital too.
Criminals are more sophisticated
today than ever before, but we’ve
invested millions in security,
resilience and defence to hold
them back.
We’ve built state-of-the-art joint
operations centres around the world,
so that we’re watching for the next
attack 24 hours a day, 365 days a
year. We’ve introduced machine
learning to help spot and stop
fraudulent transactions.
We’re using in-app and online
prompts, as well as our adverts,
to help educate customers about
new types of fraud and scams, such
as push payment fraud. And we’re
protecting the privacy of our
customers with world-class data
protection.
As technology continues to change,
we know that the threats will keep
evolving too. But our plans to make
our bank more digital mean we’re
committed to always staying one
step ahead.
10 Barclays PLC Annual Report 2019
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3. Protecting and
4. Maintaining and increasing
strengthening our culture
our diversification
Group income by customer
%
As a purpose-driven organisation, we are
working hard to create a culture where each
and every colleague feels empowered to take
decisions that balance all our stakeholder
interests.
Our most senior leaders spend significant time
setting the right tone at Barclays, and our
purpose and values are now deeply embedded
in their message.
We are committed to creating a culture which
gives our colleagues the opportunity to reach
their potential, within an inclusive and
supportive environment.
As an example of this, we have launched the
BeWell programme which provides expert
advice and guidance on practical steps that
colleagues can take to look after their physical
and mental health.
You can read more about our approach
to supporting our people on pages 28
to 31.
We believe that our purpose-driven culture will
help us reduce the impact of poor conduct on
our stakeholders and our financial performance
and we track our progress through metrics
such as the number of operational risk events
and compliance breaches.
Outside our organisation, we believe that our
success over the long term is tied inextricably
to the positive impact we can have on the
environment and the communities where we
live and work.
You can read more about how we see
our role in society on pages 32 to 35.
Our diversification is a real strength, and we
will maintain and increase our diversity as
we evolve.
Our revenue today comes from different
businesses, different types of customer and
client, different types of income, and different
geographies. We believe this diversification
creates the balance and resilience required to
deliver through the economic cycle.
As a result of having such a broad range of
products and services, we can support our
customers and clients across almost all of
their financial needs. It also creates
opportunities for growth.
Across our businesses there are multiple areas
where we benefit from significant scale – and
where there is opportunity to further enhance
the products and services we deliver for our
customers and clients, without materially
increasing capital deployed.
For example, in our payments business, we are
using our strengths in the UK to better serve
UK small businesses, while also targeting
international expansion in Europe. Our
Corporate Bank is enhancing its client-facing
digital platform and expanding into new
European markets without the overheads of a
branch presence. And Barclays UK is building
an integrated banking, financial planning and
investments platform connected to the
Barclays App, and focusing on our c.1m
Premier customers.
In addition, by combining our operating
platform, through BX, we can share our
investment and expertise across the whole
of Barclays.
Our results indicate that our strategy is
delivering. By optimising returns in our scale
businesses whilst targeting growth in some
of our less capital intensive businesses,
we believe that we will continue to deliver.
Our business model, described on the
following pages, is the way in which we use
our resources and deploy our strengths to
deliver value for all our stakeholders.
Diversification creates
the balance and
resilience required to
deliver through the
economic cycle.
27
2019
20
36
11
6
UK Consumer
International
Consumer and
Payments
Business Banking
Corporate
Investment Banking
Group income by region
%
4
55
2019
33
8
United Kingdom
Europe
Americas
Other
Group income by business
£bn
7.4
2019
14.7
BUK
BI
home.barclays/annualreport
Barclays PLC Annual Report 2019 11
Financial reviewFinancial statementsShareholder informationRisk reviewGovernanceStrategic report
BUSINESS MODEL
Serving our stakeholders
Banks play a key role
in connecting the
providers and users
of capital – Barclays
recognises this role
in serving society,
and our success as a
business has always
been inextricably
linked to the progress
of the people,
communities and
businesses we serve.
We deploy our resources…
to deliver the right outcomes
for our clients
to serve our diversified
customer base…
ranging from retail banking
customers, through to the largest
multinational corporates and
institutional clients
People
Our people are our
organisation. We deliver
success through a purpose-
driven and inclusive culture.
Financial
resources
We deploy our financial
resources to help our
customers and clients
achieve their ambitions.
Technology and
infrastructure
Our deep technology and
infrastructure capabilities
drive seamless customer
experiences and support
strong resiliency.
UK Consumer
27%
of our Group income
International Consumer
and Payments
20%
of our Group income
Business Banking
6%
of our Group income
Corporate
11%
of our Group income
Operations and
governance
Our risk management,
governance and controls help
ensure client outcomes are
achieved in the right way.
Investment Banking
36%
of our Group income
12 Barclays PLC Annual Report 2019
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across all of their
financial needs…
with our diverse range of
products and services
employing our
unique strengths…
which allow us to be the trusted
financial partner for all of our
customers and clients
to deliver value
to all our stakeholders
and fulfilling a vital role in the
economies in which we operate
Move
We facilitate transactions
and move money around
the world.
■■ Payments
■■ Foreign exchange
Brand and heritage
Our strong brand and
heritage earns trust
from our customers and
ensures we are delivering
outcomes in the right way.
CUSTOMERS AND CLIENTS
Supporting financial goals for
our customers and clients with
products and services delivered
through a superior offering.
Lend
We lend to customers and
clients to support their needs.
■■ Term lending
■■ Credit cards
■■ Overdrafts
■■ Trade and
working
capital
Connect
We connect companies
seeking funding with
the financial markets.
■■ Equity capital markets
■■ Debt capital markets
Protect
We ensure the assets of our
clients and customers are safe.
■■ Deposit accounts
■■ Risk management
Invest and advise
We help our customers
and clients invest assets
to drive growth.
■■ Investments
■■ Trading
■■ M&A
Diversified model
Our diversified model
strengthens our ability
to deliver attractive and
sustainable Group
returns amidst
economic uncertainty.
Digitisation
and innovation
Being at the forefront
of innovation allows
us to deliver excellent
customer experiences
and enables growth.
Service execution
Our service company,
BX, allows us to deliver
excellent customer
experiences and
drive effective and
efficient services.
See pages 20 to 27
COLLEAGUES
Helping our colleagues
across the world develop as
professionals, and achieve
their ambitions in the
right way.
See pages 28 to 31
SOCIETY
Providing support to our
communities, and access
to social and environmental
financing to address
societal needs.
See pages 32 to 35
INVESTORS
Delivering attractive and
sustainable shareholder
returns on a foundation of
strong capital and funding.
See page 36
home.barclays/annualreport
Barclays PLC Annual Report 2019 13
S
t
r
a
t
e
g
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r
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o
r
t
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l
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n
STAKEHOLDER ENGAGEMENT
Engaging with our stakeholders
Barclays aims to create value for its stakeholders, balanced across
both the short and the long term. We engage with our stakeholders
to better inform them of our activities and to create mutually
supportive opportunities and outcomes for them.
Why we focus on
these stakeholders?
Our customers and clients are
central to our business – without
them, we would not exist.
Our people are our most valuable
asset. They make a critical
difference to our success, and our
investment in them protects and
strengthens our culture.
Delivering long-term returns for
all our stakeholders depends on
deep and thoughtful engagement
with the numerous individuals
and interest groups representing
wider society.
Delivering for our investors
ensures the business continues
to be successful in the long term
and can therefore continue to
deliver for all our stakeholders.
Who are our stakeholders?
CUSTOMERS AND CLIENTS
Our customers and clients are those
stakeholders who use our products,
services and financial expertise.
See pages 20 to 27
COLLEAGUES
Our colleagues embody our culture
and provide excellent service to our
customers and clients.
See pages 28 to 31
SOCIETY
Society is represented by the
communities in which we serve as
well as the world in which we live.
See pages 32 to 35
INVESTORS
Our investor stakeholder group
encompasses all parties interested
in the success and sustainability
of the business, from our shareholders
and bondholders to regulators
and public policy makers.
See page 36
How do we engage them?
What do they tell us?
How do we respond to them?
We engage and build our relationships with
our customers and clients in a number of
ways, from face-to-face interactions to the
award-winning Barclays App.
We conduct a wide range of customer and
client research to better understand their
interactions with, and expectations of, Barclays.
This includes close analysis of our NPS and
monitoring of customer complaints.
We have an established approach to engaging
colleagues to ensure we take their perspectives
into account in our decision-making and
action plans, and share with them our strategy
and progress. Our employee opinion survey
formally captures their views and is a key part
of how we track engagement.
Our leaders engage face to face with
colleagues locally and we engage collectively,
including through an effective partnership with
Unite, and the Barclays Group European Forum.
We engage in a continual dialogue with
non-governmental organisations (NGOs)
and other interest groups to improve our
understanding of current and emerging
environmental and societal topics.
We participate in multiple sustainability and
human rights forums and global and regional
industry initiatives, engaging directly through
Barclays’ Sustainability and Environmental,
Social and Governance (ESG) teams.
We conduct extensive engagement with our
institutional equity and fixed income investors
throughout the year.
We have a collaborative and transparent
dialogue with our regulators and work together
to ensure we meet prudential and conduct
based regulatory standards, contributing to
a safe and robust banking system.
Our AGMs give the Board the opportunity to
engage with investors on the running of their
company, and to receive feedback.
Based on data from millions of individual transactions
In 2019, we developed our services following engagement with our customers
and personal interactions, our customers and clients
and clients. These included:
■■ to be able to trust that our products and services
200 local clinics for UK SMEs to prepare for Brexit
■■ holding events for customers and clients ranging from our Eagle Labs to over
■■ the upgrade of BARX as an integrated, cross-asset electronic trading platform
to create a better experience for Investment Bank clients
■■ raising the unsecured lending limit to £100k for SME clients with a digital
application process allowing clients to receive money within 24 hours.
tell us they want:
meet their needs
■■ value for money
■■ to find Barclays easy to deal with.
These insights help to inform our business decisions
and improve our products and services.
In the 2019 employee opinion survey, our colleagues
The results from our employee opinion survey help shape how we run the
told us:
business and the areas that will make a real difference to our colleagues:
■■ overall colleague engagement score is 77%
■■ we ensure everyone is kept up to date on the strategy, performance and
■■ 88% say they are able to work dynamically, and 80%
would recommend Barclays as a good place to work
■■ only 61% said the stress levels at work are manageable
and only 53% believe that we have been successful in
eliminating obstacles to efficiency.
progress of Barclays through a co-ordinated, multi-channel approach
across a combination of leader-led engagement, and digital and print
communication
■■ we are continuing to focus on tools and training for physical and mental
well-being and we are investing in technology and in our premises.
This data and other insights form an important part
of our decision-making, and improving these scores
is a key priority.
During 2019, our society stakeholders told us that they
We responded on key topics in 2019 through a wide range of
wanted to hear more about:
initiatives including:
■■ supporting our customers and clients in the transition
■■ publication of our Energy & Climate Change and Forestry and
to a low-carbon economy
Palm Oil Statements
■■ responsible financing for companies in sensitive
■■ becoming a founding signatory of the United Nations Principles
for Responsible Banking
■■ managing our broader environmental and social
■■ continued growth in our suite of green finance products
■■ the support we’re giving to the communities in which
■■ maintaining ongoing dialogue with a wide range of NGOs
■■ further engagement on ESG with investors and broader stakeholders
■■ launching Building Thriving Local Economies pilots in the UK.
energy sectors
impacts
we operate.
Discussions with our investors included:
We have responded to investors in a number of ways including:
■■ drivers of sustainable improvement in Group returns
■■ the new Chairman’s ‘listening tour’, which helped to inform new deep-dive
■■ the macroeconomic environment and headwinds
to the delivery of our strategy and targets
Board sessions
■■ our focus on cost efficiency and ongoing investment
US comfort in our capital position
■■ passing the 2019 BoE and CCAR stress tests, giving regulators in the UK and
in digital and technology
We continued to have constructive engagement with
regulators, evidenced by positive stress test outcomes.
ESG engagement increased during 2019, reflecting the pace
of change in the industry and its importance to our investors.
■■ taking Barclays to its stakeholders, from 2020, the AGM will be held outside
of London; our 2020 AGM will be held in Glasgow, where we are building a
new strategic campus site.
14 Barclays PLC Annual Report 2019
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CUSTOMERS AND CLIENTS
Our customers and clients are those
stakeholders who use our products,
services and financial expertise.
See pages 20 to 27
COLLEAGUES
Our colleagues embody our culture
and provide excellent service to our
customers and clients.
See pages 28 to 31
SOCIETY
Society is represented by the
communities in which we serve as
well as the world in which we live.
See pages 32 to 35
INVESTORS
Our investor stakeholder group
encompasses all parties interested
in the success and sustainability
of the business, from our shareholders
and bondholders to regulators
and public policy makers.
See page 36
Why we focus on
these stakeholders?
Our customers and clients are
We engage and build our relationships with
central to our business – without
our customers and clients in a number of
them, we would not exist.
ways, from face-to-face interactions to the
award-winning Barclays App.
We conduct a wide range of customer and
client research to better understand their
interactions with, and expectations of, Barclays.
This includes close analysis of our NPS and
monitoring of customer complaints.
Our people are our most valuable
We have an established approach to engaging
asset. They make a critical
colleagues to ensure we take their perspectives
difference to our success, and our
into account in our decision-making and
investment in them protects and
action plans, and share with them our strategy
strengthens our culture.
and progress. Our employee opinion survey
formally captures their views and is a key part
of how we track engagement.
Our leaders engage face to face with
colleagues locally and we engage collectively,
including through an effective partnership with
Unite, and the Barclays Group European Forum.
Delivering long-term returns for
We engage in a continual dialogue with
all our stakeholders depends on
non-governmental organisations (NGOs)
deep and thoughtful engagement
and other interest groups to improve our
with the numerous individuals
understanding of current and emerging
and interest groups representing
environmental and societal topics.
wider society.
We participate in multiple sustainability and
human rights forums and global and regional
industry initiatives, engaging directly through
Barclays’ Sustainability and Environmental,
Social and Governance (ESG) teams.
Delivering for our investors
We conduct extensive engagement with our
ensures the business continues
institutional equity and fixed income investors
to be successful in the long term
throughout the year.
and can therefore continue to
deliver for all our stakeholders.
We have a collaborative and transparent
dialogue with our regulators and work together
to ensure we meet prudential and conduct
based regulatory standards, contributing to
a safe and robust banking system.
Our AGMs give the Board the opportunity to
engage with investors on the running of their
company, and to receive feedback.
Who are our stakeholders?
How do we engage them?
What do they tell us?
How do we respond to them?
Based on data from millions of individual transactions
and personal interactions, our customers and clients
tell us they want:
In 2019, we developed our services following engagement with our customers
and clients. These included:
■■ holding events for customers and clients ranging from our Eagle Labs to over
■■ to be able to trust that our products and services
200 local clinics for UK SMEs to prepare for Brexit
meet their needs
■■ value for money
■■ to find Barclays easy to deal with.
These insights help to inform our business decisions
and improve our products and services.
■■ the upgrade of BARX as an integrated, cross-asset electronic trading platform
to create a better experience for Investment Bank clients
■■ raising the unsecured lending limit to £100k for SME clients with a digital
application process allowing clients to receive money within 24 hours.
In the 2019 employee opinion survey, our colleagues
told us:
The results from our employee opinion survey help shape how we run the
business and the areas that will make a real difference to our colleagues:
■■ overall colleague engagement score is 77%
■■ 88% say they are able to work dynamically, and 80%
would recommend Barclays as a good place to work
■■ only 61% said the stress levels at work are manageable
and only 53% believe that we have been successful in
eliminating obstacles to efficiency.
■■ we ensure everyone is kept up to date on the strategy, performance and
progress of Barclays through a co-ordinated, multi-channel approach
across a combination of leader-led engagement, and digital and print
communication
■■ we are continuing to focus on tools and training for physical and mental
well-being and we are investing in technology and in our premises.
This data and other insights form an important part
of our decision-making, and improving these scores
is a key priority.
During 2019, our society stakeholders told us that they
wanted to hear more about:
We responded on key topics in 2019 through a wide range of
initiatives including:
■■ supporting our customers and clients in the transition
■■ publication of our Energy & Climate Change and Forestry and
to a low-carbon economy
Palm Oil Statements
■■ responsible financing for companies in sensitive
■■ becoming a founding signatory of the United Nations Principles
energy sectors
for Responsible Banking
■■ managing our broader environmental and social
■■ continued growth in our suite of green finance products
impacts
■■ the support we’re giving to the communities in which
we operate.
■■ maintaining ongoing dialogue with a wide range of NGOs
■■ further engagement on ESG with investors and broader stakeholders
■■ launching Building Thriving Local Economies pilots in the UK.
Discussions with our investors included:
We have responded to investors in a number of ways including:
■■ drivers of sustainable improvement in Group returns
■■ the new Chairman’s ‘listening tour’, which helped to inform new deep-dive
■■ the macroeconomic environment and headwinds
to the delivery of our strategy and targets
Board sessions
■■ passing the 2019 BoE and CCAR stress tests, giving regulators in the UK and
■■ our focus on cost efficiency and ongoing investment
US comfort in our capital position
in digital and technology
We continued to have constructive engagement with
regulators, evidenced by positive stress test outcomes.
ESG engagement increased during 2019, reflecting the pace
of change in the industry and its importance to our investors.
■■ taking Barclays to its stakeholders, from 2020, the AGM will be held outside
of London; our 2020 AGM will be held in Glasgow, where we are building a
new strategic campus site.
home.barclays/annualreport
Barclays PLC Annual Report 2019 15
Financial reviewFinancial statementsShareholder informationRisk reviewGovernanceStrategic report STAKEHOLDER ENGAGEMENT
Engaging with our stakeholders
Having regard to our stakeholders
in Board decision-making.
As a result of these activities, the Board has
an overview of engagement with stakeholders,
and other relevant factors, which enables the
Directors to comply with their legal duty
under section 172 of the Companies Act 2006.
For more details on how our Board operates,
and the way in which it reaches decisions,
including the matters it discussed and
debated during the year, please see
pages 48 to 51.
Engagement in action
The following are some examples of how
the Directors have had regard to the matters
set out in sections 172(1)(a)-(f ) when
discharging their section 172 duties and the
effect of that on certain of the decisions taken
by them.
Section 172(1) statement
The Directors have acted in a way that they
considered, in good faith, to be most likely
to promote the success of the Company for
the benefit of its members as a whole, and
in doing so had regard, amongst other
matters, to:
■■ the likely consequences of any decision
in the long term
■■ the interests of the Company’s employees
■■ the need to foster the Company’s business
relationships with suppliers, customers
and others
■■ the impact of the Company’s operations
on the community and the environment
■■ the desirability of the Company
maintaining a reputation for high
standards of business conduct
■■ the need to act fairly as between
members of the Company.
The Directors also took into account the views
and interests of a wider set of stakeholders,
including our pensioners, regulators, the
Government and non-governmental
organisations. You can find out more about
how Barclays engages with its stakeholders
on the previous pages.
Considering this broad range of interests
is an important part of the way the Board
makes decisions, although in balancing
those different perspectives it won’t always
be possible to deliver everyone’s desired
outcome.
How does the Board engage
with stakeholders?
The Board will sometimes engage directly
with certain stakeholders on certain issues,
but the size and distribution of our
stakeholders and of Barclays means that
stakeholder engagement often takes place
at an operational level.
The Board considers and discusses
information from across the organisation
to help it understand the impact of Barclays
operations, and the interests and views of
our key stakeholders. It also reviews strategy,
financial and operational performance, as
well as information covering areas such as
key risks, and legal and regulatory compliance.
This information is provided to the Board
through reports sent in advance of each Board
meeting, and through in-person presentations.
The Board considers
and discusses
information from across
the organisation to help
it understand the
impact of Barclays
operations, and the
interests and views of
our key stakeholders.
16 Barclays PLC Annual Report 2019
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Being accountable
for our decisions
Our governance is designed to ensure that
we take into account the views of all our
stakeholders, so that our decision-making is
collaborative and well-informed – both before
and after we make our decisions public.
In October 2019, we announced that we
would be withdrawing over-the-counter
access to cash for our customers at Post
Offices in the UK. This was a decision made
after carefully balancing the economic impact
of a significant increase in transaction fees,
and our ability to put in place comprehensive
plans to safeguard our customers’ access
to cash. Following our announcement,
we continued to engage with customers,
Members of Parliament, and the government.
It became clear from this further engagement
that our full participation in the Post Office
Banking Framework is crucial to the viability
of the Post Office network at this point in time.
As a result of that further engagement and
debate, we reversed our decision. The Board
has reviewed the planning and decision-
making process around this issue. This has
highlighted and reconfirmed, among other
things, the importance of listening to all of
our stakeholders, on an ongoing basis.
Improving the quality
of our decision-making
The Board’s agenda in 2019 has been
significantly influenced by a comprehensive
‘listening tour’ undertaken by our new
Chairman following his arrival at Barclays in
March, before he became Chairman in May.
Nigel Higgins held around 50 meetings with
shareholders and other stakeholders as part of
this ‘listening tour’ and has also subsequently
spent considerable time this year meeting
with stakeholders across the globe as part of
his induction, including with our investors,
customers and colleagues.
The Board and Executive Committee used the
feedback to agree a prioritised series of deep
dives which now form a significant part of
each Board meeting. These deep dives have
helped to facilitate an in-depth understanding
of issues with a view to helping management
and the Board make well-informed decisions
both now and in the future. The deep dives
conducted in 2019 covered a wide range of
topics, including focus on particular business
areas, capital allocation, our culture, our
societal purpose and environmental matters.
Striving for simplicity
and effectiveness
Barclays is a large, diversified organisation
and in 2019 the Board took several decisions
to simplify its governance model. The
consolidation and streamlining of
membership of the Barclays PLC and Barclays
Bank PLC Boards, announced in September
2019, has benefited Board members and
our colleagues by significantly increasing
co-ordination and efficiency and reducing
complexity and duplication.
Oversight of the activities of Barclays Bank
PLC, which includes our CIB, is now vested
in a board the members of which also have
direct accountability to Barclays PLC’s
shareholders through their separate
responsibilities as members of the Barclays
PLC Board. In reaching this decision, the Board
took great care to consider the broader UK
regulatory environment, so as to safeguard
both the letter and the spirit of the UK
ring-fencing legislation which came into force
at the start of 2019.
Recognising the importance of our culture,
reputation and the environment to the Board
and to all our stakeholders, we also decided
to transfer primary oversight for these key
matters from the Reputation Committee to
the Board.
Deep dives have
helped the Board to
develop an in-depth
understanding of
issues such as capital
allocation, culture,
and societal purpose.
home.barclays/annualreport
Barclays PLC Annual Report 2019 17
Financial reviewFinancial statementsShareholder informationRisk reviewGovernanceStrategic report KEY PERFORMANCE INDICATORS
A balanced assessment of our progress
Our performance measurement framework enables a
balanced assessment of progress towards the strategic
goals of the organisation, viewed from the perspectives
of each of our key stakeholder groups.
A broad range of financial and non-financial
measures are analysed as part of regular
business strategy and performance reviews.
To assess our performance, we use a number
of sources including regular management
reporting of our key metrics, as well as
external measures, to provide a balanced
review of performance during the year, while
additionally monitoring for emerging trends.
Performance against our financial targets and
strategic non-financial performance measures
is directly linked to executive remuneration,
and influences incentive outcomes for Barclays’
employees more broadly. This approach
enables us to deliver positive and sustainable
outcomes for all our stakeholders while
maintaining flexibility for our businesses
to adapt in a fast-moving world.
We consider a range of metrics across all
stakeholder groups and continuously assess
whether new measures should be added or
removed from our dashboards, in order to
ensure these remain relevant and appropriate.
For example, in recent years, digital
engagement and related customer satisfaction
scores have become increasingly important
as we continue on our digital journey.
Key measures used in our 2019 assessment
include, but are not limited to, the metrics
reported on this page, and in the broader
discussion of our performance on the
following Customers and Clients,
Colleagues and Society pages.
Notes
Prior period comparatives for Society are only shown for
2018, reflecting Barclays’ new commitments launched
in 2019.
a ®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.
b Source: Coalition Competitor Analysis. Market share
represents Barclays’ share of the total industry revenue
pool. Analysis is based on Barclays’ internal business
structure and internal revenues.
c Source: Dealogic.
d 2018 financing has been restated to incorporate
sustainability-linked financing facilities and to
ensure a consistent basis of reporting with 2019.
e Excluding litigation and conduct.
CUSTOMERS AND CLIENTS
We aim to build trust by offering
innovative products and services,
with an excellent customer and
client experience, such that
customers and clients are happy
to recommend us to others.
See pages 20 to 27
COLLEAGUES
We promote and maintain a diverse
and inclusive workforce in which
colleagues of all backgrounds are
treated equally and supported to
achieve their potential within a
positive, values-based culture.
See pages 28 to 31
SOCIETY
We manage the environmental
and societal impact of our business,
making decisions that provide all
our stakeholders with access to a
prosperous and sustainable future.
See pages 32 to 35
INVESTORS
Our ambition is to generate
attractive and sustainable returns
through the economic cycle.
We measure our progress through
our Group financial targets.
See page 36
Barclays UK net
promoter score (NPS®)a
+18
2019
+17
2018
+14
2017
The NPS is a view of how willing
customers are to recommend our
products and services to others.
Colleague
engagement
%
2019
2018
2017
77
79
78
This is a measure derived from our
nine engagement questions in the
Your View survey.
Social and environmental
financing
£bn
34.8
28.5d
2019
2018
Financing in select social and
environmental segments aligned to
Barclays impact eligibility framework.
Group return on
tangible equity (RoTE)e
%
2019
2018
2017
(1.2)
9.0
8.5
RoTE increased to 9.0%, in line with
the 2019 target.
CET1 ratio target of c.13.5%, following removal
of the operational risk floor during 2019.
CC&P US customer digital
engagement
%
Barclays UK complaints
excluding PPI
%
71
69
66
-8
-9
CIB revenue ranks and
market shares
(#,%)
#6
4.4
#6
4.2
#7
4.2
#7
4.1
#7
4.2
#8
3.6
2019
2018
2017
2019
2018
2019
2018
2017
Metric shows percentage of digitally active
CC&P US consumers.
We received a significant volume of PPI-related
claims leading up to the FCA deadline of
29 August 2019. As such the underlying trend
provides a more meaningful comparison.
Markets global revenue ranking and share (Coalition)b
Banking global fee ranking and share (Dealogic)c
Demonstrating our performance vs peers.
Females at Managing Director
and Director level
“ I would recommend Barclays
as a good place to work”
“I believe my team and I role-model
-13
2017
80
83
82
2.3
2.3
%
2019
2018
2017
million
2019
2018
the values”
%
92
93
2019
2018
A new question since the 2018 Your View
employee survey showing our colleagues’
connection to Barclays’ values and culture.
66,000
Metric reflects % of women in senior
leadership roles within Barclays.
A question in the 2019 Your View employee survey
that measures colleague advocacy.
LifeSkills – No. of people
upskilled in the UK per year
Connect with Work – No. of people
placed into work globally
Emissions generated from Barclays’ branches,
offices and data centres, including all indirect
emission from electricity consumption.
Number of people participating in the
Barclays LifeSkills programme focused on
employability skills.
Number of people placed into work following
training provided by Barclays Connect with
Work partner organisations.
Operational carbon
emissions
t CO2 equiv.
2019
134,347
2018
286,599
%
2019
2018
2017
CET1 ratio
%
2019
2018
2017
25
24
23
13.8
13.2
13.3
Operating
expensese
£bn
13.6
13.9
14.2
2019
2018
2017
Group operating expenses in line with the
2019 guidance. 2018 excludes litigation and
conduct and a GMP charge of £140m.
Cost: income
ratioe
%
2019
2018
2017
63
66
68
Cost efficiency remains a priority and we
continue to target a cost: income ratio of
<60% over time.
18 Barclays PLC Annual Report 2019
home.barclays/annualreport
CUSTOMERS AND CLIENTS
We aim to build trust by offering
innovative products and services,
with an excellent customer and
client experience, such that
customers and clients are happy
to recommend us to others.
See pages 20 to 27
COLLEAGUES
We promote and maintain a diverse
and inclusive workforce in which
colleagues of all backgrounds are
treated equally and supported to
achieve their potential within a
positive, values-based culture.
See pages 28 to 31
SOCIETY
We manage the environmental
and societal impact of our business,
making decisions that provide all
our stakeholders with access to a
prosperous and sustainable future.
See pages 32 to 35
INVESTORS
Our ambition is to generate
attractive and sustainable returns
through the economic cycle.
We measure our progress through
our Group financial targets.
See page 36
Barclays UK net
promoter score (NPS®)a
+18
2019
+17
2018
+14
2017
The NPS is a view of how willing
customers are to recommend our
products and services to others.
Colleague
engagement
%
2019
2018
2017
77
79
78
9.0
8.5
This is a measure derived from our
nine engagement questions in the
Your View survey.
Social and environmental
financing
£bn
34.8
28.5d
2019
2018
Financing in select social and
environmental segments aligned to
Barclays impact eligibility framework.
Group return on
tangible equity (RoTE)e
%
2019
2018
2017
(1.2)
CC&P US customer digital
engagement
%
Barclays UK complaints
excluding PPI
%
71
69
66
-8
-9
2019
2018
2017
2019
2018
-13
2017
Metric shows percentage of digitally active
CC&P US consumers.
We received a significant volume of PPI-related
claims leading up to the FCA deadline of
29 August 2019. As such the underlying trend
provides a more meaningful comparison.
Females at Managing Director
and Director level
%
“ I would recommend Barclays
as a good place to work”
%
2019
2018
2017
25
24
23
2019
2018
2017
80
83
82
Metric reflects % of women in senior
leadership roles within Barclays.
A question in the 2019 Your View employee survey
that measures colleague advocacy.
CIB revenue ranks and
market shares
(#,%)
#6
4.4
#6
#8
#7
#7
4.2
4.1
4.2
#7
4.2
3.6
2019
2018
2017
Markets global revenue ranking and share (Coalition)b
Banking global fee ranking and share (Dealogic)c
Demonstrating our performance vs peers.
“I believe my team and I role-model
the values”
%
92
93
2019
2018
A new question since the 2018 Your View
employee survey showing our colleagues’
connection to Barclays’ values and culture.
Operational carbon
emissions
t CO2 equiv.
2019
134,347
2018
286,599
LifeSkills – No. of people
upskilled in the UK per year
million
Connect with Work – No. of people
placed into work globally
2019
2018
2.3
2.3
66,000
Emissions generated from Barclays’ branches,
offices and data centres, including all indirect
emission from electricity consumption.
Number of people participating in the
Barclays LifeSkills programme focused on
employability skills.
Number of people placed into work following
training provided by Barclays Connect with
Work partner organisations.
CET1 ratio
%
2019
2018
2017
13.8
13.2
13.3
RoTE increased to 9.0%, in line with
the 2019 target.
CET1 ratio target of c.13.5%, following removal
of the operational risk floor during 2019.
Operating
expensese
£bn
13.6
13.9
14.2
2019
2018
2017
Group operating expenses in line with the
2019 guidance. 2018 excludes litigation and
conduct and a GMP charge of £140m.
Cost: income
ratioe
%
2019
2018
2017
63
66
68
Cost efficiency remains a priority and we
continue to target a cost: income ratio of
<60% over time.
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Barclays PLC Annual Report 2019 19
Financial reviewFinancial statementsShareholder informationRisk reviewGovernanceStrategic report
Barclays UK
Barclays UK is our UK ring-fenced bank,
comprised largely of our UK Personal
and Business Banking and Barclaycard
Consumer UK businesses.
UK Personal Banking offers retail solutions
to help customers with their day-to-day
banking needs. UK Business Banking serves
business clients, from high growth
start-ups to small and medium-sized
enterprises, with specialist advice for
their business banking needs.
Barclaycard Consumer UK is a leading
credit card provider, offering flexible
borrowing and payment solutions, while
delivering a leading customer experience.
Income
Operating
expensesa
Profit
before taxa
Return on
tangible equitya
Risk weighted
assets
£7.4bn
£4.0bn
£2.6bn
17.5%
£75bn
a Excluding litigation and conduct.
20 Barclays PLC Annual Report 2019
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CUSTOMERS AND CLIENTS
Barclays UK
We serve personal and small business
customers across all of their banking needs.
Barclays is one of the most recognisable
British brands. We serve customers in the
UK across the entire spectrum of their
banking needs.
We also support small and medium-sized
businesses, providing the financing, saving
and transactional products and services they
need to grow.
Strategic priorities
Barclays UK places customers at the centre
of what we do. This means listening to our
customers, and adapting our products and
services to ensure we have the capabilities
to support their ever-evolving needs – from
receiving their first salary payment, through
moving home to saving and investing for
retirement. It also means transforming the
way we organise ourselves by creating a core
team centred around our customers’ needs,
enabling us to move faster.
As part of our transformation, we are using
technology to improve our service and to
make it more efficient and reliable for our
customers. We continue to make progress
in eliminating the causes of complaints
and improving the quality of our service.
Nevertheless, accelerating progress on behalf
of our customers remains a key priority, as the
interruptions to our services and the level of
complaints we receive from our customers is
still more than we would like.
Barclays UK is focused
on providing services
and insights, to help
customers manage
their finances.
The way we serve our customers is
increasingly digital, a reflection of how
most of our customers now prefer to interact
with us. Further investment in our digital
capabilities remains fundamental to our
strategy, ensuring that our customers have
the flexibility to manage the majority of their
day-to-day banking needs via mobile and
online banking.
This allows us to understand our customers’
needs to a degree never previously possible,
meaning we can tailor our services
accordingly and deliver insights to customers,
which help them manage their finances more
effectively.
Additionally, the investment we are making
in our technology, especially moving to the
Cloud, means that we can get products to
customers more quickly and deliver a more
personalised digital experience.
However, we recognise that more complex
needs, like property transactions, still need
to be dealt with in person. That’s why we’re
also investing in our physical locations, using
technology wherever possible, to make them
quicker and easier to use for everyone.
Operating environment
The lower interest rate environment makes
borrowing more affordable but, combined with
intense competition in the mortgage market
and our focus on secured lending, continues
to compress our net interest margin.
The accelerated pace of change in this
competitive environment has also moved
the traditional boundaries of retail banking
and reshaped customer expectations. We
are making good progress in meeting these
new expectations, for example, with balance
tracking, spending categorisation and a
controls hub allowing customers to manage
the types of spend they want, but we
recognise that we still have more to do.
We must also continue to adapt to evolving
regulation, for example by offering
alternatives to traditional forms of credit
in unsecured lending.
Our achievements
in 2019
We continued to progress our digital strategy
through 2019. As at the end of the year,
59% of our products were provided to our
customers through digital channels and
the number of digitally-active customers
increased by 6% to 11.4 million year on year.
We upgraded our mobile banking offering so
that our customers can now use one app to
access their Barclaycard account alongside
other Barclays products. This upgrade also
meant that 1.2 million Barclaycard customers,
who previously had no relationship with us
other than their credit card, can now access
more of our products and services through
the Barclays App.
We have also improved the products and
services that we offer our customers.
2019 saw us enhance our market-leading
unsecured business loans, enabling Business
Banking clients to borrow up to £100,000
digitally – an increase from £25,000
previously. This is another industry first for
Barclays, as we are currently the only UK bank
able to offer an instant answer on clients’
eligibility for lending at this scale, and making
funds available the next working day.
home.barclays/annualreport
Barclays PLC Annual Report 2019 21
Financial reviewFinancial statementsShareholder informationRisk reviewGovernanceStrategic report CUSTOMERS AND CLIENTS
Barclays UK
Fostering innovation
Barclays Eagle Labs
Barclays Eagle Labs is a platform
to support the UK’s entrepreneurial
community. Through a national network
of 24 labs we incubate high-growth tech
businesses, offering co-working spaces,
mentoring opportunities and access
to cutting-edge technology to rapidly
prototype new product ideas.
We currently support over
470 startups and to date our
members and alumni have
collectively raised over £600m
of funding.
Committed to connecting communities,
in 2019 we hosted or helped organise
2,200 events throughout the UK. These
were attended by over 80,000 people,
with a strong focus on educating
individuals, businesses and larger
organisations.
We have progressed with efforts to improve
our digital estate, data capabilities and
ultimately create the opportunity to better
engage partners. We have continued our
support for some of the most promising
emerging FinTechs through our network
of Rise sites and deepened our strategic
relationship with MarketFinance (a peer-
to-peer invoice discounting platform).
Overall, our relentless focus on customers
is reflected in an improved Net Promoter
Score for Barclays UK of +18, and +11 for the
Barclaycard brand, which shows the strength
and depth of our relationships.
Barclays UK Net Promoter Score
+18
Barclaycard Net Promoter Score
+11
Digitally-active customers
11.4m
Barclays App users
8.4m
UK new mortgage lending
£25.5bn
Focus for 2020
and beyond
We aim to continue the progress made
during 2019 in driving down complaints, by
continuing to identify and address the root
cause of customer problems, and by making
selective investments to improve
infrastructure.
We want to continue to improve our
customers’ digital experience in 2020, as well
as developing enhancements to our online
and mobile platforms. We will continue to
invest in equipping our people with the tools
and skills they need to achieve this, as well as
strengthening our culture.
We are also creating an integrated banking,
advice and investments platform, building on
our award-winninga Barclays App. Customers
will be able to access financial planning
services and investment products, as an
extension of their existing banking products
and services.
Finally, we will continue to embed our new
ways of working into our organisation, in
order to ensure that we are able to meet
our customers’ ever-evolving needs.
Note
a Best use of mobile at FStech Awards 2019.
22 Barclays PLC Annual Report 2019
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Barclays International
Barclays International consists of the
Corporate and Investment Bank and
Consumer, Cards and Payments.
With relentless focus on delivering for
customers and clients around the world,
Barclays International’s diversified business
portfolio provides balance, resilience and
exciting growth opportunities. The division
has strong global market positions
and continues to invest in people and
technology in order to deliver sustainable
improved returns. Barclays International
offers customers and clients a range of
products and services spanning consumer
and wholesale banking.
Income
Operating
expensesa
Profit
before taxa
Return on
tangible equitya
Risk weighted
assets
£14.7bn
a Excluding litigation and conduct.
£9.3bn
£4.2bn
9.3%
£209bn
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Barclays PLC Annual Report 2019 23
Financial reviewFinancial statementsShareholder informationRisk reviewGovernanceStrategic report CUSTOMERS AND CLIENTS
Barclays International:
Corporate and Investment Bank
Our Corporate and Investment Bank aids money
managers, institutions, governments and corporate
clients in managing their financial needs.
Our Corporate and Investment Bank is one
of the world’s leading providers of funding,
financing, cash management, advisory and
risk management products and services.
We work with money managers, financial
institutions, governments and corporate
clients globally to help them innovate
and grow.
Strategic priorities
Over the last few years, our US competitors
have consolidated their strong position, and
our European peers have focused efforts on
a narrower product set.
Barclays is therefore able to differentiate
itself as a European headquartered provider
of universal banking services. As our clients
look to diversify their service providers, and
decrease their exposure to the US credit cycle,
we believe our ability to provide this
diversification is a real strength.
Our strategy is also shaped by the increasingly
sophisticated needs of our clients, and
technological evolution across our industry.
We are focused on three areas:
Adapting to the evolving needs of our clients
We are investing in technology that makes it
easier for our clients to do business with us.
That includes the development of our
electronic offering in Markets and the
digitalisation of our Corporate Banking
client service platform.
Running an efficient and effective business
Achieving better operational performance
and driving improvements in market share,
while maintaining cost discipline and driving
more productive use of capital by recycling
risk-weighted assets to the highest
returning opportunities.
Improving returns by growing high
returning and capital efficient businesses
Focused growth in areas such as transaction
banking in Corporate Banking and fee-led
advisory and equity origination work in
Banking. We are also developing other
higher-returning businesses where we see
opportunities, such as securitised products.
Operating environment
The economic conditions of 2019 continued
to provide a challenging context for corporate
and institutional banking and financing
activity. Features such as the low interest rate
environment, the UK’s withdrawal from the EU
and global trade tensions combined to
dampen and delay deal activity, particularly
primary issuance.
That meant the global markets revenue pool
shrank by 2%a in 2019.
Our Banking business has also seen its
available fee pool shrink, with declines of
14-18%b compared with 2018 in the UK and
Europe, and 2-3%b in the Americas and Asia.
We expect many of these macroeconomic
trends to continue, and are shaping our
business accordingly.
Our achievements
in 2019
Despite the challenging conditions, many of
our businesses have performed well. We have
continued to gain market share in Markets and
Banking and all of our businesses continue to
deliver for our clients. However, our Corporate
and Investment Bank as a whole must make
further progress in generating the returns our
shareholders expect.
In Markets, we have helped clients navigate
the volatile trading environment and
continued to grow despite subdued financial
markets, with share up 0.2%c in a highly
competitive environment.
That was, in part, a result of continued
investment in our electronic capabilities,
particularly through investment in our BARX
and options platforms. We are now partway
through a multi-year effort to provide our
clients with market-leading execution
capabilities and liquidity access, and
increase the strength of our digital offering.
In Corporate Banking, we have also invested
in our digital proposition, with over 80%
of our clients now using iPortal, our digital
self-service platform, creating a ‘single
window’ for clients to self-serve for many
day-to-day corporate banking needs through
a reliable, easy to use interface.
We have also broadened our business across
Europe, with our single platform now live
across seven of our nine target European
countries, without the overheads of a branch
network. We continue to focus on capital
productivity and transaction banking revenue
growth to improve returns.
In Banking, we saw notable improvements in
share and revenue in both advisory and equity
underwriting. In the UK and US, we improved
our rank to #5b, and globally, improved to #6b.
Our ambition is to continue to deliver a
more diversified product mix, and improve
the proportion of income generated by less
capital intensive businesses. In this context,
we increased our global fee share to 4.2%b,
despite a declining market.
We also continued to invest and evolve to
meet the changing needs of our clients. This
saw us create one of the first Sustainable and
Impact Banking (SIB) teams in the market,
enabling us to provide thoughtful content and
execution capabilities to serve the ESG needs
of our clients.
Our strategy is shaped
by the increasingly
sophisticated needs
of our clients, and
technological evolution
across our industry.
24 Barclays PLC Annual Report 2019
home.barclays/annualreport
Income
£10.2bn
Operating expensesd
£7.0bn
Profit before taxd
£3.1bn
Return on tangible equityd
8.0%
Global banking fee share rankb
6th
Top-ranked European bank
on a full-year basis
Global markets revenue rankc
6th
Largest non-US bank
Committed to sustainable
finance
Apple Inc. €2.0bn Green Bond
We continue to lead the market in our
commitment to sustainable finance
through our ESG franchise. In November
2019, we priced a €2.0bn green bond for
Apple. The transaction was the largest-
ever Euro-denominated green bond
issued by a US corporate, and the
second-largest Euro-denominated
corporate green bond offering of all time.
Apple intends to use the
proceeds from the offering
to finance one or more of
its ‘Eligible Green Projects’:
mitigating its impact on
climate change by reducing
the carbon footprint of its
supply chain, pioneering
the use of greener materials
in its products and processes,
and conserving resources
by transitioning to recycled
and renewable materials for
production.
We were able to use our expertise in
green banking and track record of
success to support Apple in their
ambitions to support new opportunities
that will protect the planet in a
sustainable way. The transaction, among
many others, demonstrates the role that
Barclays plays in financing and advising
on transactions that contribute to a
sustainable future for us all.
Bond franchise and the existing renewables
business in our Power & Utilities Group.
We are tracking our progress against all
strategic priorities closely, to make sure that
our choices are delivering the returns we
expect, and that we can adjust our plans
accordingly.
Notes:
a Source: Coalition FY19 Preliminary Competitor Analysis.
b Source: Dealogic.
c Source: Coalition FY19 Preliminary Competitor Analysis.
Market share represents Barclays’ share of the total
industry revenue pool. Analysis is based on Barclays’
internal business structure and internal revenues.
d Excluding litigation and conduct.
Focus for 2020
and beyond
Our strategy puts us on a clear path to evolve
with the needs of our clients, and in doing so
to increase returns.
We will continue to focus on growth in
high-returning, capital efficient parts of our
business, as well as maintaining our focus
on cost discipline and operational rigour.
We will also look to make further, selective
investments for the long term; establishing
ourselves firmly as the leading European
Corporate and Investment Bank, competing
on an even footing with our US peers, and
operating at the most efficient scale in serving
our clients.
In Corporate Banking, we will continue the
investment in our digital proposition and in
our European offering. We will also focus on
steadily improving our credit portfolio returns
by reallocating risk weighted assets to
higher-returning opportunities.
Markets will continue to focus on growing
client balances, building a large and stable
accrual income base. We will keep investing in
low-touch electronic execution platforms, to
drive efficiency and scale. We will also broaden
the reach of our fixed income and equities
product suite to hedge fund clients, through
our Prime Brokerage offering.
Banking will continue to invest in select
sectors in the US and Europe to improve
revenue contribution from our equity and
advisory offerings and help us narrow the
gap to our US peers.
Following creation of the SIB team, we will
accelerate our efforts to support growth stage
companies as well as our broader client base
on integrating ESG.
The SIB group will coordinate the ESG
activities for our clients across Corporate and
Investment Bank – including our current Green
home.barclays/annualreport
Barclays PLC Annual Report 2019 25
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Barclays International:
Consumer, Cards and Payments
Our Consumer, Cards and Payments business
is at the forefront of the digital economy.
Consumer, Cards and Payments includes
the following key businesses:
In the UK, our payments business enables
clients ranging from small businesses to large
corporates to make and receive payments. We
are a leading corporate card issuer for large
and small businesses, and have expanded
into providing business-to-business supplier
payment solutions. We also help businesses
accept payments from their customers
in-store, in-app and online. We are also
one of the UK’s largest finance partners
for retailers, providing point-of-sale finance
solutions to consumers.
In the US, our co-branded cards business
provides credit cards to consumers. Our
partners include American Airlines, JetBlue
and Wyndham Hotels & Resorts.
In Germany, we offer market-leading
consumer credit cardsa, while continuing
to develop our lending offering.
Our Private Bank provides a diverse
range of personal and institutional wealth
management products and services, including
investments, credit and cash management
solutions.
Strategic priorities
Our strategy is to grow capital efficient
businesses such as payments. We will also
grow in other areas of expertise, such as our
US co-branded credit card business, though
we have scaled back our presence in Barclays
branded US credit cards.
Barclays is a top-ten
credit card issuer
in the US.
We plan to grow our payments business by
deepening our client relationships through
tighter integration across Barclays and
through significant investment in our digital
and client reporting capabilities, where we
have historically had gaps.
We will also build upon our deep payments
experience by integrating with the software
providers our clients use, in order to scale up
our payments solutions across the UK and
into Europe. Further investment in our digital
infrastructure will be key to continuing to
simplify processes and make it easy for our
clients to access an end-to-end payment
service from Barclays in the UK and across
Europe.
In our US co-branded cards business,
we are strengthening our foundations
through platform upgrades, infrastructure
improvements and process automation to
meet evolving customer needs. Our co-
branded business model is well proven and
is creating opportunities for growth. We
continue to focus on deeper engagement with
current partners, whilst expanding our reach
with new strategic opportunities.
Our Private Bank remains focused on
delivering bespoke solutions for global
high-net-worth, ultra-high-net-worth and
family office clients. We have made a number
of digital enhancements to streamline
onboarding for our Private Bank clients and
this will remain an area of focus.
Operating environment
Market changes are primarily driven by
changes in consumer behaviour. For example,
the UK card payment market is growing
significantly, with a shift from in-store to
online payments. Digital and e-commerce
focused players are growing fast and gaining
market share.
The continued low interest rate environment
means consumers are borrowing more,
creating opportunities for new entrants who
are focused solely on point-of-sale financing,
to compete with traditional card issuers
like Barclays.
Private Banking continues to be highly
fragmented, and while digital penetration is
lower than other segments, technology and
automation are playing an increasing role.
Our achievements
in 2019
On top of strong partner renewal activity in
the US, we launched a refreshed Uber credit
card with new reward features to maximise
customer engagement and value for our
partner and cardholders. We also launched
refreshed American Airlines Aviator Red and
Silver cards and relaunched our Barclaycard
Financing Visa – a simplified financing-
focused product for Apple consumers
in the US.
We have also made progress in upgrading the
US platform and data infrastructure, which
has both improved customer experience and
made our business more efficient.
In point-of-sale lending in the UK, we have
worked with Apple to launch the ‘Trade-In-
With-Instalment’ solution. This offers
customers the opportunity to upgrade their
iPhone through a 24-month instalment loan
with 0% interest. It is a good example of how
we are providing value for both consumers
and our clients.
In our payments business in the UK, we have
retained key strategic clients and forged new
partnerships with companies like Coupa and
TouchBistro, highlighting our unique
payments integration capabilities.
We see a third of all
card payments made
in the UK, which gives
us a broad and deep
understanding of the
payments environment.
26 Barclays PLC Annual Report 2019
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Income
£4.4bn
Operating expensese
£2.3bn
Profit before taxe
£1.2bn
Return on tangible equitye
15.9%
Net Promoter Score
+33
US Cards
CC&P US customer digital
engagement
71%
Next generation fraud
protection
Barclaycard Transact
New regulations are introducing
additional authentication requirements
for online card payments. This can slow
down the checkout experience for
consumers, and sometimes mean they
abandon their purchase altogether.
As more transactions move
online, it is critical to ensure
higher-risk transactions
have these higher levels
of authentication while
continuing to allow low-risk
consumer spend to be
approved seamlessly.
Launched in September 2019, Transact
is our new online fraud and payment
solution. It uses AI to send payments
through the quickest route – helping our
corporate clients take payments at the
speed their customers expect, and
helping to prevent abandoned
transactions.
With a third of all card payments made in the
UKb, Barclays is one of the largest payment
processors in Europec, and is a leading
corporate card issuer. We recently won the
B2B Payments Innovation Award at the 2019
Payments Awards, which highlights the
strength of our franchise in payments.
Making it easier for small businesses to
join our payments network has been at the
centre of our digital transformation. We have
successfully streamlined a paper-based
journey into a digital experience, now with
same day onboarding for most of our clients.
In the US, we continue to see strong net
promoter scores. We maintained our ranking
in the top 10 of US credit card issuersd.
Focus for 2020
and beyond
We continue to make our businesses more
digital, meeting the changing needs of clients
and consumers. We also see opportunities to
make our businesses more efficient.
We will remain focused in the US on
upgrading our platform, enabling us to
transact faster, and create stronger
foundations for growth, including new
planned product offerings in consumer
lending and point-of-sale financing.
Our successful track record with our retail
partners in the UK serves us well as we
develop product propositions across our
payments business. We will also expand our
acquiring business geographically, particularly
across Europe.
We have a strong foundation and deep subject
matter expertise across a wide range of
businesses and regions. By bringing together
a number of our efforts, we will unlock further
growth opportunities for Barclays and deliver
world-class solutions for our customers.
In the Private Bank, we continue to work
closely with the CIB to build out further our
suite of products, with a focus on expanding
our investment and credit propositions,
supported by improved digital capabilities.
Notes
a Sources: Bankenfachverband, Statistisches
Bundesamt, plus own calculations.
b Source: UK Finance.
c Source: Nilson Report #1153.
d Source: Nilson Report #1161.
e Excluding litigation and conduct.
home.barclays/annualreport
Barclays PLC Annual Report 2019 27
Financial reviewFinancial statementsShareholder informationRisk reviewGovernanceStrategic report COLLEAGUES
Our people and culture
We believe that the culture of Barclays is built
and shaped by the thousands of professionals
around the world who serve our customers
and clients with a shared purpose and values.
Our people make a critical difference to our
success, and our investment in them protects
and strengthens our culture.
We increasingly draw on the latest thinking
from behavioural science and data science to
identify what’s most likely to be effective in
hiring, developing and engaging our people,
and then track effectiveness over time. We’re
also starting to use the same data-driven
approach to give us a much more accurate
picture of how people progress through our
organisation.
Hiring the best people
We continue to focus on hiring people with
the skills that will help us accelerate the digital
transformation of our organisation, as well as
adapt more quickly to the changing needs of
our customers and clients.
We have increased hiring across our core
strategic locations globally. Building a modern,
scale presence in a smaller number of sites
enables us to make significant investments in
the workplace that would not otherwise be
possible. The transition to having more of our
people work from these strategic sites means
change for our existing colleagues. We
recognise the disruption that this can create
and we are managing the impacts
thoughtfully.
Within BX, we continue to rebalance the mix
of contractors and permanent colleagues, so
that more people work directly for us. We
believe this is a competitive advantage and
further strengthens our culture.
People with different
perspectives and life
experiences make our
organisation stronger.
We want to hire from within and are
increasingly using data and analytics to
identify and support high performers and
potential future leaders – particularly from
those groups that are currently under-
represented amongst our senior colleagues.
34% of our vacancies were filled by internal
candidates during 2019.
Just under 900 graduates joined us in 2019,
enabling us to develop our pipeline of future
leaders in-house. The percentage of graduate
female hires was 34%. We also provided over
300 people with the opportunity to complete
a structured apprenticeship.
We have continued to put additional effort
into supporting people who have been in
the armed forces to find a career at Barclays,
through the ‘After’ programme. We have also
supported those returning to the workforce
after a career break, through our
‘Encore’ programme.
People with different perspectives and life
experiences make our organisation stronger.
We are committed to attracting, developing
and retaining a diverse and inclusive
workforce, and providing equal opportunities.
We aim to make sure our hiring is as diverse
as possible. Our policies require us to give full
and fair consideration to all populations based
on their aptitudes and abilities. We’re using
data and analytics to better understand how
we can improve our hiring process.
We recognise the importance of measuring
progress around our gender diversity agenda
and believe that setting targets is an effective
way to do this. We’ve set ourselves a target of
28% female Managing Directors and Directors
by the end of 2021, and have signed up to the
Hampton Alexander targets of 33% female
representation on each of our Boards and
across our Group Executive Committee (ExCo)
and their direct reports by the end of 2020. We
continue to report on our results as part of the
Hampton Alexander Review and HM Treasury
Women in Finance Charter.
Females at Managing Director
and Director level
%
28% target by 2021
2019
2018
25
24
Females on Board of Directors
%
33% target by 2020
2019
2018
33
27
Females on Group ExCo and ExCo
direct reports (Senior Managers)
%
33% target by 2020
2019
2018
26
28
Females in Barclays
%
46
2019
54
Female
Male
Under the Companies Act 2006, Barclays is required to
report on the gender breakdown of our employees and
‘senior managers’. Our global workforce was 87,369
(47,392 male, 39,970 female, 7 unavailable), with 107
senior managers (79 male, 28 female). This is on a
headcount basis, including colleagues on long-term
leave. Unavailable refers to colleagues who do not record
gender in our systems. ‘Senior Managers’ represents
the Group Executive Committee and their direct reports.
28 Barclays PLC Annual Report 2019
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Developing talent for the future
We operate in a highly-regulated environment,
so it’s critical to our success that our people
understand the rules that govern how we
operate. We invested £36m in training last
year to ensure we get this right.
A wide range of development opportunities
are available to help all our people build their
career, delivered both in-person and through
our new digital learning platform, Learning
Lab, which is making development more
available than ever.
We also launched two new flagship leadership
development programmes during 2019. This
is a significant investment in our future
leaders, driven by our core belief that quality
leadership makes a difference to our success.
We track the progression of people that have
participated in these programmes to see how
effective they are.
We remain committed to closing pay gaps at
Barclays; the difference in seniority between
male and female colleagues, and between
BAME and non-BAME colleagues. You can
find out more about this in our Pay Gaps
Report, available at barclays.com
Colleague engagement
We have an established approach to engaging
colleagues which includes the majority of
the UK’s Financial Reporting Council (FRC)
recommendations, and is in line with new
governance requirements in 2019. This
ensures that we understand their perspective,
take it into account in our decision making at
the most senior level, and share with them our
strategy and progress.
That extends to those who work for us
indirectly as well, such as contractors,
although in a more limited way. In 2020,
our supplier code of conduct will require
organisations with more than 250 employees
to demonstrate that they have an effective
workforce engagement approach of their own.
It’s important to us that our Board members
are engaged with our people – directly, and
indirectly through our management team.
We regularly report on our colleague
engagement activity to our Boards.
Together with direct engagement, this
comprehensive reporting approach and
dedicated time at board meetings helps
our Board take the issues of interest to
our colleagues into account in their
decision making.
This has enabled them to confirm that our
workforce engagement approach is effective.
Listening to our people
Our regular colleague survey formally
captures the views of all our people and
is a key part of how we track colleague
engagement. Our overall engagement score
reduced slightly to 77% in 2019, but 80%
of our colleagues would still recommend
Barclays as a good place to work. Our
colleagues also shared that 79% of them
feel it’s safe to speak up to share their views.
89% of colleagues told us they believe
Barclays is focused on achieving good
customer and client outcomes and 86% said
they are proud of the contribution Barclays
makes to the community and society.
Only 61% of our people said the stress levels
at work are manageable, and 53% believe
that we have been successful in eliminating
obstacles to efficiency. Improving these scores
is a key priority and we are working on the
underlying problems.
The results from the survey are an important
part of the conversations our leaders have
about how we run the business, and it’s a
specific focus for our Executive Committee
and our Board. The Executive Committee
holds a dedicated town hall for colleagues
each year, specifically to talk about their
feedback and the actions we’re taking in
response, and there are many follow up
communications and action plans built
across the Group.
We monitor our culture across the
organisation, and in individual business areas,
through culture dashboards. These combine
colleague survey data with other metrics
about our business, so that we can see the
effect our people’s engagement has on our
performance, and on the continued strength
of our culture. 82% of our people have heard
or read senior leaders talking about the
character and culture of Barclays.
Number of employees
split by region
000s
2.8
2019
2018
47.8
9.8
20.4
49.9
10.6
19.8
Total
80.8
Total
83.5
3.2
UK
Europe
Americas
Asia Pacific
Split by level
%
2019
7
2018
7
39
38
54
55
Senior (Managing Director and Director)
Middle (Associate Vice President and
Vice President)
Junior (Business Analyst grades)
Split by full time/part time
%
90
10
2019
Full time
Part time
Split by payroll/non-payroll
in Technology
%
74
26
2019
Payroll
Non-payroll
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Barclays PLC Annual Report 2019 29
Financial reviewFinancial statementsShareholder informationRisk reviewGovernanceStrategic report COLLEAGUES
Our people and culture
Our people policies
Another way we shape the culture of our
organisation is through our people policies,
which are reviewed regularly, including by
our Board.
Our policies are designed to provide equal
opportunities and create an inclusive culture,
in line with our values and in support of our
long-term success. They also reflect relevant
employment law, including the provisions of
the Universal Declaration of Human Rights
and ILO Declaration on Fundamental
Principles and Rights at Work.
We expect our people to treat each other
with dignity and respect, and do not tolerate
discrimination, bullying, harassment or
victimisation on any grounds.
We are committed to paying our people fairly
and equitably relative to their role, skills,
experience and performance – in a way that
balances the needs of all our stakeholders.
That means our remuneration policies reward
sustainable performance that’s in line with
our purpose and values, as well as our risk
expectations. You can find more information
in our Fair Pay Report, available on
barclays.com
We encourage our people to benefit from
Barclays’ performance by enrolling in our
share plans, further strengthening their
commitment to the organisation.
The Directors’ Remuneration Report sets
out updates on remuneration outcomes and
developments during 2019. It also explains
our plans for 2020, including our proposed
new Directors’ Remuneration Policy, which
will be subject to a vote at the next AGM.
Facts and figures
77%
Colleague engagement
893
graduate hires
311
apprenticeships
10%
voluntary employee turnover
15%
employee turnover
15
average training hours per annum
per employee (payroll)
Keeping our people informed
In addition to these data sources, our leaders,
including our Board, engage face-to-face with
colleagues locally to hear what they think.
That might be through site visits, large-scale
town halls, training and development
activity, mentoring, informal breakfast
sessions, committee membership, diversity
and well-being programmes, or focus and
consultative groups.
We make sure we’re regularly keeping
everyone up to date on the strategy,
performance and progress of the organisation
through a strategically-coordinated, multi-
channel approach across a combination of
leader-led engagement, and digital and print
communication, including blogs, vlogs and
podcasts.
We also engage with our people collectively
through a strong and effective partnership
with Unite, as well as the Barclays Group
European Forum, which represents all
colleagues within the European Union.
These conversations help us to deliver
things like a collective pay deal for our Unite
covered colleagues, who represent 84% of our
UK-based colleagues, as well as more complex
business change and our long-term focus on
colleague well-being.
We regularly brief our union partners on the
strategy and progress of the business and
seek their input on ways in which we can
improve the colleague experience of working
for Barclays. The collective bargaining
coverage of Unite in the UK represents
c.52% of our global workforce.
When we make significant changes to our
business, they can affect our people and
can mean that redundancies are necessary.
We consult in detail with colleague
representatives on major change programmes
affecting our people. We do this to help us
minimise compulsory job losses wherever
possible, including through voluntary
redundancy and redeployment.
We are committed
to paying people fairly
– in a way that balances
the needs of all our
stakeholders.
30 Barclays PLC Annual Report 2019
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The tools to succeed
We provide tools, programmes and support
that enable colleagues to balance their
work-life with their personal commitments,
supporting career development opportunities
at each life stage.
We offer enhanced maternity, paternity,
adoption and shared parental entitlements.
We’re continuing to shape a more agile,
technology-led culture through dynamic
working, so that we can meet our people’s
desire to work more flexibly. 88% of
colleagues say they are able to work
dynamically and this is one of the biggest
drivers for overall engagement, with more
favourable scores across all questions.
However, our people also told us that we need
to invest more in the technology and services
we use internally. Only 56% of people said
they have the work tools and resources they
need to achieve excellent performance and
this is a reduction year over year. We’ve made
significant progress particularly in our new
strategic campus sites, but we need to get the
balance right between required investment
and cost discipline in order to effectively
balance the needs of all of our stakeholder
groups.
We’re replacing the old devices that we know
our people can find frustrating, and we’re
updating our software and connectivity so
that getting work done is easier. We’ve also
invested in the technology support we provide
to our people, so that when things do go
wrong, we can put them right more quickly.
Over the next few years, our focus will be on
enabling much greater collaboration, right
across the organisation, so that we can unlock
the power of the connections between our
people.
Building a supportive culture
Diversity of thought and experience works
best when everyone feels included. People
who feel they can be themselves at work are
happier and more productive, so we believe
that creating an inclusive and diverse culture
isn’t just the right thing to do, but is also best
for our business.
We focus on five areas: disability, gender,
LGBT+, multicultural, and multigenerational.
Each of these is represented and championed
by a senior leader, and embedded deeply
into the organisation through colleague
networks organised by our people and
funded by Barclays.
Our networks provide colleagues with
valuable support and advice, create
development opportunities, and raise
awareness of issues and challenges. Our
networks also influence our people policies,
teaching us how we need to adapt to give our
people the support they need to succeed. 85%
of our colleagues say that they feel included
within their teams.
Our policies require managers to give full and
fair consideration to those with a disability
on the basis of their aptitudes and abilities;
both when hiring and through ongoing
people management, as well as ensuring
opportunities for training, career development
and promotion are available to all. As part of
the UK government Disability Confident
scheme, we encourage applications from
people with a disability, or a physical or
mental health condition.
We encourage everyone working at Barclays,
or thinking about joining us, to tell us what
support and adjustments they need to be their
best at work. We’re working hard to make the
processes that support this more effective,
recognising that at times getting the support
colleagues need can be slow.
We track the ever-changing composition of
our people through online dashboards, to
make sure that our senior leaders understand
the diverse makeup and needs of the
organisation they lead. We’re also an inaugural
signatory of the UK’s Race at Work Charter.
Through our BeWell programme, we provide
expert advice and guidance on the practical
steps colleagues can take to look after their
physical and mental health. In 2020, our
Mental Health Awareness training will become
mandatory for all colleagues. We were one
of the first businesses to sign up to the
Mental Health at Work Commitment. 74%
of colleagues say that Barclays supports
employee efforts to enhance their well-being.
Black, Asian and Minority Ethnic
(BAME) colleaguesa
Global
%
2019
2018
United Kingdom
%
2019
2018
USA
%
2019
2018
42
40
19
18
49
46
Age of employees
%
22.6
0.5
24.4
0.6
38.1
37.6
<20
>=20 & <30
>=30 & <40
>=40 & <50
>=50 & <60
>60 years
Unavailable
22.5
22.0
13.0
2019
2.5
0.8
12.4
2018
2.2
0.8
a BAME populations include Asian, Mixed, Black,
Hispanic/Latino, Native Hawaiian or Other Pacific
Islander and Native American colleagues.
Employees with an undeclared ethnicity (21% of
our global population) have been excluded from
all calculations, both for 2019 and 2018.
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Barclays PLC Annual Report 2019 31
Financial reviewFinancial statementsShareholder informationRisk reviewGovernanceStrategic report SOCIETY
Our role in society
Our success over the long term is
tied inextricably to the preservation
of our environment and the progress
of our communities.
Stakeholder focus on the societal impact
of businesses on wider ESG factors has
continued to evolve rapidly during 2019.
Investors, customers and clients, regulators,
policymakers and broader society are all
accelerating the pace of change.
We continue to strengthen the integration
of social and environmental issues into
our business strategy. Demonstrating the
growing strategic importance of these issues,
the Group Executive Committee created the
Environmental and Social Impact (ESI)
Committee in June 2019 to manage
environmental and social matters. Chaired by
the Group Chief Executive, with representation
from business and function leadership, the
Committee provides strategic management
oversight, sets our approach and monitors
execution against priorities.
Sometimes, that will take the form of an
unambiguous statement of intent – as we
have made through our Energy and Climate
Change Statement. Often, though, the mark
of our contribution will be seen most clearly
in the way we run our business.
We believe we can make a difference in four
key ways.
We understand the
issues that define our
shared future and the
role we might play in
addressing them.
1. Making growth ‘green’,
sustainable and inclusive
Banks help to finance the future. In the way
we prioritise and mobilise financial resources,
and in how we do business, we can help
shape the future to be cleaner, fairer and
leave no one behind.
Social and environmental financing
We continue to make good progress towards
our social and environmental financing
commitment, having provided £34.8bn of
social and environmental financing in 2019
(2018: £28.5bn), facilitating a total of £63.3bn
towards our £150bn goal. Social financing
was £23.9bn (69% of total), environmental
financing was £7.8bn (22% of total).
Supra-national, national and regional
development institution finance continues
to be a key driver of the £23.9bn in social
financing (up 9% from £21.8bn in 2018).
Sustainability-linked loans, which can be
linked to a range of different social and
environmental performance metrics, increased
to £3.1bn. These loans doubled year on year
as more clients integrate sustainability metrics
into their loan facilities.
Environmental financing grew by 45% year on
year to a total of £7.8bn (2018: £5.3bn). We
have seen good growth across our product set
in our consumer and wholesale businesses.
Accessible retail products and services
We believe that banking should work for
everyone.
There were more than 570,000 Barclays Basic
Current Accounts open at the end of 2019,
serving the financial needs of those who
wouldn’t otherwise qualify for an account.
We also provide free banking to over 130,000
small not-for-profit organisations through our
Community Accounts, including sports and
community clubs, religious groups, and
local charities.
ESG and climate-related
disclosures
Barclays will publish a comprehensive
Environmental, Social and Governance
Report and associated disclosures,
including climate-related disclosures
later this year.
Social and environmental financing
facilitated by type
£bn
2019
7.8
2018
5.3
23.9
3.1
34.8
21.8
1.4
28.5*
Green
Social
Sustainability linked
* 2018 Social and Environmental financing has
been restated to incorporate sustainability-linked
financing facilities and ensure a consistent basis
of reporting with 2019.
Social and environmental financing
facilitated by region
£bn
2019
14.4
1.8
18.5
Americas
UK and Europe
Rest of World
Unreasonable impact
No. of ventures supported since 2016
124
Building thriving local economies
Pilot projects launched across the UK
3
Connect with Work
Businesses engaged to help provide
job placements for 66,000
4,200
32 Barclays PLC Annual Report 2019
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Green and Sustainable
Finance Products
Consumer
Barclays Green Home Mortgage –
Rewards homebuyers who choose to buy
an energy-efficient new build home with
lower interest rates on their mortgage.
ESG investment products – Range of
impact investing and ESG investment
products for consumers.
Corporate
Green Asset Finance – Financing green
assets through lease purchase, finance
and operating leases.
Green Loans – Lending for a variety of
green and energy-efficient projects.
Innovation Finance – Financing of up to
£5m at competitive rates to support green
business innovation in small to medium-
sized businesses.
Green Deposits – Allows our largest
clients to earmark their cash balances
against the green assets held on Barclays’
balance sheet.
Green Trade Loans – Supporting the
green working capital needs of clients
from procurement through to final
sale of goods.
Capital Markets and
Strategic Advisory
Green and Sustainable Capital Markets –
Active in underwriting Green and
Sustainability Bond issuance across
sectors and geographies.
Sustainable and Impact Banking –
Launched dedicated coverage group for
high-growth sustainability ventures and
ESG-focused private and public investors.
We continue to improve our customer
experience for those who have accessibility
requirements. Our main digital channels
have all been accredited for accessibility by
AbilityNet, a leading UK accessibility charity.
Video banking is now helping hard of hearing
customers reliant on lip-reading to connect
with us.
To help keep our customers safe, we’ve
invested millions of pounds in multi-layered
security systems that protect against fraud
and scams. We prevent thousands of
attempted fraudulent transactions every day,
and stopped over £720 million of fraud from
taking place in the past year alone.
Our customers are increasingly choosing to
access our products and services digitally, and
using our branches less and less. That means
we must constantly assess how and why our
branches are used, and make commercial
decisions based on that information.
Where we take the difficult decision to
close a branch, we work closely with the local
community to understand their needs and any
alternative solutions we can provide. These
solutions will be specific to each area but
may include cashback from local retailers,
arrangements with the nearest Post Office, or
pop-up branches, as well as Barclays Collect
for businesses, video banking, fully-automated
facilities or cash machines. We also work
closely with customers in communities across
the UK to help them access and feel confident
in using our digital services through our team
of Barclays Digital Eagles.
In October 2019, we made a commitment to
freeze branch closures for ‘last-in-town’ and
remote locations, protecting 105 branches for
at least two years, and we will maintain a full
service proposition for our customers through
the Post Office for the next three years.
2. Managing our social and
environmental impact
The scale and scope of the support we provide
to our customers and clients means that we
can have a significant impact on the world
around us. We take seriously our obligations
to manage that impact responsibly.
As a bank, our potential adverse
environmental and social impacts are
frequently indirect, arising from the provision
of financial services to business customers
operating in sensitive sectors. We believe
that appropriate risk management of these
environmental and social impacts is not
only the right thing to do, but ensures the
longevity of our business and our ability to
serve our clients.
Social Innovation Facility
Fostering social innovation in the way
we think, work and operate is a priority
for Barclays.
Barclays Social Innovation Facility (SIF)
incubates financial products and services
that will have a sustained social or
environmental impact. The SIF works
with ideas created by innovators within
Barclays and helps to support them
through the development process
from idea refinement, to scoping
out the market, to commercialising
the opportunity. Products range from
impact investing to retail banking
services for ex-military. Read more
at home.barclays/citizenship
Environmental and social risks are governed
and managed as part of Barclays’ credit risk
and reputation risk management frameworks
and processes. These include the client
transaction review process, which is
managed by a dedicated Environmental Risk
Management team, as part of the central
Credit Risk Management function, as well
as the Group Sustainability and Reputation
risk teams.
Our approach to environmental and social
risk management is based on a combination
of statements, standards and guidance.
Formal position statements are developed in
consultation with numerous stakeholders and
aligned with industry best practices. We have
also developed internal standards to
implement our position statements.
Policies and position statements can
be downloaded from home.barclays/
citizenship/statements-and-policy-
positions/
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Barclays PLC Annual Report 2019 33
Financial reviewFinancial statementsShareholder informationRisk reviewGovernanceStrategic report SOCIETY
Our role in society
3. Running a responsible business
We know that trust is earned by repeatedly
doing the right thing. Our approach to
governance is built to reinforce that trust.
We believe the best way to build that trust is
to invest in our culture and support our people
in the choices they make every day with
guidance and policies that help.
Adherence is confirmed through pre-contract
attestation. Further, Barclays PLC is a signatory
to the Prompt Payment Code in the UK,
committing to pay our suppliers within clearly
defined terms. In 2019, we achieved 85%
(2018: 82.1%) on-time payment by value to
our suppliers, meeting our public commitment
to the suppliers of 85%.
That starts with our purpose and our values,
and is locked into our organisation through
The Barclays Way. The Barclays Way is the
touchstone for everyone in Barclays on the
standard of conduct we expect, and sets a
tone from the top that is unequivocal about
who we are and what we stand for.
Whistleblowing
Most employees feel comfortable raising
concerns through the usual escalation
channels: their line manager, as well as
Compliance, Legal and HR contacts.
If employees prefer to raise an issue in
confidence, including a formal whistleblowing
issue, we have a dedicated ‘Raising Concerns’
team that employees can contact which direct
their issue to the most appropriate team.
Whistleblowing reports will be directed to
a dedicated, confidential and independent
whistleblowing team to investigate.
In 2019, the whistleblowing team opened
a total of 254 whistleblowing investigations
(2018: 364), with the majority of the
investigations focused on allegations of
breaches of controls or processes. Of the 217
whistleblowing investigations closed in 2019,
28% were found to have some level of
substantiation.
Managing our supply chain
14,000 companies from more than 26
countries supply Barclays across a broad
range of products and services. Nearly 90%
of our third party spend is concentrated in
the UK and US.
Our supply base is diverse, including
start-ups, small and medium-sized businesses,
businesses owned, controlled and operated by
under-represented segments of local societies
as well as multinational corporations. Many
of our suppliers have their own extensive
supply chains.
Our engagement with suppliers is important.
The Directors have regard, via management
oversight, to the need to foster business
relationships with suppliers and, as such,
engage with them to ensure adherence to
the Barclays’ Supplier Code of Conduct and
Supply Control obligations which cover our
expectations of suppliers.
IT failures and resilience
Technology plays an increasingly important
role in how we deliver for our customers
and clients.
The stability and resilience of our technology
systems has a direct impact on the quality of
our service. We make significant investments
in our infrastructure to guard against risk
ranging from large scale data corruption,
to hacking and third party failure.
Our multi-channel approach to delivering
for our customers provides a level of
resilience, and we maintain and regularly
test comprehensive recovery plans to be
used in the event of a failure.
4. Investing in our communities
A strong, inclusive economy is a better
economy for everyone. A vibrant, skilled
workforce ensures that businesses can thrive,
and that individuals, along with their families
and wider communities, can achieve financial
independence and security.
We are helping to build skills and break down
barriers to work wherever we find them, to
enable people to succeed now and in the
future. We do that through our flagship
programmes.
LifeSkills gives people across the UK the
skills, knowledge and confidence they need
to be ready for the world of work – now
and in future.
We’ve already helped millions of people
through the programme since 2013 and are
committed to helping a further 10 million
people by 2022. We have made good progress
towards our target, with 2.3m upskilled
through the Life Skills programme in 2019.
Connect with Work provides people from
often overlooked communities with vital work
skills, and connects them to businesses that
are recruiting, including Barclays’ clients
and suppliers.
By the end of 2019 we helped 66,000 people
around the world into work with 4,200
businesses. We aspire to have placed 250,000
people into work through the programme
by 2022.
Eagle Labs is a UK network of
branch-based spaces that support individuals
and businesses to innovate and grow.
Eagle Labs are helping drive transformation
in SMEs and across industry sectors, through
local collaborations with industry-leading
companies, universities and start-ups.
Unreasonable Impact is a partnership between
Barclays and the Unreasonable Group. It helps
fast-growing, social and environment-focused
companies globally to accelerate their
business and create hundreds of new jobs
while solving some of society’s most
pressing problems.
With advice and guidance from a
community of world-class mentors and
industry specialists, the programme has so
far supported 124 growth-stage ventures.
By 2022, we aspire to have supported
250 high-growth businesses through
Unreasonable Impact.
Alongside these high-impact programmes,
we also support our employees to make a
difference on the issues that matter most to
them personally, by supporting them to
volunteer their time and skills in their own
community and matching their financial
contribution with our own.
Building Thriving
Local Economies
Our Thriving Local Economies initiative
aims to identify the drivers and barriers
to local economic success and enables
Barclays to support those economies to
thrive beyond the provisioning of our
day-to-day products and services. In
2019 Taunton Deane, in the South West
of England, joined Bury and Kilmarnock
as our pilot communities. During the
three-year programme, we are working
closely with local councils, schools and
business groups in those communities to
better understand what help and support
they need to thrive.
34 Barclays PLC Annual Report 2019
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ESG and climate-related
disclosures
Barclays supports the goals
of the Paris Agreement,
and we recognise the role
that banks must play in
assisting the transition to
a low-carbon economy.
This can be accomplished
through the provision of
products and services which
mobilise the capital required
to execute this transition,
and better management of
climate-related risk within
our portfolio.
We will be publishing a full
suite of ESG and climate-related
disclosures later this year,
including an updated climate
change position, ESG Report
and separate TCFD publication.
Developing the Principles
for Responsible Banking
The Principles for Responsible Banking (PRB)
provide a single framework for the global
banking industry to embed sustainability
at strategic, portfolio and transactional levels,
and across all business areas. The Principles
help to align banks with society’s goals, as
expressed in the Paris Climate Agreement
and the United Nations’ Sustainable
Development Goals.
As one of the 30 founding banks, we are
proud to have partnered to help develop and
support the Principles. We recognise that
implementing the Principles will be a journey
and we will continue to embed the Principles
into our business. We will provide initial
disclosures on how Barclays is responding to
the Principles as part of our ESG Report and
associated disclosures.
Supporting UK Business
When the customers, clients and communities
we serve succeed, Barclays succeeds. This is
particularly true in the United Kingdom, where
we have been part of the fabric of the country
for over 325 years.
As our home market experienced uncertainty
around Brexit through the year, we continued
to support local businesses and communities
through this period of change.
From farmers embracing the fourth industrial
revolution to manufacturers forging trade
links in new markets, small, medium and
large businesses across the UK continue
to demonstrate ambition, innovation
and resilience.
To help them fulfil their potential, we launched
our dedicated support package for small and
medium-sized businesses (SMEs) – the
lifeblood of the economy. This included a
dedicated £14.7bn SME lending fund, our
1,500-strong team of on-the-ground
relationship managers and over 200 Brexit and
Beyond clinics, held across the country. We
have already lent £3.8bn to SMEs during 2019.
As our home
market experienced
uncertainty around
Brexit, we continued
to support local
businesses and
communities through
this period of change.
home.barclays/annualreport
Barclays PLC Annual Report 2019 35
Financial reviewFinancial statementsShareholder informationRisk reviewGovernanceStrategic report INVESTORS
Financial review
Barclays delivered year on year improved RoTE
of 9.0%. This represents the third consecutive
year of improved underlying RoTE performance.
Financial metrics
Group RoTE
RoTE measures our ability to generate
acceptable returns for shareholders. It is
calculated as profit after tax attributable
to ordinary shareholders 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 to align
management’s interests with those of its
shareholders. RoTE lies at the heart of the
Group’s capital allocation and performance
management process.
CET1 ratio
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 the Group’s CET1 capital
as a percentage of its risk weighted assets
(RWAs). RWAs are a measure of the Group’s
assets adjusted for their associated risks.
Operating expenses
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.
Cost: income ratio
The cost: income ratio measures operating
expenses as a percentage of total income
and is used to assess the productivity of
our business operations.
Our performance in 2019
Group RoTE
RoTE, excluding litigation and conduct,
increased to 9.0% (2018: 8.5%), in line with
the 2019 target. Based on an average target
CET1 ratioa of 13.2%, RoTE was also 9.0%.
We continue to target greater than 10% RoTE.
Notwithstanding global macroeconomic
uncertainty and the current low interest rate
environment, we believe we can achieve a
meaningful improvement in returns in 2020.
CET1 ratio
The CET1 ratio increased to 13.8%
(December 2018: 13.2%).
CET1 capital decreased by £0.3bn to
£40.8bn. This was driven by underlying profit
generation of £5.0bn offset by dividends
paid and foreseen of £2.4bn, an additional
provision for PPI of £1.4bn, pension deficit
reduction contribution payments of £0.5bn,
a decrease in the currency translation reserve
of £0.5bn, mainly driven by the depreciation
of period end USD against GBP, and a loss
on the redemption of Additional Tier 1 (AT1)
securities of £0.4bn.
RWAs decreased by £16.8bn to £295.1bn
primarily driven by the reduction in the
Group’s operational risk RWAs, as well as the
depreciation of period end USD against GBP.
The Group continues to target a CET1 ratio
of c.13.5%.
Operating expenses
Operating expenses decreased to £13,585m
(2018: £13,896m) in line with 2019 guidance,
as cost efficiencies were partially offset by
continued investment.
Cost: income ratio
Barclays UK and Barclays International each
generated positive cost: income jaws, resulting
in the Group cost: income ratio, excluding
litigation and conduct, reducing to 63%
(2018: 66%).
Cost control remains a priority and
management continues to target a cost:
income ratio of less than 60% over time.
Group return on
tangible equity (RoTE)b
%
2019
2018
2017
(1.2)
9.0
8.5
RoTE increased to 9.0%, in line with the 2019 target.
CET1 ratio
%
2019
2018
2017
13.8
13.2
13.3
CET1 ratio target of c.13.5%, following removal
of the operational risk floor during 2019.
Operating expensesb
£bn
13.6
13.9
14.2
2019
2018
2017
Group operating expenses in line with the 2019
guidance of less than £13.6bn. 2018 excludes
litigation and conduct and a GMP charge of £140m.
Cost: income ratiob
%
2019
2018
2017
63
66
68
Cost control remains a priority and we
continue to target a cost: income ratio of
<60% over time.
Note
a The average target CET1 ratio reflects the change
in the Group target from c.13.0% to c.13.5% in
September 2019 following the removal of the
operational risk RWAs floor.
b Excluding litigation and conduct.
36 Barclays PLC Annual Report 2019
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RISK, VIABILITY AND NON-FINANCIAL INFORMATION
Managing risk
Barclays is exposed to internal and external risks
as part of our ongoing activities. These risks are
managed as part of our business model.
Enterprise Risk
Management Framework
At Barclays, risks are identified and overseen
through the Enterprise Risk Management
Framework (ERMF), which supports the
business in its aim to embed effective
risk management and a strong risk
management culture.
The ERMF governs the way in which Barclays
identifies and manages its risks.
The management of risk is then embedded
into each level of the business, with all
colleagues being responsible for identifying
and controlling risk.
Monitoring the risk profile
Together with a strong governance process,
using business and Group level Risk
Committees as well as Board level forums,
the Board receives regular information in
respect of the risk profile of the Group, and
has ultimate responsibility for Group risk
appetite and capital plans. Information
received includes measures of risk profile
against risk appetite as well as the
identification of new and emerging risks.
In 2019, Barclays also conducted a group-
wide, exploratory stress test against a severe
but plausible near-term climate scenario.
The aim of the analysis was to identify key
vulnerabilities that were most relevant and
material to the Group’s business model and
geographical footprint.
We believe that our structure and governance
supports us in managing risk in the changing
economic, political and market environments.
Risk appetite
Risk appetite defines the level of risk we are
prepared to accept across the different risk
types, taking into consideration varying
levels of financial and operational stress.
Risk appetite is key to our decision-making
processes, including ongoing business
planning and setting of strategy, new product
approvals and business change initiatives.
Three lines of defence
The first line of defence is comprised of the
revenue generating and client-facing areas,
along with all associated support functions,
including Finance, Treasury, Human Resources
and Operations and Technology. The first line
identifies the risks, sets the controls and
escalates risk events to the second line
of defence.
The second line of defence is made up of Risk
and Compliance and oversees the first line by
setting limits, rules and constraints on their
operations, consistent with the risk appetite.
The third line of defence is comprised
of Internal Audit, providing independent
assurance to the Board and Executive
Committee on the effectiveness of
governance, risk management and control
over current, systemic and evolving risks.
Although the Legal function does not sit
in any of the three lines, it works to support
them all and plays a key role in overseeing
legal risk throughout the bank. The Legal
function is also subject to oversight from the
Risk and Compliance functions (second line)
with respect to the management of
operational and conduct risks.
We believe that
our structure and
governance will assist
us in managing risk
in the changing
economic, political and
market environments.
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Barclays PLC Annual Report 2019 37
Financial reviewFinancial statementsShareholder informationRisk reviewGovernanceStrategic report RISK, VIABILITY AND NON-FINANCIAL INFORMATION
Managing risk
The ERMF defines eight principal risks
Financial principal risks
Credit risk
Market risk
Treasury and
Capital risk
The risk of loss to the Group from the failure of clients,
customers or counterparties, including sovereigns, to fully
honour their obligations to the Group, including the whole
and timely payment of principal, interest, collateral and
other receivables.
The risk of loss arising from potential adverse changes in the
value of the Group’s assets and liabilities from fluctuation in
market variables including, but not limited to, interest rates,
foreign exchange, equity prices, commodity prices, credit
spreads, implied volatilities and asset correlations.
Liquidity risk:
The risk that the Group is unable to meet its contractual or
contingent obligations or that it does not have the appropriate
amount, tenor and composition of funding and liquidity to
support its assets.
Capital risk:
The risk that the Group has an insufficient level or
composition of capital to support its normal business
activities and to meet its regulatory capital requirements
under normal operating environments or stressed conditions
(both actual and as defined for internal planning or regulatory
testing purposes). This includes the risk from the Group’s
pension plans.
Interest rate risk in the banking book:
The risk that the Group is exposed to capital or income
volatility because of a mismatch between the interest rate
exposures of its (non-traded) assets and liabilities.
Non-financial principal risks
Operational risk
The risk of loss to the Group from inadequate or failed
processes or systems, human factors or due to external
events where the root cause is not due to Credit or
Market risks.
How risks are managed
Credit risk teams identify, evaluate, sanction, limit and
monitor various forms of credit exposure, individually
and in aggregate.
A range of complementary approaches are used to
identify and evaluate Market risk and to capture
exposure to Market risk. These are measured, controlled
and monitored by Market risk specialists.
Treasury and Capital risk is identified and managed
by specialists in Capital Planning, Liquidity, Asset and
Liability Management and Market risk. A range of
approaches are used appropriate to the risk, such as:
limits; plan monitoring; internal and external
stress testing.
Operational risk comprises the following risks; data
management and information, execution risk, financial
reporting, fraud, payments processing, people, physical
security, premises, prudential regulation, supplier, tax,
technology and transaction operations.
It is not always cost effective or possible to attempt to
eliminate all operational risks.
Operational risk is managed across the businesses and
functions through an internal control environment with
a view to limiting the risk to acceptable residual levels.
Model risk
Conduct risk
The risk of potential adverse consequences from financial
assessments or decisions based on incorrect or misused
model outputs and reports.
Models are independently validated and approved prior
to implementation and their performance is monitored
on a continual basis.
The risk of detriment to customers, clients, market integrity,
effective competition or Barclays from the inappropriate
supply of financial services, including instances of wilful or
negligent misconduct.
The Compliance function sets the minimum standards
required, and provides oversight to monitor that these
risks are effectively managed and escalated where
appropriate.
Reputation risk
The risk that an action, transaction, investment, event,
decision or business relationship will reduce trust in the
Group’s integrity and/or competence.
Legal risk
The risk of loss or imposition of penalties, damages or fines
from the failure of the Group to meet its legal obligations
including regulatory or contractual requirements.
Reputation risk is managed by embedding our purpose
and values and maintaining a controlled culture within
the Group, with the objective of acting with integrity,
enabling strong and trusted relationships with customers
and clients, colleagues and broader society.
The Legal function supports colleagues in identifying
and limiting legal risks.
38 Barclays PLC Annual Report 2019
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Viability statement
Provision 31 of the 2018 UK
Corporate Governance Code
The financial statements and accounts have
been prepared on a going concern basis.
In addition, Provision 31 of the 2018 UK
Corporate Governance Code requires the
Directors to make a statement in the Annual
Report regarding the viability of the Group,
including an explanation of 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.
Time horizon
In light of the analysis summarised below,
the Board has assessed the Group’s current
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 time frame is used in
management’s Working Capital and Viability
Report (WCR), prepared at February 2020. 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 time frame has
also been chosen because:
■■ it is within the period covered by the
Group’s formal 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
■■ it is representative of the level
of anticipated 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.
Considerations
In making its assessment the Board has:
■■ carried out a robust and detailed
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
meet regulatory requirements
■■ reviewed how those risks are identified,
managed and controlled (further detail
provided on pages 139 to 146)
■■ considered the WCR which provides an
assessment of forecast CET1, leverage,
Tier 1 and total capital ratios, as well as the
build-up of MREL up to the end of 2022
■■ reviewed the Group’s liquidity and funding
profile, including forecasts of the Group’s
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, supply
chain resiliency and regulatory changes
■■ considered the sustainability of capital
distributions
■■ considered scenarios which might affect
the operational resiliency of the Group
■■ reviewed the draft statutory accounts
and the in-depth disclosure of the financial
performance of the Group
■■ considered the Group’s medium-term plan
■■ reviewed the possible impact of legal,
competition and regulatory matters set out
in Note 26 to the financial statements on
pages 303 to 306.
Assessment
Risks faced by the Group’s business,
including in respect of financial, conduct and
operational risk, are controlled and managed
within the Group in line with the ERMF.
Executive management set a risk appetite for
the Group, which is then approved by the
Board. Risk and Compliance set limits, within
which businesses are required to operate.
Management and the Board then oversee the
ongoing risk profile. Internal Audit provide
independent assurance to the Board and
Executive Committee over the effectiveness
of governance, risk management and control
over current 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 129 to 137. Certain risks are additionally
identified as key themes and monitored
closely by the Board and Board Committees.
These are chosen on the basis of their ability
to impact viability over the time frame of the
assessment but in some instances the risks
exist beyond this time frame.
These particular risks include:
■■ the consequences of the UK’s exit from
the EU are unpredictable and diverse,
difficult to predict and may impact over a
prolonged period. In particular, a significant
deterioration in the macroeconomic
environment in the UK and Europe could
lead to increased credit rating downgrades
of the UK sovereign and the Group,
significantly increasing borrowing costs,
widening credit spreads and could
materially adversely affect the Group’s
interest margins and liquidity position
■■ 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
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Barclays PLC Annual Report 2019 39
Financial reviewFinancial statementsShareholder informationRisk reviewGovernanceStrategic report RISK, VIABILITY AND NON-FINANCIAL INFORMATION
Viability statement
■■ 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
■■ evolving operational risks (notably
cybersecurity, technology and resilience)
and the ability to respond to the new
and emerging technologies in a
controlled fashion.
As a universal bank with a diversified and
connected portfolio of businesses, servicing
customers and clients globally, the Group is
impacted in the longer term by a wide range
of macroeconomic, political, regulatory and
accounting, technological, social and
environmental 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. Notably, the consequences of
the withdrawal of the UK from the EU and the
associated economic and operational risks
have received significant management
attention, particularly, given the greater
uncertainty this is likely to cause in 2020
and beyond.
Stress tests
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 macroeconomic internal
stress test, conducted in Q4 2019, considered
the potential impacts of:
■■ a severe UK recession triggered by the
UK leaving the EU with no transitional
arrangements, including falling property
prices which fail to recover over the
forecast horizon and rising unemployment
■■ the US entering into a recession of similar
magnitude to the UK, with heightened
levels of concern over consumer and
corporate debt as a result of the ongoing
US-China trade dispute
■■ weakness in peripheral Europe driven
by weakening in global demand with
heightened trade tensions and ballooning
debt burdens in Italy and Spain, the threat
of a populist uprising beginning to
dominate the political landscape,
all of which could result in, among other
things, a loss of income or increased
impairment. The stress test outcome for
macroeconomic tests shows our full financial
performance over the horizon of the scenario
and focuses on the CET1 capital ratio.
In addition, Barclays conducted a group-wide,
exploratory stress test against a severe but
plausible near-term climate scenario. The aim
of the analysis was to identify key
vulnerabilities that were most relevant and
material to the Group’s business model and
geographical footprint.
Legal proceedings, competition, regulatory and
remediation/redress conduct matters are also
assessed as part of the stress testing process.
Capital and liquidity risk appetite 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.
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.
Examples include extreme macroeconomic
downturn scenarios, or specific idiosyncratic
events, covering operational risk (for example,
cyberattack), adverse outcomes in legal
proceedings, competition, regulatory and
conduct matters and capital/liquidity events.
We use an inventory of models, quantitative
procedures and judgement to support the
stress test calculations and projections. These
tools range from experienced management
judgement through to sophisticated financial
and behavioural models. The stress test
evaluation process produces both gross
impacts and the effect of mitigation including
management actions. This enables us to
understand, monitor and control the risks
identified. The stress testing process is
overseen by a governance structure from the
Board through executive business and risk
committees. Management believes that the
internal and external stress testing process
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.
40 Barclays PLC Annual Report 2019
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Non-financial
information statement
Certain of the non-financial information required pursuant to the Companies Act is provided by reference to the following locations:
Non-financial information
Business model
Policies
Principal risks
Key performance indicators
Section
Business model
Non-financial information statement
Risk review
Principal risk management
Risk performance
Key performance indicators
Pages
12
41
125
139
147
18
We use a variety of tools to track and measure our strategic delivery, and collect both quantitative and qualitative information to get the full picture
of our performance.
The Non-Financial Reporting requirements contained in sections 414CA and 414CB of the Companies Act 2006 are addressed within this section
by means of cross reference in order to indicate which part of the strategic narrative the respective requirements are embedded. We have used
cross referencing as appropriate to deliver clear, concise and transparent reporting.
We have a range of policies and guidance (also available at home.barclays/esg) that support our key outcomes for all of our stakeholders.
Performance against our strategic non-financial performance measures, as shown on pages 18 to 35, is one indicator of the effectiveness and
outcome of policies and guidance.
Across Barclays, policies and statements of intent are in place to ensure consistent governance on a range of issues. For the purposes of the
Non-Financial Reporting requirements, these include, but are not limited to:
Environmental matters
Policy statement
Description
Energy and Climate
Change statement
Our Energy and Climate Change statement sets out our approach to energy sectors with higher carbon-related
exposures from extraction or consumption, and/or those with an impact in certain sensitive environments, namely
thermal coal, Arctic oil and gas, and oil sands. The statement outlines the important role Barclays plays in ensuring
that the world’s energy needs are met, while helping to limit the threat that climate change poses to people and to
the natural environment.
World Heritage Site
and Ramsar Wetlands
statement
We understand that certain industries, and in particular mining, oil and gas, and power, can have negative impacts
on areas of high biodiversity value including UNESCO World Heritage Sites (WHS) and Ramsar Wetlands (RW). Our
WHS and RW statement outlines our client due diligence approach to preserving and safeguarding these sites.
Climate Change
Financial and
Operational Risk Policy
In 2019, we published a ‘Climate Change Financial Risk and Operational Risk Policy’. This introduced climate
change as an overarching risk impacting certain principal risks: credit risk, market risk, treasury and capital risk and
operational risk. The policy is jointly owned by the relevant Principal Risk Leads with oversight by the Board Risk
Committee.
Forestry and
Palm Oil statement
We recognise that the production of timber products and palm oil is often associated with significant environmental
and social impacts, particularly in relation to biodiversity loss, tropical deforestation and climate change. Our
Forestry and Palm Oil Statement outlines our due diligence approach for clients involved in these activities, ensuring
that we support clients that promote sustainable forestry and agribusiness practices whilst respecting the rights of
workers and local communities.
Colleagues
Policy statement
Description
Board Diversity Policy
The Board Diversity Policy sets out the approach to diversity on the Boards of Barclays.
Code of Conduct
The Barclays Code of Conduct outlines the Values and Behaviours which govern our 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.
Health, safety
and welfare
Our commitment is to ensure the health, safety and welfare of our employees and to provide and maintain safe
working conditions. Effective management of health and safety will have a positive effect on the services we provide.
Equality and Diversity
Charter
Barclays Equality and Diversity Charter governs the approach for employees of the Group. A diverse employee-base
will include and make good use of differences in the skills, regional and industry experience, background, race,
gender and other distinctions between employees, with all appointments made on merit.
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Barclays PLC Annual Report 2019 41
Financial reviewFinancial statementsShareholder informationRisk reviewGovernanceStrategic report RISK, VIABILITY AND NON-FINANCIAL INFORMATION
Non-financial
information statement
Social matters
Policy statement
Description
Donations
Tax
Sanctions
Barclays works in partnership with non-profit organisations, including charities and NGOs, to develop high-
performing programmes and volunteering opportunities that harness the skills and passion of our employees.
Barclays has chosen to partner with a small number of organisations, allowing us to have deeper relationships
and ultimately enabling us to have the greatest impact on our communities in which we operate. Barclays does
not accept unsolicited donation requests.
Our Tax Principles are central to our approach to tax planning, for ourselves or on behalf of our clients. Since their
introduction in 2013 we believe our Tax Principles have been a strong addition to the way we manage tax, ensuring
that we take into account all of our stakeholders when making decisions related to our tax affairs. The same applies
to our Tax Code of Conduct.
Sanctions are restrictions on activity with targeted countries, governments, entities, individuals and industries that
are imposed by bodies such as the United Nations (UN), the European Union (EU), individual countries or groups of
countries. The Barclays Group Sanctions Policy is designed to ensure that the Group complies with applicable
sanctions laws in every jurisdiction in which it operates.
The defence industry
We provide financial services to the defence sector within a specific policy framework. Each proposal is assessed
on a case-by-case basis and legal compliance alone does not automatically guarantee our support. The Barclays
Statement on the Defence Sector outlines our appetite for defence-related transactions and relationships.
Human rights
Policy statement
Description
Human rights
Modern slavery
Supply chain
We operate in accordance with the Universal Declaration of Human Rights and take account of other internationally
accepted human rights standards. We also promote human rights through our employment policies and practices,
through our supply chain and through the responsible use of our products and services.
Barclays recognises its responsibility to comply with all relevant legislation including the UK Modern Slavery Act
2015. In accordance with the requirements of the Act, we release an annual Barclays Group Statement on Modern
Slavery, which outlines the actions we have taken to address the risks of modern slavery and human trafficking in
our operations, supply chain, and customer and client relationships.
Our supply base is diverse, including start-ups, small and medium-sized businesses, and businesses owned,
controlled and operated by under-represented segments of society as well as multinational corporations. We
recognise that these partnerships have significant direct and indirect environmental and social impacts. We actively
encourage our supplier partners to meet Barclays’ requirements in order to meet our obligations to our stakeholders.
Data protection
Across Barclays, the privacy and security of personal information is respected and protected. Our Privacy Statement
governs how we collect, handle, store, share, use and dispose of information about people. We regard sound privacy
practices as a key element of corporate governance and accountability.
Anti-bribery and anti-corruption
Policy statement
Description
Bribery and corruption We recognise that corruption can undermine the rule of law, democratic processes and basic human freedoms,
impoverishing states and distorting free trade and competition. Our statement reflects the statutory requirements
applicable in the UK as derived from the United Nations and Organisation for Economic Co-operation and
Development conventions on corruption.
Anti-money laundering
and counter-terrorist
financing
Barclays Anti-Money Laundering Policy is designed to ensure that we comply with the requirements and obligations
set out in UK legislation, regulations, rules and industry guidance for the financial services sector, including the need
to have adequate systems and controls in place to mitigate the risk of the bank being used to facilitate financial
crime.
42 Barclays PLC Annual Report 2019
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OUR GOVERNANCE
OUR GOVERNANCE
Contents
Welcome to our Governance report. This report
explains who we are, at Board and Executive
Committee (‘ExCo’) level; how our governance
framework operates, and our key areas of focus
in 2019.
Our primary aim is that our governance:
■■ is effective in providing challenge, advice and support to
management
■■ provides checks and balances and encourages constructive
challenge
■■ drives informed, collaborative and accountable decision-making
■■ creates long-term sustainable value for our shareholders,
having regard to our other stakeholders.
We are in a new regime for 2019, with the revised 2018 UK Corporate
Governance Code (the ‘Code’) and the Companies (Miscellaneous
Reporting) Regulations 2018 (the ‘Regulations’) now in force, and our
Governance Report reflects these requirements. To view our specific
compliance as against the Code, please see pages 74 to 79.
Certain additional information, signposted throughout this report,
will be available at home.barclays/corporategovernance
Directors’ report
Remuneration report
■■ Board of Directors: a year of renewal
■■ Executive Committee: strategically enhanced and strengthened
■■ Striving for simplicity and effectiveness
■■ Our key areas of focus in 2019
■■ Key priorities
■■ Board Audit Committee report
■■ Board Nominations Committee report
■■ Board Risk Committee report
■■ How we comply
■■ Other statutory information
Page
44
47
48
50
51
52
61
66
74
80
85
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Barclays PLC Annual Report 2019 43
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance DIRECTORS’ REPORT
Board of Directors:
a year of renewal
2019 has been a year of renewal for
the Board: a new Chairman, two
significant Non-Executive Director
appointments (with a further
Non-Executive Director appointed
with effect from February 2020) and
a smaller Board. We believe that a
Board with the right balance of skills,
experience and diversity is critical
to the sustainable delivery of value
to our shareholders and we are
confident that the changes to the
composition of the Board will help
us to achieve this.
This has also been a year of significant
change to the ExCo. We have
strengthened the ExCo, enhancing
engagement and oversight and
driving greater accountability for key
business areas. We have achieved this
by appointing to the ExCo the heads
of our Corporate Bank, our Markets
business, our Banking business, and
the new Global Head of Consumer
Banking and Payments.
Nigel Higgins
Group Chairman
Appointed:
2 May 2019
Jes Staley
Group Chief
Executive
Appointed:
1 December 2015
Relevant skills and experience:
Nigel is the Group Chairman. He is also Chairman
of Barclays Bank PLC. Nigel has extensive experience
in, and understanding of, banking and financial
services, gained through a 36-year career at Rothschild
& Co. where he was most recently Deputy Chairman.
Prior to that he was Chairman of the Group Executive
Committee and Managing Partner of Rothschild & Co.
He is a seasoned business leader with a strong
track record in leading and chairing a range of
organisations and in acting as a strategic adviser
to multiple major international corporations and
governments. The breadth of Nigel’s knowledge and
operational experience with international banking
groups, building teams and culture, and growing
businesses are all hugely beneficial to Barclays, and
enables Nigel to contribute to the strategic direction
and long-term sustainable success of Barclays.
Key current appointments
Chairman, Sadler’s Wells; Non-Executive Director,
Tetra Laval Group
Committee membership
Board Nominations Committee (Chair)
Relevant skills and experience
Jes has nearly four decades of extensive experience
in banking and financial services. He brings a wealth
of investment banking knowledge to the Board
as well as strong executive leadership, and this
contribution is reflected in Barclays’ strategy and
long-term sustainable success of the business.
He previously worked for more than 30 years at
JP Morgan where he initially trained as a commercial
banker, later advancing to the leadership of major
businesses involving equities, private banking
and asset management, and ultimately heading
JP Morgan’s Global Investment Bank.
Key current appointments
Board Member, Bank Policy Institute; Board Member,
Institute of International Finance
Committee membership
None
Crawford Gillies
Senior Independent
Director
Appointed:
1 May 2014
Mike Ashley
Non-Executive
Appointed:
18 September 2013
Relevant skills and experience
Crawford has extensive business and management
experience at executive and board level spanning
over 30 years. Beneficial to the Board and to Barclays’
strategy and long-term sustainable success is
his key understanding of stakeholder needs and
his experience in international and cross-sector
organisations, strong leadership and strategic
decision-making. Crawford brings to the Board
robust remuneration experience gained from his
former remuneration committee chairmanships
at Standard Life plc and other current positions.
Key current appointments
Non-Executive Director, SSE plc; Chairman,
Edrington Group
Committee membership
Board Audit Committee, Board Nominations
Committee, Board Remuneration Committee (Chair)
Relevant skills and experience
Mike has deep knowledge of accounting, auditing
and associated regulatory issues, having previously
worked at KPMG for over 20 years. Mike’s former
roles include acting as the lead engagement partner
on the audits of large financial services groups
including HSBC, Standard Chartered and the Bank
of England, as Head of Quality and Risk Management
for KPMG Europe LLP and as KPMG UK’s Ethics
Partner. The Board benefits from his extensive
experience in accounting, auditing and financial
reporting and therefore Mike continues to contribute
to the long-term sustainable success of the business.
Key current appointments
Member, Cabinet Office Board; Member, International
Ethics Standards Board for Accountants; Member,
ICAEW Ethics Standards Committee; Member,
Charity Commission
Committee membership
Board Audit Committee (Chair), Board Nominations
Committee, Board Risk Committee
44 Barclays PLC Annual Report 2019
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Tim Breedon CBE
Non-Executive
Appointed:
1 November 2012
Sir Ian Cheshire
Non-Executive
Appointed:
3 April 2017
Mary Anne Citrino
Non-Executive
Appointed:
25 July 2018
Relevant skills and experience
Relevant skills and experience
Relevant skills and experience
Tim’s continued contribution to Barclays’ strategy
Sir Ian is a member of the Board and is also
Mary Anne is an experienced Non-Executive Director
and long-term sustainable success comes from his
Chair of Barclays Bank UK PLC. He contributes
with considerable financial services and investment
extensive financial services experience, knowledge of
to the Board substantial business experience
banking experience, following an executive career
risk management and UK and EU regulation, as well
particularly in the international retail sector from
spanning over 20 years with Morgan Stanley.
as an understanding of key investor issues. He had
his lengthy executive career at the Kingfisher
This enables her to contribute to the effectiveness
a distinguished career with Legal & General, where,
Group, as well as experience in sustainability and
of Barclays’ operations, strategy and long-term
among other roles, he was the Group CEO until June
environmental matters which are important to the
sustainable success of the business. Her current
2012, and this experience enables Tim to provide
Group’s strategy and long-term sustainable success.
other Non-Executive positions and Senior Advisory
challenge, advice and support to management on
Sir Ian holds strong credentials in leadership, is
role with Blackstone, coupled with her previous
business performance and decision-making.
involved with many charitable organisations, such
board and senior management level positions
Key current appointments
Chairman, Apax Global Alpha Limited
Committee membership
Board Audit Committee, Board Nominations
Committee, Board Remuneration Committee,
Board Risk Committee (Chair)
as The Prince of Wales’s Charitable Foundation,
(with Dollar Tree Inc., Health Net, Inc., and
and is highly regarded by the Government for his
Blackstone Advisory Partners), contribute to
work with various Government departments.
the wide-ranging global, strategic and advisory
Key current appointments
experience she can provide to the Board.
Chairman, Maisons du Monde; Chairman, Menhaden
Key current appointments
plc; Lead Non-Executive Director for the Government;
Non-Executive Director, HP Inc.; Non-Executive
Trustee, Institute for Government
Committee membership
Board Nominations Committee
Director, Ahold Delhaize N.V.; Non-Executive Director,
Alcoa Corporation; Senior Advisor, The Blackstone
Group L.P.
Committee membership
Board Risk Committee
Mohamed A. El-Erian
Non-Executive
Appointed:
1 January 2020
Dawn Fitzpatrick
Non-Executive
Appointed:
25 September 2019
Mary Francis CBE
Non-Executive
Appointed:
1 October 2016
Relevant skills and experience
Relevant skills and experience
Relevant skills and experience
Mohamed is a highly respected economist and investor,
Dawn is a highly experienced financial executive
Mary has extensive and diverse board-level
with considerable experience in the asset management
who holds the role of Chief Investment Officer
experience across a range of industries, including
industry and multilateral institutions. He is chief
at Soros Fund Management LLC. Her previous
her previous Non-Executive Directorships of the Bank
economic advisor at Allianz SE, the corporate parent
experience includes 25 years with UBS and its
of England, Alliance & Leicester, Aviva, Centrica and
of PIMCO (Pacific Investment Management Company
predecessor organisations, most recently as
Swiss Re Group. Through her former senior executive
LLC) where he formerly served as Chief Executive and
Head of Investments for UBS Asset Management.
positions with HM Treasury, the Prime Minister’s
Co-Chief Investment Officer. As well as serving on several
Her knowledge of the businesses and markets
Office, and as Director General of the Association
advisory committees and boards, Mohamed is a regular
in which the Group operates further strengthens
of British Insurers, she brings to the Board a strong
columnist for Bloomberg Opinion and a contributing
the depth and range of relevant sector skills and
understanding of the interaction between public and
editor at the Financial Times. He has also published
experience across the Board. This enables Dawn to
private sectors, skills in strategic decision-making and
widely on international economic and financial topics.
challenge and contribute effectively to the Group’s
reputation management and promotes strong board
He spent 15 years at the IMF where he served as
operations and the long-term sustainable success
governance values, which enables her to continue to
Deputy Director before moving to the private sector
of the business.
contribute effectively to the long-term sustainable
success of the Group.
Key current appointments
Chief Investment Officer, Soros Fund Management
Key current appointments
LLC; Member of The New York Federal Reserve’s
Non-Executive Director, Valaris PLC; Member of
Investor Advisory Committee on Financial Markets;
Advisory Panel, The Institute of Business Ethics;
Member of Advisory Board and Investment
Member, UK Takeover Appeal Board
Committee of the Open Society Foundations and
their Economic Justice Programme
Committee membership
Board Remuneration Committee
Committee membership
Board Risk Committee
and financial services. Mohamed’s acute knowledge
and understanding of international economics and the
financial services sector strengthens the Board’s capacity
for overseeing the strategic direction and development
of the Group. Mohamed’s knowledge and experience
enables him to contribute to the long-term
sustainable success and strategy of the business.
Key current appointments
Non-Executive Director, Under Armour Inc.;
Chief Economic Advisor, Allianz SE; Senior Advisor,
Gramercy Funds Management; Senior Advisor,
Investcorp Bank BSC
Committee membership
None
Nigel Higgins
Group Chairman
Appointed:
2 May 2019
Jes Staley
Group Chief
Executive
Appointed:
1 December 2015
Relevant skills and experience:
Relevant skills and experience
Nigel is the Group Chairman. He is also Chairman
Jes has nearly four decades of extensive experience
of Barclays Bank PLC. Nigel has extensive experience
in banking and financial services. He brings a wealth
in, and understanding of, banking and financial
of investment banking knowledge to the Board
services, gained through a 36-year career at Rothschild
as well as strong executive leadership, and this
& Co. where he was most recently Deputy Chairman.
contribution is reflected in Barclays’ strategy and
Prior to that he was Chairman of the Group Executive
long-term sustainable success of the business.
Committee and Managing Partner of Rothschild & Co.
He previously worked for more than 30 years at
He is a seasoned business leader with a strong
JP Morgan where he initially trained as a commercial
track record in leading and chairing a range of
banker, later advancing to the leadership of major
organisations and in acting as a strategic adviser
businesses involving equities, private banking
to multiple major international corporations and
and asset management, and ultimately heading
governments. The breadth of Nigel’s knowledge and
JP Morgan’s Global Investment Bank.
operational experience with international banking
groups, building teams and culture, and growing
businesses are all hugely beneficial to Barclays, and
enables Nigel to contribute to the strategic direction
and long-term sustainable success of Barclays.
Key current appointments
Chairman, Sadler’s Wells; Non-Executive Director,
Tetra Laval Group
Committee membership
Board Nominations Committee (Chair)
Key current appointments
Board Member, Bank Policy Institute; Board Member,
Institute of International Finance
Committee membership
None
Crawford Gillies
Senior Independent
Director
Appointed:
1 May 2014
Mike Ashley
Non-Executive
Appointed:
18 September 2013
Relevant skills and experience
Relevant skills and experience
Crawford has extensive business and management
Mike has deep knowledge of accounting, auditing
experience at executive and board level spanning
and associated regulatory issues, having previously
over 30 years. Beneficial to the Board and to Barclays’
worked at KPMG for over 20 years. Mike’s former
strategy and long-term sustainable success is
roles include acting as the lead engagement partner
his key understanding of stakeholder needs and
on the audits of large financial services groups
his experience in international and cross-sector
including HSBC, Standard Chartered and the Bank
organisations, strong leadership and strategic
of England, as Head of Quality and Risk Management
decision-making. Crawford brings to the Board
for KPMG Europe LLP and as KPMG UK’s Ethics
robust remuneration experience gained from his
Partner. The Board benefits from his extensive
former remuneration committee chairmanships
experience in accounting, auditing and financial
at Standard Life plc and other current positions.
reporting and therefore Mike continues to contribute
Key current appointments
Non-Executive Director, SSE plc; Chairman,
Edrington Group
Committee membership
Board Audit Committee, Board Nominations
Committee, Board Remuneration Committee (Chair)
to the long-term sustainable success of the business.
Key current appointments
Member, Cabinet Office Board; Member, International
Ethics Standards Board for Accountants; Member,
ICAEW Ethics Standards Committee; Member,
Charity Commission
Committee membership
Board Audit Committee (Chair), Board Nominations
Committee, Board Risk Committee
Tim Breedon CBE
Non-Executive
Appointed:
1 November 2012
Sir Ian Cheshire
Non-Executive
Appointed:
3 April 2017
Mary Anne Citrino
Non-Executive
Appointed:
25 July 2018
Relevant skills and experience
Tim’s continued contribution to Barclays’ strategy
and long-term sustainable success comes from his
extensive financial services experience, knowledge of
risk management and UK and EU regulation, as well
as an understanding of key investor issues. He had
a distinguished career with Legal & General, where,
among other roles, he was the Group CEO until June
2012, and this experience enables Tim to provide
challenge, advice and support to management on
business performance and decision-making.
Key current appointments
Chairman, Apax Global Alpha Limited
Committee membership
Board Audit Committee, Board Nominations
Committee, Board Remuneration Committee,
Board Risk Committee (Chair)
Relevant skills and experience
Sir Ian is a member of the Board and is also
Chair of Barclays Bank UK PLC. He contributes
to the Board substantial business experience
particularly in the international retail sector from
his lengthy executive career at the Kingfisher
Group, as well as experience in sustainability and
environmental matters which are important to the
Group’s strategy and long-term sustainable success.
Sir Ian holds strong credentials in leadership, is
involved with many charitable organisations, such
as The Prince of Wales’s Charitable Foundation,
and is highly regarded by the Government for his
work with various Government departments.
Key current appointments
Chairman, Maisons du Monde; Chairman, Menhaden
plc; Lead Non-Executive Director for the Government;
Trustee, Institute for Government
Committee membership
Board Nominations Committee
Relevant skills and experience
Mary Anne is an experienced Non-Executive Director
with considerable financial services and investment
banking experience, following an executive career
spanning over 20 years with Morgan Stanley.
This enables her to contribute to the effectiveness
of Barclays’ operations, strategy and long-term
sustainable success of the business. Her current
other Non-Executive positions and Senior Advisory
role with Blackstone, coupled with her previous
board and senior management level positions
(with Dollar Tree Inc., Health Net, Inc., and
Blackstone Advisory Partners), contribute to
the wide-ranging global, strategic and advisory
experience she can provide to the Board.
Key current appointments
Non-Executive Director, HP Inc.; Non-Executive
Director, Ahold Delhaize N.V.; Non-Executive Director,
Alcoa Corporation; Senior Advisor, The Blackstone
Group L.P.
Committee membership
Board Risk Committee
Mohamed A. El-Erian
Non-Executive
Appointed:
1 January 2020
Dawn Fitzpatrick
Non-Executive
Appointed:
25 September 2019
Mary Francis CBE
Non-Executive
Appointed:
1 October 2016
Relevant skills and experience
Mohamed is a highly respected economist and investor,
with considerable experience in the asset management
industry and multilateral institutions. He is chief
economic advisor at Allianz SE, the corporate parent
of PIMCO (Pacific Investment Management Company
LLC) where he formerly served as Chief Executive and
Co-Chief Investment Officer. As well as serving on several
advisory committees and boards, Mohamed is a regular
columnist for Bloomberg Opinion and a contributing
editor at the Financial Times. He has also published
widely on international economic and financial topics.
He spent 15 years at the IMF where he served as
Deputy Director before moving to the private sector
and financial services. Mohamed’s acute knowledge
and understanding of international economics and the
financial services sector strengthens the Board’s capacity
for overseeing the strategic direction and development
of the Group. Mohamed’s knowledge and experience
enables him to contribute to the long-term
sustainable success and strategy of the business.
Key current appointments
Non-Executive Director, Under Armour Inc.;
Chief Economic Advisor, Allianz SE; Senior Advisor,
Gramercy Funds Management; Senior Advisor,
Investcorp Bank BSC
Committee membership
None
home.barclays/annualreport
Relevant skills and experience
Dawn is a highly experienced financial executive
who holds the role of Chief Investment Officer
at Soros Fund Management LLC. Her previous
experience includes 25 years with UBS and its
predecessor organisations, most recently as
Head of Investments for UBS Asset Management.
Her knowledge of the businesses and markets
in which the Group operates further strengthens
the depth and range of relevant sector skills and
experience across the Board. This enables Dawn to
challenge and contribute effectively to the Group’s
operations and the long-term sustainable success
of the business.
Key current appointments
Chief Investment Officer, Soros Fund Management
LLC; Member of The New York Federal Reserve’s
Investor Advisory Committee on Financial Markets;
Member of Advisory Board and Investment
Committee of the Open Society Foundations and
their Economic Justice Programme
Committee membership
Board Risk Committee
Relevant skills and experience
Mary has extensive and diverse board-level
experience across a range of industries, including
her previous Non-Executive Directorships of the Bank
of England, Alliance & Leicester, Aviva, Centrica and
Swiss Re Group. Through her former senior executive
positions with HM Treasury, the Prime Minister’s
Office, and as Director General of the Association
of British Insurers, she brings to the Board a strong
understanding of the interaction between public and
private sectors, skills in strategic decision-making and
reputation management and promotes strong board
governance values, which enables her to continue to
contribute effectively to the long-term sustainable
success of the Group.
Key current appointments
Non-Executive Director, Valaris PLC; Member of
Advisory Panel, The Institute of Business Ethics;
Member, UK Takeover Appeal Board
Committee membership
Board Remuneration Committee
Barclays PLC Annual Report 2019 45
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance DIRECTORS’ REPORT
Board of Directors:
a year of renewal
Brian Gilvary
Non-Executive
Appointed:
1 February 2020
Tushar Morzaria
Group Finance
Director
Appointed:
15 October 2013
Diane Schueneman
Non-Executive
Appointed:
25 June 2015
Relevant skills and experience
Tushar is a chartered accountant with over 25 years
of strategic financial management, investment
banking, operational and regulatory relations
experience, which enables him to contribute to
the long-term sustainable success and strategy of
the business. He joined Barclays from JP Morgan,
where he held various senior roles including the
CFO of its Corporate & Investment Bank at the time
of the merger of the investment bank and the
wholesale treasury/security services business.
Key current appointments
Member, the 100 Group of the FTSE 100 Finance
Directors; Main Committee Chair, Sterling Risk Free
Reference Rates Working Group
Committee membership
None
Relevant skills and experience
Diane is a member of the Board, Chair of Barclays
Execution Services Limited and a member of the
Board of Barclays US LLC. She brings to Barclays
a wealth of experience in managing global,
cross-discipline business operations, client services
and technology in the financial services industry,
which enables her to robustly challenge the Group’s
strategy and support the long-term sustainable
success of Barclays. Diane had 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.
Key current appointments
None
Committee membership
Board Audit Committee, Board Nominations
Committee, Board Risk Committee
Relevant skills and experience
Brian has served as Chief Financial Officer for BP PLC
since 2012. He joined BP in 1986 after obtaining a
PhD in Mathematics. After performing a broad range
of commercial and financial roles across all facets
of the group, he became chief executive of BP’s
integrated supply and trading function (2005–2009).
Brian will retire from BP in June 2020. His experience
outside BP includes serving as a Non-Executive
Director and audit committee member of Air Liquide
S.A., the Royal Navy, and the Francis Crick Institute.
Brian also chairs the ‘100 Group’ of the FTSE 100
Finance Directors. Brian brings to the Board his
extensive experience of management, finance and
strategy gained at BP and other public and private
boards. His experience with, and understanding of,
the challenges and opportunities inherent in
advancing a sustainable energy future will be
invaluable as Barclays considers how it can help
to accelerate the transition to a low-carbon world.
Key current appointments
Chief Financial Officer, BP p.l.c.; Non-Executive
Director, Air Liquide S.A.; Non-Executive Director, the
Royal Navy; Senior Independent Director, the Francis
Crick Institute; Chairman, the 100 Group of the FTSE
100 Finance Directors
Committee membership
None
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 corporate law and M&A at
Hogan Lovells in the UK. Stephen has extensive
experience in corporate governance, legal, regulatory
and compliance matters. Stephen serves as Vice
Chair of the GC100, the association of General
Counsel and Company Secretaries working in
FTSE 100 companies, and has previously served
as Chairman of the ICC UK’s Committee on
Anti-Corruption.
46 Barclays PLC Annual Report 2019
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Executive Committee: strategically
enhanced and strengthened
We have changed the composition of the
ExCo, removing a management layer and
bringing key business areas closer to, and
making their leaders a part of, the most senior
management forum for the Group.
The following new roles and additions to the
ExCo mean that it now has a stronger and
closer strategic focus on, and oversight over,
the businesses comprising our CIB and our
global consumer banking and payments
businesses:
New roles
President of Barclays Bank PLC
Paul Compton
Global Head of Consumer
Banking and Payments
Ashok Vaswani
Jes Staley
Group Chief
Executive
Tushar Morzaria
Group Finance
Director
Paul Compton
President of
Barclays Bank PLC
Laura Padovani
Group Chief
Compliance Officer
Paul and Ashok were previously members of
the ExCo in their capacities as Chief Operating
Officer and CEO of Barclays UK respectively.
Alistair Currie
Head of
Corporate Banking
Mark Ashton Rigby
Group Chief
Operating Officer
Roles elevated to the ExCo
Global Head of Banking
Joe McGrath
Global Head of Markets
Stephen Dainton
Head of Corporate Banking
Alistair Currie
Stephen Dainton
Global Head of
Markets
Tristram Roberts
Group Human
Resources Director
Matt Hammerstein
CEO, Barclays UK
Ashok Vaswani
Global Head of
Consumer Banking
and Payments
Bob Hoyt
Group General Counsel
C.S. Venkatakrishnan
Group Chief Risk Officer
Joe McGrath
Global Head of Banking
home.barclays/annualreport
Barclays PLC Annual Report 2019 47
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance DIRECTORS’ REPORT
Striving for simplicity
and effectiveness
Barclays is a large, diversified organisation. We are committed,
through our governance model, to driving four key features:
simplification, collaboration, accountability and quality of
decision-making.
Our governance framework
Our Group-wide governance framework
has been designed to facilitate the effective
management of the Group by our CEO and
his ExCo whilst preserving the constructive
challenge, support and oversight of our major
subsidiary boards in the UK, Ireland and the
US, consistent with their respective legal and
regulatory responsibilities. The Barclays PLC
(BPLC) Board sets the strategic direction and
risk appetite of the Group and is the ultimate
decision-making body for matters of
Group-wide strategic, financial, regulatory
or reputational significance.
BPLC is the Group parent company and
has a premium listing on the London Stock
Exchange. Each of our main operating entities,
Barclays Bank PLC (BBPLC), Barclays Bank UK
PLC (BBUKPLC), Barclays Bank Ireland PLC,
Barclays US LLC and Barclays Bank Delaware,
has its own board comprising Executive and
Board Governance Framework
Non-Executive Directors. Each also has
its own board committees.
During the year, we consolidated and
streamlined membership of the BPLC and
BBPLC Boards, such that membership of the
BBPLC Board is now a subset of the BPLC
Board, with all members of the BPLC Board
except the Senior Independent Director (SID),
the Chairman of BBUKPLC and one Non-
Executive Director now also serving on the
board of BBPLC. This partial consolidation
has significantly increased coordination
and efficiency, and reduced complexity
and duplication. The revised BBPLC Board
composition vests oversight over the activities
of BBPLC in a board the members of which
also have direct accountability to BPLC’s
shareholders through their separate
responsibilities as members of the
BPLC Board.
Board composition
In 2019, we welcomed our new Chairman,
Nigel Higgins. We also announced the
appointment of two new Non-Executive
Directors:
■■ Dawn Fitzpatrick, who joined the Board
on 25 September 2019; and
■■ Mohamed A. El-Erian, who joined the
Board on 1 January 2020.
In January 2020, we announced the
appointment of Brian Gilvary who joined
the Board on 1 February 2020.
All of these appointments bring tremendous
insight and experience relevant to the markets
in which we operate. In accordance with the
recommendation of the Code, Reuben Jeffery
and Dr. Dambisa Moyo, each having served
on the Board for nine years, stepped down,
as did Sir Gerry Grimstone and Mike Turner.
Barclays PLC
Responsible for the overall leadership of the Group
Audit Committee
Nominations Committee
Risk Committee
• Assesses integrity of the
Group’s financial reporting
of the Board
• Reviews the composition
• Monitors and recommends
• Evaluates effectiveness of
• Recommends the
the Group’s internal
controls
• Scrutinises activities and
performance of internal
and external auditors
• Reviews and monitors the
Group’s whistleblowing
policies
appointment of new
Directors
• Considers succession
plans for key Board and
ExCo positions
• Oversees the annual Board
effectiveness review
the Group’s financial,
operational and legal risk
appetite
• Monitors the Group’s
financial, operational and
legal risk profile
• Considers reports on key
financial and legal risk
issues
• Oversees conduct and
compliance
Remuneration
Committee
• Sets overarching principles
and parameters of
remuneration across the
Group
• Considers and approves
remuneration for the
Chairman, Executive
Directors, other senior
executives and certain
Group employees
• Oversees remuneration
issues
For more information
see page 52
For more information
see page 61
For more information
see page 66
For more information
see page 121
48 Barclays PLC Annual Report 2019
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Matthew Lester stepped down on 1 January
2020. We also bade farewell to John McFarlane,
who stepped down after four years as
Chairman, including a period where he was
Executive Chairman. We are grateful to them
all for their service to Barclays.
We are actively seeking to complement the
current range of skills on our Board, ideally
with individuals who can bring additional
retail banking and technology experience.
Our strong belief in the benefits of diversity –
of gender, ethnicity and thought – underpins
our search. In the report of our Nominations
Committee we address the continuing
evolution of our Board.
Principal committees
The principal committees of the Board, and
the core responsibilities of each, are described
in the ‘Board Governance Framework’ table at
the foot of the previous page. The remit of each
committee is set out in brief in the table, and
you can read more about the committees and
their work on pages 52 to 73 and 121 to 123.
In September 2019, the Board reviewed the
responsibilities of the Reputation Committee
and reallocated them mainly to the Board so
that it could itself directly oversee the critical
topics of culture, the environment and
reputation. Responsibility for the oversight of
Conduct risk and Compliance was transferred
from the Reputation Committee to the
Risk Committee.
We measure our effectiveness
An effective Board is one that delivers for
stakeholders. We assess the effectiveness
of our Board, its committees and Board
members each year, as required by the Code.
Although the Code only requires an externally
facilitated evaluation every three years, for
each of the past four years we have used the
services of an external agency to facilitate the
assessment of the effectiveness of the Board.
This year, the Nominations Committee
decided to ask our Senior Independent
Director (SID), with the support of the
Company Secretary, to conduct the
assessment. They are well placed to do this,
having been closely involved in the transition
to a new Chairman and the evolving
composition of the Board and the way it
operates. You can read more about our 2019
process and our progress against the 2018
review on pages 64 to 65.
Board composition as at 31 December 2019
Balance of Non-Executive Directors – Executive Directors
No. of Directors
1
2
Chairman
Executive Directors
Non-Executive Directors
Gender balance
No. of Directors
Male
Female
Board allocation of timea
%
8
9
4
2019
2018
50
16
25
8
44
12
42
2
Strategy formulation
and implementation
monitoring
Finance (including
capital and liquidity)
Governance and risk
(including regulatory
issues)
Other
(including
remuneration)
Length of tenure (Chairman and Non-Executive Directors)
No. of Directors
5
3
2
0-3 years
3-6 years
6-9 years
Industry experienceb
No. of Directors
12
8
4
3
1
1
Financial
services
Political/
regulatory
experience
Current/recent
Chair/CEO
Accountancy/
auditing
Operations/
technology
Retail/
marketing
International experiencec
No. of Directors
9
4
4
International
(UK)
International
(US)
International
(Rest of
the world)
Notes
a Based on scheduled
Board meetings.
b Individual Directors may fall
into one or more categories.
c In relation to board
experience based on
the location of the
headquarters/registered
office of a company.
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Barclays PLC Annual Report 2019 49
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance
DIRECTORS’ REPORT
Our key areas of focus in 2019
We think of governance as how we govern the organisation
and make decisions to promote its success for the long-term
benefit of our stakeholders. Effective governance makes
possible the delivery of our purpose and our strategy.
Governance in action: our
programme of prioritised
deep dives
To underpin informed and sound decision-
making, the Board needs to have a deep
and granular understanding of the Group
as a whole and each of its significant
businesses – where the key risks lie,
how and where resources are allocated
and the contribution made by each part
of the business.
Led by the Chairman, the Board and the ExCo
have agreed a prioritised series of deep dives
which now form a significant part of each
Board meeting, with two to four deep dives
on the agenda for a typical Board meeting.
The materials for each deep dive facilitate
an in-depth understanding of the issues
and generate meaningful discussion, debate,
support to management and challenge on
key topics, allowing the Board to exercise
effective oversight and assist the delivery
of the Group’s strategy.
Through this process, the Board considers
strategy at every meeting, rather than in
a set piece event once a year.
The Board has discharged its responsibilities
as described in this high-level flow diagram.
Board
responsibilities
Setting strategy
and
Challenging and
supporting management
to drive sustainable
value creation for our
shareholders
through
Entrepreneurial and
ethical leadership
and by
Engaging with our
stakeholders
and
Compliance with law
and regulation
all in
Setting risk
appetite and risk
management
and
Effective internal and
financial control
within a framework of
that aligns our values
with our strategy
Promoting our
culture and purpose
50 Barclays PLC Annual Report 2019
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Stakeholder engagement
We have enjoyed extensive engagement with
our shareholders in 2019 through a variety
of mechanisms, including:
■■ in February, March and April 2019,
Nigel Higgins held around 50 meetings
with shareholders and other stakeholders.
This was a ‘listening tour’, the aim of
which was for Nigel to introduce himself
to a wide range of stakeholders, including
our institutional shareholders, and to
hear directly from them their views on the
Group before he became Chairman in
May 2019. We also engaged with activist
investor Sherborne Investors Management
LP as part of this process
■■ our AGM, where the Board engaged
extensively with shareholders, both
formally during the meeting and
informally before and after the AGM
■■ through our intensive Investor Relations
programme of conference calls, webcasts
and meetings at the time of each of our
quarterly results releases.
Our broader stakeholder engagement is
described in the Strategic report. Specifically
with regard to our workforce, engagement
with our colleagues has long been a part
of our DNA as an organisation. The Board
conducted a full review of our existing
engagement model and concluded that this,
with certain enhancements, would be the best
and most effective means to ensure sustained
engagement with our workforce whilst also
meeting the objectives of the Code’s new
workforce engagement requirements. Our
workforce engagement model is described
in the People section on page 28 to 31.
Purpose, culture and values
Our purpose, adopted in May 2018, is
‘Creating opportunities to rise’. This is
underpinned by our values: respect, integrity,
service, excellence and stewardship, and by
the behaviours associated with them. Our
purpose, values and behaviours are designed
to support each other, to drive our culture and
to guide our strategy and decision-making.
The Board has recently examined our purpose
and concluded that whilst it is fully integrated
into many of our key processes and decision-
making forums, we have further work to do
to bring to life: to express and apply it
consistently across the Group, and for it
to better connect all of our stakeholders,
our businesses, ESG activities and ambitions.
This work is under way.
Our values were adopted in January 2013.
They were, and remain, fully embedded and
integrated into the Group.
Our culture is a core area of focus for the
Board, which believes that the right culture
and values, supported by effective leadership
and a consistent tone from the top, are crucial
to the success of the Group.
How does the Board review
our culture?
The Board reviews our culture in a number
of ways, including:
■■ quantitative and qualitative feedback on
how our culture aligns with our purpose,
values and strategy through Culture
Dashboards, so the Board can see the
effect our people engagement has on our
performance, and the continued strength
of our culture
■■ analysis of employee survey results
■■ face-to-face engagement with employees
locally to hear what they think
■■ review of people policies, which are
designed to provide equal opportunities
and create an inclusive culture, in line
with our values and in support of our
long-term success.
Key priorities
Core areas of focus
Our programme of deep dives is outlined
below and in the ‘Governance in action’
section on the previous page. This programme
commenced in July 2019, following the
appointment of Nigel Higgins as Chairman.
The deep dives held this year included
consideration of a wide range of topics,
covering selected individual business units
as well as Group-wide matters such as our
capital allocation framework, our costs, our
societal purpose, our culture, the environment
and our risk profile.
Feedback from our shareholders and wider
stakeholders has been taken into account
in arriving at and prioritising our deep dives.
The Board received updates on the
performance of the business and execution
of the strategy at every meeting, and the
approval of our MTP, in which our strategy
is embedded, was a key Board responsibility
at its November and December 2019
meetings. We also gave considerable focus to
developments in the regulatory environment,
and to engagement with our regulators in the
UK and the US in particular. The oversight of
risk and of our control environment is also
a core Board responsibility and has been
addressed at meetings through the year.
The Board believes
the right culture and
values, supported by
effective leadership
and a consistent
tone from the top,
are crucial to the
success of the Group.
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Barclays PLC Annual Report 2019 51
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance DIRECTORS’ REPORT: BOARD AUDIT COMMITTEE REPORT
Ensuring reporting integrity and
an effective controls environment
The Board Audit Committee has a central role
in maintaining and challenging the quality of Barclays’
external disclosures and its internal control environment.
Dear Fellow Shareholders
2019 was a year of steady progress for
the Group both in enhancing its control
environment and embedding new financial
reporting requirements, particularly in relation to
the expected credit loss (ECL) model introduced
by the implementation of IFRS 9 in 2018.
Ensuring focus on strengthening the Barclays’
internal control environment has continued
to be a key activity for the Committee. 2019
was an important year for the Barclays Internal
Control Environment Programme (BICEP)
which commenced in January 2017 and is on
track to complete by the end of March 2020.
As at the end of 2019, 94% of issues were
either closed or in validation with 96% of the
BICEP milestones achieved. When BICEP is fully
completed, the Group’s control environment
will be in a much stronger position, but
inevitably, as expectations and standards
change and new control events occur, work is
still required both to maintain and to further
develop it. The Committee is therefore working
to ensure that as we transition to ‘business as
usual’, management has a robust framework
for identifying and responding to control issues
with appropriate reporting to the Committee
and other Board Committees. A key component
of this will be the work the Chief Controls Office
is doing to further streamline and automate
the Risk and Controls Self-Assessment (RCSA)
process to make it more dynamic.
In assessing general control issues for
disclosure in this Annual Report, the
Committee continued to apply similar
concepts to those used for assessing internal
financial controls for the purposes of the US
Sarbanes-Oxley Act (SOX). The conclusion we
reached is that there are no control issues that
are considered to be a material weakness and
which therefore merit specific disclosure.
IFRS 9 continued to be a major focus for the
Committee this year as models continue to be
validated and refined. In addition, disclosures
have been enhanced, although more work is
required to develop the ability to generate and
disclose more meaningful sensitivity analyses.
Following the introduction of the time bar
by the FCA at the end of August, the level
of subjectivity of the PPI provision at
31 December 2019 has been considerably
reduced. However the Committee did consider
whether the ‘spike’ in complaints received
just before the deadline might have been
anticipated and was satisfied that there was
no evidence that would have justified an
earlier significant increase in the provision.
completion of a tailored questionnaire by
Committee members and standing attendees.
I continued my regular meetings with the
Chairs of the main subsidiary audit committees,
including the Chair of the BBPLC audit
committee until the consolidation of the BPLC
and BBPLC boards. Since that time I have also
met with the Chair of the Barclays US LLC audit
committee, attended a meeting of the Barclays
Bank Ireland PLC audit committee, and
attended the meeting of the BBUKPLC audit
committee which considered the main year-end
accounting issues. The Chair of the BBUKPLC
audit committee also attends the meeting of
the Committee where we consider the control
environment of BBUKPLC as part of our
year-end evaluation. I also continued to
meet frequently with members of senior
management, including the Group Finance
Director and Chief Internal Auditor. In relation
to the latter, I am pleased that the Committee
approved the appointment in September 2019
of Lindsay O’Reilly as the new Chief Internal
Auditor following a joint recommendation from
myself and the Group Chief Executive Officer. As
she was appointed to this role from a first line
of defence function, the Committee have taken
steps to understand and safeguard against
potential and perceived conflicts of interest that
may arise in order to support BIA’s continued
independence from the business. BIA is a key
component in supporting the Committee’s
work and I am pleased with the way that the
function has continued to develop throughout
the year in scoping, performing and reporting
the outcomes of its work both to management
and the Committee.
I have also continued my regular engagement
with the Group’s regulators both in the UK and
US. This has encompassed not only my work
as the Chair of the Committee, but also my role
as the Group’s Whistleblowing Champion. In
that respect, I also oversaw the production of
the first of three annual reports which we have
agreed to submit to the FCA and PRA in the UK
and also the New York Department of Financial
Services containing certain information
regarding our whistleblowing programme.
Committee performance
The performance of the Committee was
assessed internally as part of the annual
effectiveness review of the Board. In line
with the approach adopted for all Board
Committees in 2019, the process involved
The results confirm that the Committee is
operating effectively, and the Board takes a
high level of assurance from the technical
and commercial competence and diligence
of the Committee’s work. It is considered
well-constituted, with the right balance of skills
and experience to provide an appropriately
broad level of challenge and oversight of the
areas within its remit. Consideration will need
to be given to adding an additional member
of the Committee with recent and relevant
financial experience following the departure
of Matthew Lester at the end of the year.
Last year’s review commented on the
improved focus of the Committee on key
issues in the context of managing a
demanding agenda efficiently so that time
is allocated to the most significant items
for discussion. As the Committee has taken
on additional responsibilities during the year,
for example the oversight of tax matters,
continued focus on this area will be beneficial.
In response to a request to provide feedback
on the interaction with subsidiary audit
committees, the review highlighted that
interaction with the BBUKPLC audit committee
had been helpful and effective. Following
the consolidation of the membership of the
Committee with the BBPLC audit committee,
coverage of BBPLC matters within concurrent
meetings was considered adequate, noting
that it will benefit from further embedment.
Looking ahead
In 2020, the Committee will still continue to
monitor the embedment of IFRS 9 processes
and further enhancements to our disclosure,
particularly as regards sensitivities.
We will also be looking to assess the reporting
of control issues after the conclusion of BICEP
as well as monitor the satisfactory completion
of remediation programmes which are due to
extend beyond 31 March 2020, in particular the
Designated Markets Activity remediation plan.
Mike Ashley
Chair, Board Audit Committee
12 February 2020
52 Barclays PLC Annual Report 2019
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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 recent and
relevant experience of the banking and
financial services sector, in addition to general
management and commercial experience,
and are financially literate. In particular,
Mike Ashley, who is the designated financial
expert on the Committee for the purposes of
SOX 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. Matthew Lester,
who resigned from the Committee on
1 January 2020, held a number of senior
finance roles across a range of business
sectors, including financial services, during
his executive career. You can find more details
of the experience of Committee members
in their biographies on pages 44 to 46.
During 2019, the Committee met 10 times and
the chart opposite shows how it allocated its
time. Attendance by members at Committee
meetings is also shown opposite. Committee
meetings were attended by representatives
from management, including the Group Chief
Executive Officer, Group Finance Director,
Chief Internal Auditor, Chief Controls Officer,
Chief Risk Officer, Chief Operating Officer,
Group General Counsel and Group Chief
Compliance Officer, as well as representatives
from the businesses and other functions.
The lead audit engagement partner of KPMG,
Michelle Hinchliffe, also attended Committee
meetings. The Committee held a number
of separate private sessions with each of
the Chief Internal Auditor and the lead audit
engagement partner, which were not attended
by management.
Committee members
Committee roles
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
Member
Mike Ashley
Tim Breedon
■■ evaluating the effectiveness of the Group’s
Crawford Gillies
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 policies
and 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
Meetings attended/
eligible to attend
10/10
10/10
10/10
10/10
10/10
Matthew Lester
Diane Schueneman
Committee allocation of time
%
Control Issues
Business Control
Environment
Financial Results
Internal Audit
Matters
External Audit
Matters
Other (including
litigation,
governance
and compliance)
Note
Based on scheduled
meetings.
5
17
39
11
12
16
8
12
46
14
13
7
2019
2018
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Barclays PLC Annual Report 2019 53
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance DIRECTORS’ REPORT: BOARD AUDIT COMMITTEE REPORT
Ensuring reporting integrity and
an effective controls environment
Area of focus
Reporting issue
Role of the Committee
Conclusion/action taken
Fair, balanced and
understandable
reporting
(including Country-
by-Country Reporting
and Modern Slavery
Statement)
In light of the Board’s obligation
under the Code, the Committee
assesses external reporting
to ensure it is fair, balanced
and understandable.
Going concern and
long-term viability
(refer to the Viability
Statement on pages
39 and 40)
Barclays is required to assess
whether it is appropriate to
prepare the financial statements
on a going concern basis and also,
in accordance with the Code,
Barclays must provide a statement
of its viability.
In addition to this Annual Report
and associated year-end reports,
the Committee also reviewed the
Group’s quarterly reports and the
GFD’s presentations to analysts.
The Committee informed these
reviews by:
■■ consideration of reports of the
Disclosure Committee which
included views on content,
accuracy and tone
■■ direct questioning of
management including the CEO
and GFD on the transparency
and accuracy of disclosures
■■ consideration of management’s
response to letters issued by
the FRC
■■ evaluation of the output of the
Group’s internal control
assessments and SOX s404
internal control process
■■ consideration of the results of
management’s processes relating
to financial reporting matters and
to evidence the representations
provided to the external auditors.
The Committee considered both
the going concern assumption and
the form and content of the Viability
Statement having regard to:
■■ the MTP and WCR
■■ the forecasted liquidity and
funding profile
■■ the results of stress tests based
on both internal and regulatory
specified assumptions as
reviewed by the Risk Committee
■■ current risk and strategy
disclosures.
The Committee noted specifically that
whilst the disclosures regarding IFRS 9
met nearly all the recommendations
from the Enhanced Disclosure Task
Force these were still evolving.
The Committee encouraged
management to continue to
enhance the disclosure particularly
as the ability to analyse sensitivities
was developed.
Having evaluated all of the available
information, the assurances by
management and underlying
processes used to prepare the
published financial information,
the Committee concluded and advised
the Board that the 2019 Annual Report
and financial statements are fair
balanced and understandable.
The Committee recommended to the
Board that the financial statements
should be prepared on a going concern
basis and that there were no material
uncertainties that may cast significant
doubt on the Group’s ability to
continue as a going concern.
The Committee also agreed that
the appropriate time frame for the
viability statement continued to be
three years and recommended the
viability statement to the Board
for approval.
54 Barclays PLC Annual Report 2019
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Area of focus
Reporting issue
Role of the Committee
Conclusion/action taken
Impairment
(refer to Note 7 to the
financial statements)
Following implementation of
IFRS 9, ECLs are modelled using
a range of forecast economic
scenarios. The key areas of
judgement include setting the
modelling assumptions, developing
the macroeconomic scenarios and
the methodology for weighting
them, establishing the criteria to
determine significant deterioration
in credit quality and the application
of management adjustments to
the modelled output.
Conduct provisions
(refer to Note 24 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 PPI.
Legal, competition
and regulatory
provisions
(refer to Notes 24
and 26 to the
financial statements)
Barclays is engaged in various legal,
competition and regulatory matters
which may give rise to provisioning
based on the facts.
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.
As part of their monitoring the
Committee considered a number
of reports from management on:
■■ the continued development
and embedding of controls over
the internal processes supporting
the ECL calculation and related
assessment of SOX compliance
(including by the external
auditors)
■■ model changes and refinements
to the staging criteria
■■ regeneration of the
macroeconomic variables
and associated weighting
■■ adjustments made to the
modelled output to reflect
updated data and known
model deficiencies
■■ comparisons between actual
experience and forecast losses
■■ single name exposures.
With a view to evaluating adequacy
of the provision, the Committee
analysed the judgements and
estimates made with regard to
Barclays’ provisioning for PPI claims,
taking into account:
■■ forecasts and assumptions made
for PPI complaints
■■ actual claims levels and validity
of claims
■■ increased levels of claims based
on the August 2019 time bar
for claims (including claims from
the Official Receiver).
Evaluated advice on the status
of current legal, competition and
regulatory matters and assessed
management’s judgements on
the levels of provisions to be taken
and accompanying disclosure.
Having considered and scrutinised
the reports, the Committee agreed
with management’s conclusion that
the impairment provision (including
specifically the £150m for anticipated
economic uncertainty in the UK)
was appropriate.
Going forward, the Committee
also agreed with management that
it would be appropriate to review
the frequency of regenerating the
macroeconomic scenarios.
In light of information received, the
Committee agreed with management
that the PPI provision was adequate
during H1 2019 and did not need to
be increased. The PPI provision was
increased in Q3 2019 by £1.4bn due
to the exceptionally high volume of
claims received in late August 2019
prior to the time bar. The Committee
agreed with this increase and that the
level of provision at the end of the year
was appropriate.
The Committee also made
recommendations regarding the
sensitivity disclosures.
The Committee discussed provisions
and utilisation and 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.
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Ensuring reporting integrity and
an effective controls environment
Area of focus
Reporting issue
Role of the Committee
Conclusion/action taken
Valuations
(refer to Notes
13 to 17 to the
financial statements)
Barclays exercises judgement in
the valuation and disclosure of
financial instruments, derivative
assets and certain portfolios,
particularly where quoted market
prices are not available.
Tax
(refer to Note 9 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.
The Committee noted that there
were no new significant valuation
judgements at the end of the year.
The Committee was satisfied with the
accounting treatment on an amortised
cost basis of the investments now
held as a result of the restructuring
of the long-dated derivative portfolio.
The Committee was also satisfied
that the day one valuation ascribed
to resultant instruments was
appropriate by reference both to
the existing valuation methodology
and the ongoing profitability of the
instruments now held.
The Committee was satisfied that
specific strategies were in line with the
Group’s Tax Code of Conduct and on
behalf of the Board approved the UK
Tax Strategy statement published as
part of the Country-by-Country Report.
The Committee noted that the
uncertain tax positions covered
a diverse range of issues and as
a consequence agreed with
management’s view that there was
not a significant risk of a material
adjustment during the next year.
The Committee was also satisfied
that deferred tax assets recognition
was appropriate.
The Committee:
■■ evaluated reports from the Group
Financial Controller
■■ monitored the valuation methods
applied by management requiring
significant judgement such as the
ESHLA portfolio
■■ reviewed the restructuring of the
long-dated derivative portfolio
which had previously given rise
to a significant valuation disparity
with the counterparty.
The Committee is responsible
for considering the Group’s tax
strategy and overseeing compliance
with the Group’s Tax Code of
Conduct. In this regard the
Committee received reports from
the Tax Management Oversight
Committee and in particular
considered the utilisation of the
Luxembourg tax losses and revised
US holding company structure.
The Committee reviewed the
appropriateness of provisions
made for uncertain tax positions,
including the retrospective
de-grouping of certain entities
from the UK VAT group.
The Committee also confirmed
that the estimates and assumptions
used in assessing the recoverability
of deferred tax assets were supported
by the MTP.
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Area of focus
Reporting issue
Role of the Committee
Conclusion/action taken
The effectiveness of the overall
control environment, including
the status of any significant
control issues and the progress
of specific remediation plans.
Internal controls
and business
control environment
Read more about
Barclays’ internal control
and risk management
processes on pages 78
to 79.
Raising concerns
The adequacy of the Group’s
arrangements to allow employees
to raise concerns in confidence
and anonymously without fear
of retaliation, and the outcomes
of any substantiated cases.
The Committee:
Throughout 2019, the Committee has:
■■ evaluated and tracked the status
of the most significant control
issues through regular reports
from the Chief Controls Officer,
including updates on lessons
learned and assessment against
the Controls Maturity Model.
The Committee also received
independent evaluations from
BIA and external auditors
■■ evaluated the status of specific
significant control Hot Spots,
specifically; transaction
operations, cyber, treasury and
capital liquidity risk reporting and
model risk (control framework
and model reporting)
■■ scrutinised reports from individual
businesses and functions on their
control environment and focused
on the progress relating to
remediation areas
■■ monitored CASS updates and
associated remediation activities.
At its next meeting, the Committee
will receive feedback from the Chief
Controls Office on the 2019 RCSA
process, which will help inform the
Committee’s overall assessment of
the Group’s control environment.
The Committee also received
preliminary feedback from the Chief
Controls Officer on the 2019 RCSA
process which helped inform the
Committee’s overall assessment of
the Group’s control environment.
The Committee:
■■ has overseen the embedding
of a new centralised team
to manage concerns raised
■■ received reports from
management and monitored
whistleblowing metrics and
retaliation reports.
■■ monitored progress of BICEP
against completion. At the end of
2019, the Committee noted that
BICEP was on target for completion
by March 2020
■■ monitored key control issues
through a series of deep dives and
scrutinised the pathway to ‘Return
to Satisfactory’ in respect of
internal controls operated by the
various functions and businesses
■■ recommended enhancements to
the RCSA review process, including
streamlining review through
integration with the internal control
process review
■■ enhanced monitoring of liquidity
risk remediation actions relating
to buffer increases, following an
increase in regulatory technical
breaches.
The Committee received two in-depth
semi-annual reports on whistleblowing
from management. At year end the
Committee noted the recent
‘Satisfactory’ rating by BIA of the audit
of the centralised team and considered
that the whistleblowing programme
generally met with best practice as
identified by the PRA. However the
Committee encouraged the team
to consider how interaction with
whistleblowers might be further
enhanced to improve their experience
with the process. In addition the
Committee stressed the importance of
ensuring the time taken to investigate
concerns robustly was as short as
possible in order to minimise the
potential stress for all concerned.
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Ensuring reporting integrity and
an effective controls environment
Area of focus
Reporting issue
Role of the Committee
Conclusion/action taken
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.
External audit
The work and performance
of KPMG.
At year-end the Committee approved
the 2020 Audit Plan detailing the
number of audits and areas of focus,
and was satisfied with the level of
resource to be allocated.
In particular, the Committee has
scrutinised:
■■ the appointment of the new
Chief Internal Auditor
■■ internal audit resource and the
ability of BIA to support the 2020
Audit Plan
■■ BIA’s assessment of the overall
control environment.
The Committee approved the audit
plan and the main areas of focus.
Read more about the Committee’s
role in assessing the performance,
effectiveness and independence
of the external auditor, opposite.
The Committee has:
■■ scrutinised and agreed internal
audit plans, methodology and
deliverables for 2020 including
assessing internal audit resources
and hiring levels, and any impacts
on the audit plan
■■ tracked the levels of unsatisfactory
audits, and monitored related
remediation plans
■■ considered the recommendation
for the appointment of the Chief
Internal Auditor
■■ discussed BIA’s approach to
data analytics
■■ discussed BIA’s assessment
of the management control
approach and control
environment in BBUKPLC,
BBPLC and the functions
■■ evaluated the outcomes from
BIA’s annual self-assessment.
The Committee:
■■ met with key members of the
KPMG audit team to discuss the
2019 Audit Plan and KPMG’s
areas of focus
■■ assessed regular reports from
KPMG on the progress of the 2019
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 2019 year-end
■■ considered the draft SOX control
report and the draft audit opinion.
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External auditor
Following an external audit tender in 2015,
KPMG was appointed as Barclays’ statutory
auditor with effect from the 2017 financial
year. Michelle Hinchliffe of KPMG is the Senior
Statutory Auditor and was appointed to this
role with effect from the 2018 financial year.
Assessing external auditor
effectiveness, objectivity
and independence and
non-audit services
The Committee is responsible for assessing the
effectiveness, objectivity and independence of
the Group’s auditor, KPMG. 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, the Committee also:
■■ 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 (the Policy)
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
The Committee
considered that
KPMG maintained its
independence and
objectivity, and that
the audit process
was effective.
■■ was briefed by KPMG on critical
accounting judgements and estimates and
internal controls over financial reporting
■■ considered the formal report from the
Public Company Audit Oversight Board on
their review of KPMG’s audit of the 2017
financial statements and the consequential
revisions made by KPMG to their audits
for both the 2018 and 2019 financial
statements. These were in line with the
provisional results reported last year
■■ assessed any potential threats to
independence that were self-identified
and reported by KPMG.
The Committee is aware that the FRC has
also reviewed certain aspects of KPMG’s audit
of the 2018 financial statements although its
report is not yet available. KPMG has informed
the Committee of areas for improvement
which are likely to be reported by the FRC
and how these matters have been addressed
in the 2019 audit. Based on its understanding
to date, the Committee believes that KPMG’s
audit work should provide reasonable
assurance that the financial statements
are free of material misstatement.
KPMG’s performance, independence and
objectivity during 2019 were also formally
assessed at the beginning of 2020 by way
of a questionnaire completed by key
stakeholders across the Group, including the
chairs of the BBUKPLC, Barclays US LLC and
Barclays Bank Ireland PLC audit committees.
The questionnaire was designed to evaluate
KPMG’s audit process and addressed
matters such as the quality of planning and
communication, technical knowledge, the
level of scrutiny and challenge applied and
KPMG’s understanding of the business. In
addition, as in the prior year, KPMG nominated
a senior partner of 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 to receive a report on their
assessment of audit quality.
Taking into account the result of all of the
above, the Committee considered that KPMG
maintained its independence and objectivity
and that 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 Policy applies to all Barclays’
subsidiaries and other material entities over
which Barclays has significant influence. The
core principle of the Policy is that non-audit
services (other than those legally required to
be carried out by the 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 Chair on a case-by-case basis,
supported by a risk assessment provided by
management. A summary of the Policy can
be found at home.barclays/who-we-are/
our-governance/auditor-independence
The Policy is reviewed on an annual basis
to ensure that it is fit for purpose, and that
it reflects applicable rules and guidelines.
The Policy is also aligned with KPMG’s own
internal policy on non-audit services for
FTSE 350 companies which broadly restricts
non-audit work to services that are ‘closely
related’ to the audit.
Any changes to the Policy are approved at
a Group level by the Committee. This is in
accordance with European Union law and
FRC guidance, pursuant to which audit
committees of Public Interest Entities (such
as Barclays) are required to approve non-audit
services provided by their auditors to such
entities, and subsidiary Public Interest Entities
in the UK – such as BBUKPLC and BBPLC –
can rely on the approval of non-audit services
by the ultimate parent’s audit committee.
It should be noted that audit services, and the
fee cap, will also be monitored by the relevant
audit committee, as appropriate.
Under the Policy, the Committee has
pre-approved all allowable services for which
fees are less than £100,000. 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
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
threshold must be approved by the Chair of
the Committee before work is permitted to
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.
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Ensuring reporting integrity and
an effective controls environment
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.
Provided that KPMG continue to maintain
their independence and objectivity, and
the Committee remains satisfied with their
performance, the Group has no intention
of appointing an alternative external auditor
before the end of the current required period
of 10 years.
During 2019, all engagements where expected
fees met or exceeded the above threshold
were evaluated by either the Committee Chair
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
by the Committee in 2019 (2018: none).
On a quarterly basis, the Committee reviewed
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 trivial in terms of its impact on Barclays’
financial statements and requires 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 may be regarded as such.
The Committee undertook a review of
pre-approved services at its meeting in
December 2019 and satisfied itself that such
pre-approved services were trivial in the
context of their impact on the financial
statements.
The fees payable to KPMG for the year ended
31 December 2019 amounted to £56m, of
which £11m (2018: £11m) was payable in
respect of non-audit services. A breakdown
of the fees payable to the auditor for statutory
audit and non-audit work can be found in
Note 40. Of the £11m of non-audit services
provided by KPMG during 2019, 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
■■ other services in connection with
regulatory, compliance and internal control
reports and audit procedures, required by
law or regulation to be provided by the
statutory auditor
■■ other attest and assurance services,
such as ongoing attestation and assurance
services for treasury and capital markets
transactions to meet regulatory
requirements, including regular reporting
obligations and verification reports.
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DIRECTORS’ REPORT: BOARD NOMINATIONS COMMITTEE REPORT
Delivering effectiveness
An effective Board is a cohesive Board that provides
informed and constructive support and challenge to
the management team. This is vital to the generation
of increased and sustainable stakeholder value.
Achieving this – through its focus on the
composition of the Board, its Committees
and the ExCo, and by ensuring a pipeline
of succession to these and other senior
management key roles – is the main role
of the Nominations Committee.
Delivering effectiveness is not however just
about the continuous task of evolving the
composition of the Board, a Committee or
the ExCo to ensure that each is diverse and
well balanced with the right mix of talent,
skills and experience (illustrated below).
As important is how the Board operates –
the quality of its agenda and its engagement
with management, of the papers and
presentations it considers and of the rigour
of its discussions. The effectiveness of
the Board was enhanced in 2019 through
revisions to the Board engagement process
with an intensive focus on the preparation
of our Board papers, the delivery of targeted
training sessions to the Board and our
new programme of prioritised deep dives
discussed on page 51.
Much was done in 2019 on all of these fronts,
and there is more to do.
The Committee comprises solely
Non-Executive Directors and is chaired by
our Group Chairman. Details on Committee
membership and attendance are set out
on this page.
Nominations
Committee
Identifying skills gaps
Leading appointments
Reviewing effectiveness
and effecting change
Ensuring succession
planning for key
roles in place
Reviewing core
skills and time
commitment
Committee members
Member
Nigel Higgins
Mike Ashley
Tim Breedon
Sir Ian Cheshire
Crawford Gillies
Diane Schueneman
Meetings attended/
eligible to attend
3/3
3/3
3/3
3/3
3/3
3/3
Committee allocation of time
%
Corporate
governance matters
Board and Board
Committee
composition
Succession
planning and talent
Board effectiveness
Other
Note
Not including ad hoc
meetings or paper
circulations.
9
25
44
10
12
13
41
27
11
8
Maintaining effective
Board, Committee and
ExCo composition
2019
2018
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Delivering effectiveness
Working alongside independent external
search firms Egon Zehnder and Spencer
Stuart, neither of which has any connection
to Barclays or any of the Directors other
than to assist with searches for executive
and non-executive talent, the Committee set
rigorous criteria for the roles it was seeking
to fill, both in terms of technical capabilities
and cultural/style attributes, and conducted
extensive search and selection processes.
Open advertising for Board positions was
not used this year.
The Board was delighted to announce the
appointment in September 2019 of two new
Non-Executive Directors, Dawn Fitzpatrick
and Mohamed A. El-Erian, and is confident
that each will make a very significant
contribution to the effectiveness of the Board.
Their respective skills and experience are
set out in their biographies on page 45.
Since the year-end, the Board has
announced the appointment of Brian Gilvary.
The Committee’s focus now is on securing
a further Non-Executive Director with
outstanding retail banking and technology
experience to join the Board, with the benefits
of diversity remaining a key consideration.
The Committee has also made progress
against its goal of delivering a smaller Board
– a reduction in membership during 2019 from
15 to 11, going up to 12 with the appointment
of Dawn Fitzpatrick. On 1 January 2020,
Mohamed A. El-Erian joined the Board and
Matthew Lester stepped down, as announced
on 16 December 2019. Brian Gilvary joined
the Board on 1 February 2020.
Executive succession
Executive succession is a key consideration
and during the year, the Committee closely
monitored the status and progress of Barclays’
strategies for attracting and retaining the
best talent.
The Committee played an important role
in the management changes at ExCo level
which took place in March 2019. It recognised
the significant strategic and operational
benefits of:
■■ elevating to the ExCo the heads of key
businesses within the CIB
■■ aligning the Group’s global consumer
banking and payments business under
a newly created ExCo role of Global Head
of Consumer Banking and Payments.
You can read more about these and the other
management changes on page 47.
Simplification of governance
The Board is already a little smaller than it
was, and with the support of our regulators
we have simplified the multi-tier structure
at the top of the organisation by bringing
about a much greater overlap between the
Board and the board of BBPLC. We expect
this to produce more cohesive and efficient
governance, and to enhance oversight by,
and accountability to, the Board for this key
part of our business.
Diversity
At the end of 2019 we had met our 2020
Board gender diversity target of 33%.
Although recent appointments took us to
31% we are committed to continuing to bring
the very best, diverse talent we can attract
to the Board.
Alongside the Board, the Committee
continues to champion the benefits of
diversity – be it religious, ethnic or gender
diversity or diversity of social backgrounds or
cognitive and personal strengths – at Board,
Committee and senior management level.
In pursuit of this, the Committee is monitoring
and supporting the Group’s focus on
accelerated development of the female talent
pipeline, with the aim of moving more female
talent into the ‘Ready Now’ succession
positions. The mechanisms being used
Group-wide to achieve this include:
■■ identifying female talent
■■ providing leadership and mentoring
programmes
■■ launching ‘Aspire’ – a programme used
to fast track the development of high
potential Vice Presidents to Director
(of which the majority in the programme
are female).
Successful leadership and governance
comes from different experiences and
perspectives, not just one point of view.
Our commitment is to attract and retain a
broad based pool of talent – not a particular
type of person – and the Board Diversity
Policy and the Committee terms of reference
support this. Both are available at
home.barclays/corporategovernance.
For additional information on diversity and
inclusion, our Diversity Policy and data on the
percentage of females in senior management
positions, please see pages 28 and 31
respectively.
Principal activities
The Committee’s allocation of time and
the principal activities during the year
under review are set out on pages 61 to 63.
Board composition
With the restructuring of Barclays largely
complete, and a new Chairman in place,
the Nominations Committee recognised that
balancing the existing skills on the Board with
further banking and technology experience
would enhance its ability to provide informed
and constructive challenge to management,
and therefore its effectiveness.
Building on the work of the Committee
under previous Chairman John McFarlane,
the Committee analysed the skills and
experience on the Board against those
required to drive forward the execution of
the Group’s strategy and the performance of
the business. The Committee concluded that
the Board must now include more Directors
with experience in technology, retail banking
and wholesale banking. Capturing the clear
benefits of greater diversity of background
and opinion was also recognised as a top
priority. The Committee also concluded that
to be more effective the Board would need
to be smaller.
The Board was
delighted to announce
the appointment of
Dr. El-Erian,
Ms Fitzpatrick and
Dr. Gilvary as Non-
Executive Directors.
Each will make a
significant contribution
to the effectiveness
of the Board.
62 Barclays PLC Annual Report 2019
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Committee responsibilities
Principal activities
1 Ensuring the right individuals
are appointed – in line with
suitability criteria – who can
discharge the duties and
responsibilities of Directors.
2 Effective ExCo, Board and
Committee composition,
through focus on appointment
and succession based on merit
and skill, through a diversity lens.
Approval of re-allocation of management positions and reporting lines
following the reorganisation of the Group’s consumer banking and
payments business.
1 2 3 4
Approval of key executive appointments including the Global Head of Markets.
1 2 3 4
Consideration and approval of new Group Chief Operating Officer and CEO
of BX, allowing the previous role holder (Paul Compton) to focus on the role
of BBPLC President.
1 2 3
3 Leading candidate search
and identification.
Candidate evaluation for both executive and non-executive current and future
roles including review of core skills and (for internal candidates) scrutiny of
internal feedback.
1 2 3 4
4 Regular review of succession
planning and recommendations
for key executive and
non-executive roles.
5 Monitoring of time
commitments for incoming
and existing Directors to ensure
sufficient time for effective
discharge of duties.
6 Monitoring compliance against
corporate governance guidelines
and the Diversity Policy,
including yearly review and
any recommendations for
enhancements.
7 Ensuring compliance by the
Board with legal and regulatory
requirements.
8 Individual Director, Board
and Committee effectiveness
reviews and implementing
any required actions.
9 Considering and authorising,
subject to ratification by the
Board, any conflicts of interest.
Review of the balance of skills and diversity on the Board, and leading the
search and recruitment process (including conflict analysis) for candidates
with relevant banking and technology experience. The Committee utilised
external search consultants Egon Zehnder and Spencer Stuart to facilitate
the targeted external search processes based on agreed and reviewed criteria.
1 2 3 4 6 9
Directors’ tenure and effectiveness review, and identifying candidates
for re-election.
1 2 4 6 7 8
Approval of the appointment of Ms Schueneman to the Nominations
Committee.
Analysed ExCo composition and succession planning for strengths
and weaknesses, focusing on increasing diversity. Reviewed ‘Ready Now’
successors for key roles such as Group Chief Risk Officer, Group Human
Resources Director and Group Chief Compliance Officer and suggested
external market mapping for any roles where a lack of a strong pipeline
was identified.
1 2 5
2 3 4 6
Reviewed recommendations and suggested improvements arising from
the 2018 Board Effectiveness Review.
1 2 7 8
Approved that the 2019 Effectiveness Review be conducted internally,
led by the SID with support from the Company Secretary and Nominations
Committee oversight.
Approved further enhancements to Director training through deep dive
Director training sessions.
8
7
Review and approval of the composition of the Board Committees.
1 2 5
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Delivering effectiveness
Review of Board, Committee and
individual Director effectiveness
Progress against 2018 Board
effectiveness review
The 2018 externally-facilitated effectiveness
review outlined the following key
recommendations:
■■ Board size and composition: The 2018
review highlighted that the Board, at 15
members, was large relative to peers
and suggested that a Board of 10 to12
members is optimal, with 8 to 10
Non-Executive Directors, provided that
diversity, succession planning and skills
mix criteria continue to be met.
2019: The size of the Board was reduced
to 11 (post AGM) and is currently 13.
The Committee believes that the size of the
Board is now more appropriate, with more
work to do to reduce it further in size, and
that its effectiveness, and the balance of
skills, experience and diversity on the
Board, have been enhanced during 2019.
■■ Culture, purpose and values: The 2018
review recommended that the Board
ensure that the Group’s purpose and
values are fully aligned with its culture
and that all Directors lead by example
and promote the desired culture.
2019: Deep dives have been held by the
Board covering purpose, values and culture
and considerable progress has been made
in relation to these recommendations.
■■ Director training and development:
The 2018 review recommended that
enhanced training be provided for Board
members and senior executives on UK
corporate governance, and that refresher
training sessions and more opportunities
for site visits be made available.
2019: Training on UK corporate
governance has been delivered in 2019
to Non-Executive Directors and to key
executives, and a new programme of
training sessions for Directors has been
implemented, with sessions held to date
focusing on technical aspects of some
of the more complex areas of the business,
in particular within the CIB. Opportunities
for site visits in the US and the UK have
been made available to all Board members.
■■ Board objectives: The 2018 review
recommended that to enable the Board
to spend more time on longer-term
and strategic issues a short set of annual
objectives would help to bring focus
to key issues and would result in papers
and meetings being more effective.
2019: Through the programme of deep dives,
which covers a rolling 18-month period
and reflects the Board’s key priorities and
objectives, and through the effort to address
the deep dive topics effectively in the papers
to the Board, the Committee believes that
this recommendation has, in substance,
been addressed. Time is now devoted
to strategy and strategic issues at every
meeting of the Board, rather than once a year.
2019 Board effectiveness review
The 2019 Board effectiveness review was
conducted internally, in line with the Code,
and was led by the SID with support from
the Company Secretary. The review followed
a structured interview process with Board
members, senior management and other
stakeholders, including our auditors, building
on past year’s externally facilitated review.
The review is an important part of the way
Barclays monitors and improves Board
performance and effectiveness; maximising
strengths and highlighting areas for further
development.
Feedback indicated that recent changes
in the composition of the Board have made
it more effective, with the new mix of skills
and experience enhancing the quality
of discussion.
Board members commented that meetings
are characterised by constructive dialogue on
strategic issues, and healthy challenge in an
open and collegiate environment. The quality
of management’s input to Board meetings
is felt to have improved, in part as a result
of more active Board engagement in shaping
materials for debate.
The induction of the new Chairman has
been effective, enabling him to quickly
understand the organisation and provide
effective challenge and a strong platform
for inclusive debate.
The integration of BBPLC and BPLC board
meetings is viewed as efficient, whilst still
enabling the appropriate focus on matters
relevant to each entity.
Recommendations
■■ The breadth and complexity of some
issues may necessitate a deeper discussion
than is currently possible in Board
meetings. Consideration will be given
to the best way to achieve this without
significantly increasing demands on the
Board’s time.
■■ As Barclays, and the wider industry,
becomes increasingly more digital,
there may be benefit to adding greater
technology expertise to the Board.
This could be achieved either through
greater external input, or by looking to
expand or adjust Board membership.
■■ There may also be opportunities to
increase the input to the Board from
outside Barclays on a wider range of
issues, thereby further strengthening
decision-making and ensuring that Board
members have the fullest understanding
of the context for their decisions.
■■ Barclays should ensure that its ongoing,
structured approach to workforce
engagement includes appropriate
opportunities for Board members
to engage directly with employees,
to help the Board take the issues of
interest to employees into account
in decision-making.
Review of Nominations
Committee effectiveness
The performance of the Committee was
assessed internally, in line with the approach
adopted for all Board Committees in 2019.
The process involved completion of a tailored
questionnaire by Committee members and
standing attendees.
The results confirm that the Committee
is operating effectively. This year’s review
highlights that the Committee continues
to be well constituted and that the role and
responsibilities of the Committee are clear
and well understood. The Committee’s
interaction with the Board, Board Committees
and senior management is considered
effective. In particular, this year’s review
noted the positive steps which had been taken
to address feedback from the previous review
on ensuring the same flow of information
is received by all Non-Executive Directors
in relation to discussions and decisions made
by the Committee.
The review also noted that the Committee
may benefit from a more formalised meeting
schedule. It was acknowledged that due to
the nature of the Committee’s roles and
responsibilities this is not always possible,
but further consideration will be given to
this during the year.
In response to a request to provide feedback
on interaction with subsidiary committees,
the review noted that interaction with the
BBUKPLC nominations committee had been
effective. Following the consolidation of the
membership of the Committee with the BBPLC
nominations committee, coverage of BBPLC
matters within concurrent meetings was
considered adequate, noting that it will
benefit from further embedment.
64 Barclays PLC Annual Report 2019
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As has been widely reported, earlier in his
career Mr Staley developed a professional
relationship with Mr Epstein. In the summer
of 2019, in light of the renewed media interest
in the relationship, Mr Staley volunteered and
gave to certain executives, and the Chairman,
an explanation of his relationship with
Mr Epstein. Mr Staley also confirmed
to the Board that he has had no contact
whatsoever with Mr Epstein at any time
since taking up his role as Barclays Group
CEO in December 2015.
The relationship between Mr Staley and
Mr Epstein was the subject of an enquiry
from the FCA, to which the Company
responded. The FCA and the PRA
subsequently commenced an investigation,
which is ongoing, into Mr Staley’s
characterisation to the Company of his
relationship with Mr Epstein and the
subsequent description of that relationship
in the Company’s response to the FCA.
Based on a review, conducted with the support
of external counsel, of the information
available to us and representations made
by Mr Staley, the Board (the Executive
Directors having been recused) believes that
Mr Staley has been sufficiently transparent
with the Company as regards the nature and
extent of his relationship with Mr Epstein.
Accordingly, Mr Staley retains the
full confidence of the Board, and is being
unanimously recommended for re-election
at the 2020 AGM.
The Board will continue to co-operate fully
with the regulatory investigation, and will
provide a further update as and when it is
appropriate to do so.
Review of the effectiveness
of the other Committees
In addition to reviewing its own effectiveness,
the Committee also reviewed the outcomes
of the effectiveness reviews conducted by
the Audit, Remuneration and Risk Committees
which had also been conducted by way of
tailored questionnaire. You can read about
those reviews in the individual Committee
reports elsewhere in this Governance Report.
Following consideration of the findings
of the 2019 Board and Board Committee
effectiveness reviews, the Directors remain
satisfied that the Board and each of the
Board Committees are operating effectively.
Individual Director effectiveness
All Directors in office at the end of 2019 (with
the exception of Matthew Lester who stepped
down on 1 January 2020) were subject to an
individual effectiveness review. The Chairman
and the SID considered each Director’s
individual contribution to the Board as well as
any feedback received as part of the broader
Board and Committee effectiveness review.
The reviews were conducted by the Chairman
and the Chairman’s review was conducted by
the SID. The Committee also reviewed the
independence of the Directors, and in the
cases of Tim Breedon, Mike Ashley and
Crawford Gillies, all of whom have served
(or will have by the time of the 2020 AGM)
on the Board for more than six years, their
independence was subjected to a more
rigorous review as required by the Code.
Based on these reviews, and the additional
review in respect of Mr. Staley described
below, the Board accepted the view of the
Committee that each Director proposed for
election or re-election at the 2020 AGM
continues to be effective, and contributes to
the Company’s long-term sustainable success.
Director effectiveness assessment:
disclosure of regulatory investigation
In accordance with the Code, all of the current
Directors of the Company will be submitting
themselves for election or re-election at the
2020 AGM to be held on 7 May 2020, and will
be unanimously recommended by the Board
for election or re-election as appropriate.
Further information in this regard will be set
out in the Notice of Meeting which will be
published in due course.
In deciding whether to recommend Jes Staley
for re-election, the Board has carried out its
usual formal and rigorous performance
assessment, which it does in respect of the
effectiveness of each of the Directors. As part
of its determination in respect of Mr Staley,
the Board has had regard to media reports
in the past six months that have highlighted
historical links between Mr Staley and
Jeffrey Epstein.
home.barclays/annualreport
Barclays PLC Annual Report 2019 65
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance Effective risk management:
designed to identify, assess
and control our risks
As a British universal bank, Barclays is subject to a
variety of financial, operational, legal and conduct risks.
Finally, the Committee reviewed the significant
enhancements the Group has made in its
approach to the management of the risks of
climate change. Both physical and transition
risks across all portfolios were considered in
the context of a severe but plausible climate
stress. This analysis will support the Group’s
response to the forthcoming Bank of England
(BoE) industry-wide stress test. This progress
was welcomed whilst acknowledging the
need for risk management practices generally
to evolve further across the whole industry in
respect of climate change risk.
Operational risk
During the year, the Committee continued
to monitor and challenge the progress being
made by management in the identification,
assessment and management of operational
risk. A key part of this was the further delivery
and embedding of work commenced in prior
years. Two complementary risk management
tools used by management are the RCSAs and
Structured Scenario Assessments (SSAs).
The RCSAs give ‘day-to-day’ coverage of the
risk and control environment of the Group.
They are built on a foundation of the actual
processes the Group employs and the risks
it faces from its activities. This approach
enables management to better identify and
manage operational risks going forward and
also to review in detail risk events that have
occurred in order to identify root causes.
Dear Fellow Shareholders
During 2019, the Committee maintained
its focus on the potential impact of macro-
economic developments and market volatility
on the risk profile of the Group. These issues
remain challenging and we continue to work
with management to position the Group
conservatively in response to a heightened
risk environment.
UK risks were the subject of particular
attention due to the economic uncertainty
arising from the planned withdrawal from the
EU. The October 2019 withdrawal agreement
and the subsequent General Election result
have reduced political uncertainty significantly
but the future trading relationship with the EU
is yet to be agreed. Given the tight timetable
and the potential economic consequences,
this remains a significant area of risk. The
Committee has also been active in ensuring
the operational resilience of the Group should
the UK leave the EU without reaching an
agreement on the future trading relationship.
We have continued to encourage
management to manage consumer and
corporate credit exposure in the UK in a
cautious manner and this has helped the
Group to limit losses and avoid a number
of the high profile corporate failures seen
during 2019.
Other key risks with potential for wider
contagion include those related to the
US economy where underlying economic
performance remains robust but growth
has slowed and consumer and corporate
indebtedness is high and growing. Political
and trade tensions, notably with China and
Europe, have increased and present a threat
to growth globally.
Despite the strength of the US economy
in 2019, the Committee remains focused
on the credit quality of our consumer and
corporate lending portfolios. In particular,
the US credit cards strategy was reviewed
and the Committee supported a continued
steady transition to a higher quality book
and lower-risk new business mix.
The Committee has also considered
the ageing of the credit cycle and rising
recessionary risks in our major markets. In the
second half of 2019, central banks undertook
synchronised rate cuts and other monetary
easing measures, with the Federal Reserve
Bank reversing its 2018 rate increases in the
face of moderate inflationary pressure and a
weaker growth outlook. This has supported
asset markets but increased the margin
pressures on banks from very low or negative
interest rates, whilst also presenting
operational challenges. Policy tools available
to central banks to deal with further economic
weakness are limited and with abundant
liquidity influencing risk-pricing in financial
markets, the potential exists for extreme
market moves to occur, not least in response
to policy errors. These risks are actively
managed and the Committee maintains
regular oversight of the overall risk profile of
the Group’s balance sheet and actions taken.
The ongoing focus on book quality is
evidenced by another positive impairment
performance this year.
The Committee again reviewed in detail with
management the Group’s leveraged finance
business in light of continued concerns
regarding reduced market liquidity, particularly
for larger transactions, lower quality issues
and more aggressive structures. The balance
of risk and reward in this market continues
to be acceptable and underwriting losses in
the year were modest. However, management
was encouraged to remain particularly vigilant
to these trends.
Barclays’ strategy includes some expansion of
structured credit exposures and an enhanced
control framework has been established to
control exposures and to ensure they are in
line with strategy in both scale and type.
The Committee also took on responsibility for
Conduct risk following the dissolution of the
Board Reputation Committee in September.
The role of the Committee is to oversee the
management of regulatory risk and challenge
the business to continue to deliver fair
outcomes for customers. We have welcomed
the opportunity to achieve further alignment
in the consideration of both financial and
non-financial risks. In addition to focusing
on the Conduct risk profile of our core
businesses, the Committee has identified
a number of key conduct themes requiring
active management.
66 Barclays PLC Annual Report 2019
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DIRECTORS’ REPORT: BOARD RISK COMMITTEE REPORT The Committee continued to see progress
on SSAs and a number of specific scenarios
were reviewed during the course of the
year covering both Conduct (e.g. mis-selling
of products) and Non-Conduct (e.g. customer
data compromise, supplier financial failure)
scenarios. The SSAs are used to evaluate
operational risk arising from more extreme
but plausible situations and so complement
the RCSA approach, in combination they
enable the Committee to oversee the risk the
Group faces at both ends of the risk likelihood
spectrum. The SSAs are also an important
input to our Operational risk stress testing
and capital frameworks.
Risk appetite and risk models
One of the most important roles of the
Committee is to recommend to the Board
an appropriate risk appetite for the Group.
This represents the amount of risk the Group
is able to take to earn an appropriate return
whilst meeting minimum internal and
regulatory capital requirements in a severe but
plausible stress environment. The Committee
analyses Barclays performance in both its
internally-generated stress tests and those
run externally by such bodies as the BoE, the
European Banking Authority and the Federal
Reserve Board, and following such analysis,
will recommend adjustments to the Group’s
overall risk profile.
For our internal stress test, the Committee
received a detailed briefing on the process
being applied and was satisfied that the
internally-generated scenario was appropriately
calibrated, and also stressed the particular
vulnerabilities of the Group. They were further
satisfied that the Group would meet internal
and regulatory requirements for capital
and liquidity in such a scenario.
The Committee continued to oversee the
improvement of model risk management
in the Group and the ongoing validation of
our models, with specific progress and
methodology enhancements in the model
outputs supporting our stress tests, including
the Internal Capital Adequacy Assessment
Process (ICAAP) and Internal Liquidity
Adequacy Assessment Process (ILAAP).
Our models are the core foundation upon
which the majority of our internal assessment
processes run. The Committee is pleased to
report that progress has continued during
2019 to embed the Model risk management
framework as evidenced by an increasingly
stable model inventory and further
improvements in documentation and control.
However, models remain a key risk area for
the Group, and the Committee is closely
monitoring the development of the
Group’s approach.
Risk function
The Committee is responsible for ensuring the
independence and effectiveness of the Risk
function whose primary role is the oversight
and challenge of risk-taking as the second
line of defence. It accomplishes this by
establishing the policies, limits, rules and
constraints under which first line activities
shall be performed, consistent with the
Group’s risk appetite and through monitoring
the performance of the first line of defence
against these policies, limits and constraints.
The Committee’s responsibilities include
designing a consistent classification of the
risks faced by the Group in order to organise
their management and reporting; designing
and operating the process of setting risk
appetite and material limits for the Group
as a whole and its main entities; setting
or approving strategies for approvals of
transactions, and sanctioning large individual
agreements; and establishing key controls
requirements to which customer-facing areas
of Barclays must adhere in the conduct of
their businesses.
The Committee reviewed the Risk function’s
own assessment of its capability in late 2019
which showed the function continues to meet
regulatory expectations in providing effective
and independent oversight with strong
stewardship and technical competency.
Progress continued in 2019 to ensure systems
and strategic architecture are fit for purpose
with further enhancement on technology
capabilities due from the delivery of further
strategic infrastructure in 2020.
Compliance function
The Compliance function is responsible for
the overall management and oversight of
Conduct and Reputation risk management
practices as the second line of defence.
Compliance participates in the prevention,
detection and management of breaches of
applicable laws, rules, regulations and relevant
procedures and has a key role in helping
Barclays achieve the right conduct outcomes.
The Committee supports the Compliance
function to be independent from operational
functions and have sufficient authority,
stature, resources and access to the
management body.
The Committee monitored the delivery of the
Compliance function’s Annual Plan for 2019
and approved the Compliance function’s
Annual Plan for 2020.
Committee effectiveness
The 2019 Committee effectiveness review
was conducted in line with the Code.
This internal review involved completion
of a tailored questionnaire by Committee
members, senior management and other
stakeholders, including our auditors, building
on the prior year’s externally-facilitated
review. The review is an important part of
the way Barclays monitors and improves
Committee performance and effectiveness,
maximising strengths and highlighting areas
for further development.
The results of the review were positive and
indicated that the Committee is operating
effectively; and that it provides an effective
and broad level of challenge and oversight
of the areas within its remit. During the year,
the Committee took on oversight of Conduct
and Compliance matters, following
re-allocation of the responsibilities from
the Reputation Committee.
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Barclays PLC Annual Report 2019 67
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance Following the consolidation of the
membership of the Committee with the BBPLC
risk committee, coverage of BBPLC matters
within concurrent meetings was considered
appropriate, noting that it will benefit from
further embedment.
Looking ahead
In 2020, the Committee will continue to focus
on the impact of the external environment
on the Group’s risk profile, particularly as the
negotiations on the future trade relationship
with the EU progress and the broader
geopolitical context evolves in the run
up to the US presidential election.
Tim Breedon
Chair, Board Risk Committee
12 February 2020
Committee meetings
During 2019, the Committee met nine times
and the chart opposite shows how it allocated
its time. Two of the meetings were held at
Barclays’ New York offices. Attendance by
members at Committee meetings is shown on
this page. Committee meetings were attended
by representatives from management,
including the Group Chief Executive Officer,
Group Finance Director, Group Chief Internal
Auditor, Group Chief Risk Officer, Group
Treasurer, Group Chief Compliance Officer
and Group General Counsel, as well as
representatives from the businesses and other
representatives from the Risk function. The
lead audit engagement partner of KPMG,
Michelle Hinchliffe, also attended Committee
meetings. The Committee held a number of
separate private sessions with the Group Chief
Risk Officer and the Group Chief Compliance
Officer, which were not attended by
management.
Committee roles
and responsibilities
The Committee is responsible for:
■■ recommending to the Board the Group’s
risk appetite for financial, operational
and legal risk
■■ monitoring financial, operational and legal
risk appetite, including setting limits for
individual types of risk, e.g. credit, market
and funding risk
■■ monitoring the Group’s financial,
operational and legal risk profile
■■ commissioning, receiving and considering
reports on key financial operational and
legal risk issues
■■ providing input from a financial and
operational risk perspective to the
Remuneration Committee to assist in its
deliberations relating to incentive packages
■■ oversight of conduct and compliance.
The Committee’s terms of reference
are available at home.barclays/
corporategovernance
Committee members
Member
Tim Breedon
Mike Ashley
Mary Anne Citrino
Matthew Lester
Diane Schueneman
Reuben Jeffery
(1 Jan 2019 – 2 May 2019)
Meetings attended/
eligible to attend*
9/9
9/9
7/9
9/9
8/9
3/3
* Including one combined meeting of the Risk
Committee and the Reputation Committee.
Committee allocation of time
%
Risk profile/appetite
(including capital
and liquidity
management)
Key risk issues/
monitoring
Internal control/
risk policies
Other (including
remuneration and
governance issues)
Note
Based on scheduled
meetings.
46
56
39
10
5
26
9
9
2019
2018
68 Barclays PLC Annual Report 2019
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DIRECTORS’ REPORT: BOARD RISK COMMITTEE REPORTEffective risk management: designed to identify, assess and control our risks Primary activities
The Committee has diligently discharged its responsibilities in 2019, reviewing Group exposures in the context of the current and emerging
risks facing Barclays. It has sought to promote a strong culture of disciplined risk management.
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
scenarios.
The risk context
to the 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 BoE.
■■ To advise the Board on the
appropriate risk appetite and
tolerance for the principal risks,
including the proposed overall
Group risk appetite and limits.
■■ To discuss and agree stress loss
and mandate and scale limits,
for Credit risk, Market risk and
Treasury and Capital risk.
■■ To consider and approve
internal stress test themes
and the financial constraints
and scenarios for stress testing
risk appetite for the MTP.
■■ To evaluate the results of
the BoE’s annual cyclical stress
test and the BoE’s Biennial
Exploratory Scenario.
■■ To consider the Federal Reserve
Board’s feedback of the Barclays
US LLC’s Comprehensive Capital
Analysis and Review (CCAR)
following the submission of
the CCAR stress test results.
The Committee reviewed and recommended the proposed
risk appetite to the Board for approval. It discussed and
approved the 2019 mandate and scale limits for the Group,
which included changes to A-level stress loss limits.
The Committee reviewed proposed enhancements to the
Group’s stress testing processes and models. It also attended
a stress test briefing providing additional background and
context to aid the review and approval of various stress tests.
The Committee reviewed and approved the scenarios for, and
the financial results of, the MTP internal stress test exercise,
and on the basis that the results remained within the Group’s
risk appetite constraints, subsequently recommended the
MTP to the Board for approval. It gave particular attention
to the severity of the internal stress test scenario, as well as
the application of ‘perfect foresight’ methodology through
the test.
The Committee evaluated the results of the 2018 Annual
Cyclical Scenario, which included increased focus on strategic
management actions, and approved the 2019 submission to
the BoE. Similarly, the Committee approved Barclays’ initial
Biennial Exploratory Scenario submission to the BoE.
The Committee received updates on the 2019 CCAR
submission, and reviewed the feedback from the Federal
Reserve Board following the release of the results.
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Barclays PLC Annual Report 2019 69
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance Area of focus
Matter addressed
Role of the Committee
Conclusion/action taken
The trajectory
to achieving
required
regulatory and
internal targets
and capital and
leverage ratios.
■■ To review, on a regular basis,
capital performance against
plan, tracking the capital
trajectory, any challenges and
opportunities, and regulatory
policy developments.
■■ To assess, on a regular basis,
liquidity performance against
both internal and regulatory
requirements.
■■ To monitor capital and
funding requirements.
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
geopolitical
developments,
as well as
continuing to
monitor the
political and
economic
impact of
Brexit scenarios.
■■ To review and discuss plans
for the impacts of Brexit under
various withdrawal scenarios.
■■ To consider trends in the UK
and US economies.
■■ To assess the transmission
effects of Chinese/US trade
tensions and monitor the
impacts of slowing growth
in China.
■■ To review exposures to
emerging markets as a
result of volatility in these
markets arising from the
impact of global political
and economic events.
The Committee examined and supported the forecast
capital and funding trajectory and the actions identified by
management to manage the Group’s capital position, taking
into account the potential impact of macroeconomic factors.
The Committee considered and approved the Group’s capital
adequacy assessment, together with the methodologies
and results of the reverse stress test for submission of the
2019 ICAAP, as well as approving the Group’s 2019 ILAAP.
Committee members also attended an ICAAP and ILAAP
briefing to further support their review and approval of the
submissions. The Committee evaluated regulatory feedback
on the ICAAP and ILAAP and oversaw the continued
improvement of the processes.
The Committee reviewed and agreed with management’s
approach to an out-of-cycle refresh of the Group’s 2018
ICAAP following an increase to PPI provisioning.
The Committee reviewed and scrutinised the Group Recovery
Plan, which forms a part of the Group’s capital and liquidity
risk management framework, and confirmed that it was fit for
purpose, ahead of its presentation to the Board for approval.
The Committee approved risk appetite constraints in relation
to capital and funding which require capital and liquidity
ratios to remain at a level where all internal and regulatory
requirements, and all obligations as they fall due can be met
under stress.
The Committee monitored the potential risk impacts of
Brexit, giving particular consideration to the impact risk of
an exit without an agreement in place. It received updates on,
and oversaw management’s preparations for, Brexit from a
risk perspective, reviewing in particular any potential impact
to the capital and liquidity positions.
The Committee monitored the Group’s performance in
light of a backdrop of uncertain global political and economic
conditions, with particular focus on Barclays’ European
exposures.
Other key material risk themes discussed and monitored by
the Committee included rising global debt and the response
of Central Banks, the low rates environment and potential
for weakness in US consumer credit.
The Committee received updates on the progress of the
global transition to alternative risk-free reference rates
including on preparations by the LIBOR Transition
Programme to manage and mitigate the financial and
non-financial risks associated with the transition.
70 Barclays PLC Annual Report 2019
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DIRECTORS’ REPORT: BOARD RISK COMMITTEE REPORTEffective risk management: designed to identify, assess and control our risks Area of focus
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; levels of
UK consumer
indebtedness; and
the performance
of the UK and US
cards businesses,
including levels
of impairment.
■■ To assess conditions in the UK
property market and monitor
signs of stress.
■■ To monitor how management
was tracking and responding
to persistent rising levels of
consumer indebtedness,
particularly unsecured credit
in both the UK and US.
■■ To review leveraged finance
portfolios in order to assess
these were within risk appetite
and manageable limits.
■■ To review business development
activities in the CIB.
The Committee continued to iterate the need to ensure
appropriate credit selection and discipline when selecting
business, and the importance of consumer profiling to
achieve improved risk selection. It encouraged management
to consider the impact of all associated risks.
The Committee oversaw improvements to the control
environment in the US cards business, and received updates
on the impacts of US economic conditions on the portfolio.
The Committee was updated on programmes initiated to
assist customers to meet their contractual credit obligations
in the UK including the review of practices in relation to
customer affordability and persistent debt. The Committee
also reviewed the procedures implemented to manage
corporate exposure to UK sectors primarily driven by
consumer spending.
The Committee received an update on the leveraged finance
business, which continues to be one of the largest businesses
within the Investment Bank, noting that portfolios were
within appetite and that management had a strong focus on
regulatory compliance in this area. The Committee also
received updates on the structured finance business, noting
the growth in this activity and the fact that exposures
remained within appetite.
Operational
risk
i.e. costs arising
from human
factors,
inadequate
processes and
systems or
external events.
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.
■■ To track operational risk
key indicators.
The Committee continued to focus its attention on the
financial and capital impacts of operational risk.
The Committee approved and recommended the 2019
Operational Risk Tolerance Statement to the Board, which
included financial loss appetites for fraud and transaction
operations for the first time.
The Committee used SSAs to evaluate operational risks that
might arise in extreme but plausible scenarios. They heard
updates on SSAs, including, those in relation to unauthorised
trading and supplier risk, and requested that SSAs continue
to be presented in 2020, specifically those in relation to data
privacy and misuse.
■■ To consider specific areas of
operational risks, including
fraud, conduct risk, cyber risk,
execution risk, technology and
data, including the controls
that had been put in place
for managing and avoiding
such risks.
■■ To review Barclays’ approach
to scenario analyses as a risk
management tool and assess
a range of SSAs which had been
created to support assessments
and management of tail risk
within the business, stress
testing and risk tolerance.
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Barclays PLC Annual Report 2019 71
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance Area of focus
Matter addressed
Role of the Committee
Conclusion/action taken
Model risk
governance.
■■ To evaluate the appropriateness
of the Model risk management
framework, and monitor
progress on the implementation
of an enhanced modelling
framework, including receiving
updates on findings in relation
to specific modelling processes.
Model risk
i.e. the risk of the
potential adverse
consequences
from financial
assessments or
decisions based
on incorrect or
misused model
outputs and
reports.
Risk
framework and
governance
The frameworks,
policies and tools
in place to
support effective
risk management
and oversight.
■■ To track the progress of
significant risk management
projects, including progress on
achieving compliance with the
Basel Committee for Banking
Supervision (BCBS239) risk data
aggregation principles and the
RCSA process across the Group.
■■ To assess risk management
matters raised by Barclays’
regulators and the actions
being taken by management
to respond.
■■ To review the design 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 2019.
■■ To debate the Risk function’s
view of performance, making
a recommendation to the
Remuneration Committee on
the financial and operational
risk factors to be taken into
account in remuneration
decisions for 2019.
The Committee reviewed and approved the Model Risk
Tolerance Criteria for 2019, which included CCAR models at the
Committee’s request. The Committee maintained oversight of
Model risk and in particular monitored planned improvements
to Barclays’ Model risk management framework and ongoing
upgrade plans. The Committee monitored progress to ensure
that the scope of Model risk management implementation was
expanded to bring into governance non-modelled methods
used in a number of large model frameworks.
The Committee also maintained oversight of the models used
in the 2019 CCAR, ICAAP and ILAAP submissions, and related
stress test processes to ensure they were materially brought
into governance by management. The Committee recognised
the added value that stronger model governance had on the
quality of these submissions.
The Committee sought, and were provided with, assurance from
the Independent Validation Unit of the validation of models in
relation to specific processes, including ICAAP and ILAAP.
The Committee monitored the delivery of an action plan
created by management to review areas identified for potential
improvement identified by the independent assessment of the
design and effectiveness of the Risk function completed in 2018.
The annual update to the ERMF was recommended to the
Board by the Committee. The Committee discussed and
approved an annual refresh of the Principal Risk Frameworks.
The Committee reviewed the results of the 2018 RCSAs
across the Group and recognised that its output was
extremely useful to inform internal processes, but also
to facilitate helpful dialogue with the regulator.
The Committee monitored management’s progress in
achieving compliance with all aspects of BCBS239, and
received updates on the level of implementation throughout
the year recognising the progress made towards achieving
full compliance by the end of 2020.
In relation to climate change, the Committee received an
update on the associated financial and operational risks and
endorsed management’s approach to the management of
those risks, which included the establishment of a Climate
Change Financial Risk and Operational Risk Policy and the
inclusion of climate change in the ERMF and Principal Risk
Frameworks.
The Committee discussed the report of the Group Chief Risk
Officer and considered, and reported to the Remuneration
Committee on, the proposal put forward in relation to the
impact of relevant risk factors in determining 2019
remuneration.
72 Barclays PLC Annual Report 2019
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DIRECTORS’ REPORT: BOARD RISK COMMITTEE REPORTEffective risk management: designed to identify, assess and control our risks Area of focus
Matter addressed
Role of the Committee
Conclusion/action taken
Conduct Risk*
i.e. the risk of
detriment to
customers from
the inappropriate
supply of financial
services.
Conduct robust
reviews of any
current and
emerging risks
arising from the
inappropriate
provision of
financial services,
including
instances of
wilful negligent
misconduct.
■■ To receive updates from
management on Conduct risk
and consider performance
against key Conduct risk
indicators, and the status of
initiatives in place to address
those risks to further strengthen
the culture of the business.
■■ To review the effectiveness of
the Conduct risk framework and
approve any amendments to it.
■■ Reviewed the Compliance
function’s Annual Compliance
Plan.
The Committee accepted oversight of Conduct risk following
the disbanding of the Reputation Committee in September
2019. Since then, the Committee has received a deep dive on
Conduct risk which provided a detailed overview of recent
developments made in the area as well as an update on the
current Conduct risk environment, and proposed areas of
focus for the future.
The Committee approved the revised Conduct risk
management framework which provided greater clarity
on roles and responsibilities in relation to Conduct risk
compared to previous versions. The Committee also
approved the Annual Compliance Plan which contained
key initiatives which would be implemented in 2020.
* The Risk Committee remit extended to include the oversight of Conduct risk and Compliance on 25 September 2019, following the disbanding of the Reputation Committee.
home.barclays/annualreport
Barclays PLC Annual Report 2019 73
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance DIRECTORS’ REPORT
How we comply
The 2018 UK Corporate
Governance Code
As Barclays PLC is listed on the London
Stock Exchange, we apply the principles
and provisions of the Code, as set out
below. A revised version of the Code
was published in 2018, and came into
effect for our financial year beginning
on 1 January 2019 and accordingly,
Barclays PLC has reported against
the requirements of the Code in this
annual report.
A copy of the Code can be found
at frc.org.uk. For the year ended
31 December 2019, and as at the date
of this report, we are pleased to confirm
that we complied in full with its
principles and provisions.
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 80 to 84.
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.
Board leadership and
company purpose
Role of the Board
As highlighted earlier in this report,
our governance is structured to deliver an
effective and entrepreneurial Board which:
■■ is effective in providing challenge, advice
and support to management
■■ provides checks and balances and
encourages constructive challenge
■■ drives informed, collaborative and
accountable decision-making
■■ creates long-term sustainable value for our
shareholders, having regard to our other
stakeholders.
Culture
The Barclays Way sets the framework for
achieving a dynamic and positive culture.
The Board supports The Barclays Way and the
Barclays Purpose and Values. It promotes
personal accountability and leadership and
monitors our culture to satisfy itself as to the
alignment of Barclays’ culture to its purpose,
values and strategy. See pages 34 and 128 for
more details.
Our whistleblowing policy enables employees
to raise any matters of concern anonymously
and is embedded into our business. For more
detail please refer to page 57 of the Audit
Committee Report.
Relations with shareholders
and stakeholders
The Board recognises the importance of
listening to, and understanding the views of,
our shareholders and stakeholders in order
to inform the Board’s decision-making.
Our comprehensive Investor Relations
engagement helps us to understand
investor views about Barclays, which are
communicated regularly to the Board,
and our Chairman engages with shareholders
on governance and related matters.
Our shareholder communication guidelines
are available on our website at
home.barclays/investorrelations. Our
approach to stakeholder engagement is
described on pages 14 to 17.
Institutional investors
Our engagement with institutional investors
increased throughout the year as compared
to prior years.
In 2019, the Directors, in conjunction with the
senior executive team and Investor Relations
colleagues, participated in investor meetings,
seminars and conferences across many
locations, reflecting the diverse nature of
our equity and debt institutional ownership.
We held conference calls/webcasts for our
quarterly results briefings and an in-person
presentation of our 2018 full year results for
both our equity and fixed income investors.
During 2019, discussions with investors
included, but were not limited to:
■■ introducing our new Group Chairman,
Nigel Higgins
■■ addressing shareholder queries relating to
the requisitioned resolution at the AGM to
appoint Mr Edward Bramson as a Director
of the Company
■■ the continued digitisation of Barclays
and the value being created by BX in
improving the efficiency of our cost base
■■ topics including risk management and
steps taken to mitigate the potential
impact from Brexit, as well as ESG factors,
our CIB strategy, and valuation and
capital levels
■■ corporate governance policy and practice.
Private shareholders
During 2019, we continued to communicate
with our private shareholders through our
shareholder mailings and via the information
available on our website and through our
AGM. Shareholders can also choose to sign up
to Shareview so that they receive information
about Barclays PLC and their shareholding
directly by email. We continue to endeavour
to trace shareholders who did not take up
their share entitlement following the Rights
Issue in September 2013, and offer a Share
Dealing Service aimed at shareholders with
relatively small shareholdings for whom it
might otherwise be uneconomical to deal in
Barclays shares. For more detail, please see
pages 338 to 339.
74 Barclays PLC Annual Report 2019
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Colleague engagement
The Group has a long-standing commitment
to the importance and value of colleague
engagement. Our colleagues drive our
success. You can read more about our
commitment to colleagues and our workforce
engagement in the Our people and culture
section on pages 28 to 31.
Conflicts of interest
In accordance with the Companies Act 2006
and the Articles of Association (the Articles),
the Board has the authority to authorise
conflicts of interest, and this ensures that the
influence of third parties does not
compromise the independent judgement of
the Board. 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 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
these authorisations at any time.
Division of responsibilities
Roles on the Board
Executive and Non-Executive Directors
share the same duties. However, in line with
the principles of the Code, a clear division
of responsibilities has been established.
The Chairman is responsible for:
■■ leading the Board and its overall
effectiveness
■■ demonstrating objective judgement
■■ promoting a culture of openness and
constructive challenge and debate
between all Directors
■■ facilitating constructive board relations
and the effective contribution of all
Non-Executive Directors
■■ ensuring Directors receive accurate,
clear and timely information.
Our AGM
The Board and the senior executive team
consider our AGM as a key date for shareholder
engagement, particularly with our private
shareholders. A number of Directors, including
the Chairman, are available for informal
discussion before or after the meeting.
All of the resolutions proposed by the Board at
the 2019 AGM were considered on a poll and
were passed with votes ‘For’ ranging from
70.79% to 99.87% of the total votes cast.
Resolution 24 of the AGM was a requisitioned
resolution submitted by Sherborne Investors
Management LP to appoint Mr Edward
Bramson as a Director of the Company and
the Board recommended shareholders to vote
against it. The resolution was considered on a
poll and was not passed, with votes ‘Against’
being 87.21% of the total votes cast.
At the 2019 AGM, the vote on the 2018
Directors’ Remuneration Report (Resolution 2)
was passed with 70.79% of votes cast in
favour. For further information on Barclays’
response to the significant vote against the
2018 Directors’ Remuneration Report, please
see page 121.
The Board has decided to hold the 2020 AGM
in Glasgow and thereafter expects to alternate
AGM venues between London and a venue
other than London where we have a
significant business or customer presence.
The 2020 AGM will be held on 7 May 2020 at
11:00am at the Scottish Events Campus (SEC)
in Glasgow, Scotland.
Stakeholder engagement
The Board continues to seek to understand
all stakeholders’ views, and the impact of our
behaviour and business on customers and
clients, colleagues, suppliers, communities
and society more broadly. Accordingly, the
Board monitors key indicators across areas
such as culture, citizenship, conduct, and
customer and client satisfaction on an
ongoing basis. In 2019, we built on
conversations started at the AGM to engage
in a continuing dialogue with NGOs and other
interest groups, to improve our understanding
of emerging and existing environmental and
societal topics. We will publish the Barclays
ESG Report in March 2020, which will be
made available on our website at home.
barclays/annualreport.
Throughout 2019, we have engaged with
these stakeholders through participation in
forums and round tables and joined industry,
sector and topic debates and this will continue
in 2020.
For more detail, please see
pages 14 to 17.
Responsibility for the day-to-day management
of the Group is delegated to the Group Chief
Executive Officer who is supported in this role
by the ExCo. Further information on the
membership of the ExCo can be found on
page 47.
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 (to the extent one is
required), SID, Non-Executive Directors,
Executive Directors and Committee Chairs.
Pursuant to the Charter of Expectations,
Non-Executive Directors provide effective
oversight and scrutiny, strategic guidance and
constructive challenge, whilst holding the
Executive Directors to account against their
agreed performance objectives. The Non-
Executive Directors, led by the Nominations
Committee, have primary responsibility
for the appointment and removal of the
Executive Directors.
The SID 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 Charter of Expectations is reviewed
annually to ensure it remains relevant,
and accurately reflects the requirements
of the Code and the Regulations, and
industry best practice. A copy of the
Charter of Expectations can be found at
home.barclays/corporategovernance.
Information provided to the Board
It is the responsibility of the Chairman,
as set out in our Charter of Expectations,
to ensure that Board agendas are focused on
key strategy, risk, performance and other
value creation issues, and that members of
the Board receive timely and high-quality
information to enable them to make sound
decisions and promote the success of the
Company. Working in collaboration with
the Chairman, the Company Secretary is
responsible for ensuring good governance and
information flow, to ensure an effective Board.
Throughout the year, both the Executive
Directors and senior executives keep the
Board informed of key business developments
through regular 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
them to fulfil their obligations as members
of the Board.
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Barclays PLC Annual Report 2019 75
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance DIRECTORS’ REPORT
How we comply
Attendance
Directors are expected to attend every Board meeting. In 2019, attendance was very strong both at scheduled and additional meetings (including
those called at short notice), reflected in the table below. The Chairman also met privately with the Non-Executive Directors ahead of three Board
meetings. If, owing to exceptional circumstances, a Director was not able to attend a Board meeting he or she ensured that his or her views were
made known to the Chairman in advance of the meeting. In addition, the SID met the other Non-Executive Directors individually, without the
Chairman, to appraise the Chairman’s performance, the details of which are included on page 65.
Board attendance in 2019*
Independent/Executive
Scheduled
meetings
eligible to
attend
Scheduled
meetings
attended
Additional
meetings
eligible to
attend
Additional
meetings
attended
%
attendance
Chairman
Nigel Higgins
Executive Directors
Jes Staley
Tushar Morzaria
Non-Executive Directors
Mike Ashley
Tim Breedon
Sir Ian Cheshire
Mary Anne Citrino
Dawn Fitzpatrick
Mary Francis
Crawford Gillies
Matthew Lester
Diane Schueneman
Former Chairman
John McFarlane
Former Directors
Sir Gerry Grimstone
Reuben Jeffery
Dambisa Moyo
Mike Turner
Secretary
Stephen Shapiro
on appointment†
Executive Director
Executive Director
Independent
Independent
Independent
Independent
Independent
Independent
Senior Independent Director
Independent
Independent
on appointment†
Independent
Independent
Independent
Independent
6
7
7
7
7
7
7
3
7
7
7
7
2
1
2
2
2
7
6
7
7
7
7
7
7
3
7
7
7
7
2
1
2
2
2
7
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
0
1
1
1
1
1
1
0
1
1
1
1
1
0
1
1
1
1
0
1
1
1
1
1
1
0
1
1
1
1
1
0
1
1
1
1
* Mohamed A. El-Erian and Brian Gilvary did not join the Board until 2020.
† As required by the Code, the Chairman was independent on appointment.
Board Committee cross-membership
The table below shows the number of cross-memberships of our Non-Executive Directors across our Board Committees as at 31 December 2019.
Board Audit Committee
Board Nominations Committee
Board Remuneration Committee
Board Risk Committee
Board Remuneration Committee
Board Nominations Committee
4
2
4
3
2
1
76 Barclays PLC Annual Report 2019
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Time commitment
Role
Chairman
Senior
Independent
Director
Non-Executive
Director
Committee
Chairs
Expected time
commitment (increased
during the year)
Equivalent to up to 80%
of a full-time position.
As required to fulfil
the role.
35–40 days per year
(membership of one
Board Committee included,
increasing to 50 days a
year if a member of two
Board Committees). This
expectation was increased
from 30 days and 40
days respectively.
At least 80 days per
year (including Non-
Executive Director time
commitment) for Risk and
Audit Committee Chairs,
increased from 60 days,
and at least 60 days for the
Remuneration Committee
Chair.
Where circumstances require it, all Directors
are expected to commit additional time as
necessary to their work on the Board. The
Company Secretary maintains a record of
each Director’s commitments. For the
year ended 31 December 2019 and as at the
date of publication, the Board is satisfied that
none of the Directors is over-committed and
that each of the Directors allocates sufficient
time to his or her role in order to discharge
their responsibilities effectively.
Composition, succession
and evaluation
The Company has a Nominations Committee,
the purpose and activities of which are
contained in the Nominations Committee
Report on pages 61 to 65.
Board appointments
All appointments to the Board and senior
management are viewed through a diversity
lens and are based on merit and objective
criteria, which focus on the skills and
experience required for the Board’s
effectiveness and the delivery of the Group
strategy. Board appointments are made
following a rigorous and transparent process
facilitated by the Nominations Committee,
with the aid of an external search consultancy
firm. You can read more about the work of the
Nominations Committee on pages 61 to 65.
Diversity across the Group remains a key area
of focus. For more detail on our actions to
increase diversity please see pages 28 to 31.
The Nominations Committee regularly
reviews the composition of the Board,
Board Committees and the ExCo. It frequently
considers the skills required for the Board, its
Committees and the ExCo, identifying the core
competencies, diversity and experience
required. This, along with the annual
evaluation, helps to refresh the thinking on
Board, Committee and ExCo composition and
to determine a timeline for proposed new
appointments. For the Board, it is standard
practice to appoint any new Non-Executive
Director or Chairman for an initial three-year
term, subject to annual re-election at the
AGM, which may be extended for up to a
further three-year term. As such, Non-
Executive Directors typically serve up to a total
of six years.
All Directors are subject to election or
re-election each year by shareholders at
the AGM.
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. More information on the 2019
Board evaluation and effectiveness review
can be found on pages 64 to 65.
Composition of the Board
In line with the requirements of the Code,
a majority of the Board is comprised of
independent Non-Executive Directors. We
consider the independence of our Non-
Executive Directors annually, having regard to
the independence criteria set out in the Code.
As part of this process, the Board keeps under
review the length of tenure of all Directors,
which can affect independence. The
independence of Tim Breedon, Mike Ashley
and Crawford Gillies – all of whom have served
(or will have by the time of the 2020 AGM) on
the Board for more than six years – was
subjected to a more rigorous review as
recommended by the Code. The Board
remains satisfied that the lengths of their
tenure have no impact on their respective
levels of independence or the effectiveness of
their contributions. During 2019, the previous
Chairman and the following Non-Executive
Directors stepped down from the Board. None
of these Directors raised any concerns about
the operation of the Board or management:
■■ John McFarlane
■■ Dambisa Moyo
■■ Reuben Jeffery
■■ Mike Turner
■■ Sir Gerry Grimstone
■■ Matthew Lester
The Nominations Committee Report describes
the renewal of the Board in 2019, and steps
taken to further strengthen the Board.
Time commitment
All potential new Directors are asked
to disclose their other significant
commitments. The Nominations Committee
then takes this into account when considering
a proposed appointment to ensure that
Directors can discharge their responsibilities
to Barclays effectively. This means not only
attending and preparing for formal Board
and Committee meetings, but also making
time to understand the business, and to
undertake training. As stated in our Charter
of Expectations, the time commitment is
agreed with each Non-Executive Director on
an individual basis. In addition, all Directors
must seek approval before accepting any
significant new commitment. Set out below
is the average time commitment expected for
the role of Non-Executive Directors and the
other Non-Executive positions on the Board.
Following careful review, the expected time
commitments for Non-Executive Directors,
and for the Chairs of the Audit and Risk
Committees, were increased as set out below.
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Barclays PLC Annual Report 2019 77
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance DIRECTORS’ REPORT
How we comply
Our biographies containing our relevant
skills and experience, Board Committee
memberships and other principal
appointments can be found on pages 44 to
46. Details of changes to the Board in 2019
and year to date are disclosed on pages 48
and 49.
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
and at our AGM.
Induction
On appointment to the Board, all Directors
receive a comprehensive induction that is
tailored to the new Director’s individual
requirements. The induction schedule is
designed to 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.
Following their appointment, Dawn
Fitzpatrick, Mohamed A. El-Erian and Brian
Gilvary are receiving such an induction. They
have met or will meet with the Company
Secretary, the current Non-Executive
Directors, members of the ExCo and certain
other senior executives, as part of
that process.
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 as required. In 2019, Directors
received ongoing training in relation to legal
and regulatory developments in the form of
regular briefings and the Board has enhanced
this proposition with bi-annual training
sessions intended to deepen and broaden the
Board’s understanding in some of the more
complex and technical areas of the business.
Each of these training events typically
comprises four topics.
Audit, Risk and Internal Control
Accountability
Internal governance processes have been
developed to ensure the effective operation of
the individual boards and board committees
of each of BPLC, BBUKPLC and BBPLC
respectively, in recognition of the fact that this
is key to the development and execution of
the Group’s strategy. Generally, there is one set
of rules for the Group. Group-wide
frameworks, policies and standards are
required to be adopted throughout the Group
unless local laws or regulations (or the
ring-fencing obligations applicable to
BBUKPLC) require otherwise, or the ExCo
decides otherwise in a particular instance.
The Company has an Audit Committee and a
Risk Committee. The purposes and activities
of the Audit and Risk Committees are
contained within their respective reports on
pages 52 and 66 respectively.
Internal and external audit functions
The Board together with the Audit Committee
is responsible for ensuring the independence
and effectiveness of the internal and external
audit functions. For this reason, the Audit
Committee members met regularly with the
Group Chief Internal Auditor and external
audit partner, without management present.
The appointment and removal of the Group
Chief Internal Auditor is a matter reserved to
the Audit Committee and the appointment,
and removal, of the external auditors, is a
matter reserved to the Board. Neither task is
delegated to management. This is explained in
detail on pages 52 to 60 of the Audit
Committee report.
Company’s position and prospects
The Board, together with the Audit
Committee, is responsible for ensuring the
integrity of this Annual Report and that the
financial statements as a whole present a
fair, balanced and understandable assessment
of the Group and the Company’s performance,
position and prospects. This is explained in
detail on pages 52 to 58 of the Audit
Committee report.
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.
The Group is committed to operating within a
strong system of internal control. Barclays has
an overarching framework that sets out the
approach of the Group to internal governance,
The Barclays Guide. This establishes the
mechanisms, principles and processes
through which management implements the
strategy set by the Board.
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 FRC. A key
component of The Barclays Guide is the ERMF.
The purpose of the ERMF is to identify and set
minimum requirements in respect of the main
risks to the strategic objectives of the Group.
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 system of risk management and internal
control is set out in the risk frameworks
relating to each of our eight Principal Risks
and the Barclays Control Framework, which
details requirements for the delivery of control
responsibilities. Group-wide frameworks,
policies and standards enable Barclays to
meet regulators’ expectations relating to
internal control and assurance.
78 Barclays PLC Annual Report 2019
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Changes in internal control
over financial reporting
There have been no changes 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 Company has a Remuneration
Committee, the purpose and activities of
which are described in the Remuneration
Committee reports on pages 85 to 123.
The Board has delegated responsibility
for the consideration and approval of
the remuneration arrangements of the
Chairman, the Executive Directors, other
senior executives and certain Group
employees to the Remuneration Committee.
The Remuneration Committee, when
considering the remuneration policies and
practices, seek to ensure that they support the
Company’s strategy and promote the
long-term success of the business and that
they are aligned to the successful delivery of
the Group’s strategy. All executive and senior
management remuneration policies are
developed in accordance with the Group’s
formal and transparent procedures (ensuring
that no Director is involved in deciding his/her
own remuneration outcome) and having
regard to workforce remuneration and related
policies and the alignment of incentives and
rewards with culture. All Remuneration
Committee members demonstrate
independent judgement and discretion when
determining and approving remuneration
outcomes. The Board as a whole, with the
Non-Executive Directors abstaining, considers
annually the fees paid to Non-Executive
Directors. Information on the activities of
the Remuneration Committee in 2019 can
be found in the Remuneration Report on
pages 85 to 123.
Effectiveness of internal controls
Key controls are assessed on a regular basis
for both design and operating effectiveness.
Issues arising out of these assessments,
where appropriate, are reported to the Audit
Committee. You can read more about the
work of the Audit Committee on pages 52
to 60.
The Audit Committee also reviews annually
the risk management and internal control
system, which includes the ERMF. It has
concluded that, throughout the year ended
31 December 2019 and to date, the Group
has operated a sound system of internal
control that provides reasonable assurance
of financial and operational controls and
compliance with laws and regulations. For
more details on that evaluation and its
conclusions please see pages 52 to 60.
The review of the effectiveness of the system
of risk management and internal control is
achieved through reviewing the effectiveness
of the frameworks, principles and processes
contained within The Barclays Guide, the
ERMF and the Barclays Control Framework.
Regular reports are made to the Risk
Committee and the Board covering significant
risks, measurement methodologies and
appropriate risk appetite for the Group.
The Audit Committee oversees the control
environment (and remediation of related
issues), and assesses the adequacy of
credit impairment. Further details of risk
management procedures and potential risk
factors are given in the Risk review and risk
management sections on pages 125 to 203.
Controls over financial reporting
A framework of disclosure controls and
procedures is in place to support the approval
of the financial statements of the Group.
Specific governance committees are
responsible for examining the financial reports
and disclosures to ensure that they have been
subject to adequate verification and comply
with applicable standards and legislation.
These committees report their conclusions
to the Audit Committee, which debates 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 financial statements
of the Group 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 under the supervision
of the principal executive and financial
officers, to provide reasonable assurance
regarding the reliability of financial reporting
and the preparation of financial statements,
in accordance with International Financial
Reporting Standards (IFRS). Internal control
over financial reporting includes policies and
procedures that pertain to the maintenance
of records that, in reasonable detail:
■■ accurately and fairly reflect transactions
and dispositions of assets
■■ provide reasonable assurances that
transactions are recorded as necessary to
permit preparation of financial statements
in accordance with IFRS and that receipts
and expenditures are being made only in
accordance with authorisations of
management and the respective Directors
■■ provide reasonable assurance regarding
prevention or timely detection of
unauthorised acquisition, use or disposition
of assets that could have a material effect
on the financial statements.
Internal control systems, no matter how well
designed, have inherent limitations and may
not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness
to future periods are subject to the risk that
internal controls may become inadequate
because of changes in conditions, or that
the degree of compliance with the policies
or procedures may deteriorate.
Management has assessed the internal
control over financial reporting as of
31 December 2019. In making its assessment,
management utilised the criteria set out in the
2013 COSO framework and concluded that,
based on its assessment, the internal control
over financial reporting was effective as of
31 December 2019.
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 204 to 210.
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Barclays PLC Annual Report 2019 79
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance DIRECTORS’ REPORT
Other statutory information
The Directors present their
report together with the audited
accounts for the year ended
31 December 2019.
Other information that is relevant to the
Directors’ Report, and which is incorporated
by reference into this report, can be located
as follows:
Page
Remuneration policy, including
details of the remuneration of each
Director and Directors’ interests
in shares
Corporate governance report
Risk review
92
43
125
Disclosures required pursuant to Large
and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008
as updated by Companies (Miscellaneous
Reporting) Regulations 2018 can be found
on the following pages:
Page
Engagement with employees
(Sch. 7, para 11 and 11A 2008/2018
Regs.)
Policy concerning the employment
of disabled persons
(Sch. 7, para 10 2008 Regs)
Engagement with suppliers,
customers and others in a
business relationship
(Sch. 7, para 11B 2008/2018 Regs)
Financial instruments
(Sch. 7, para 6 2008 Regs)
Hedge accounting policy
(Sch. 7, para 6 2008 Regs)
Disclosures required pursuant to
Listing Rule 9.8.4R can be found on
the following pages:
Long-term incentive schemes
Waiver of Director emoluments
28-31
31
14-15
and
32-34
269
273
Page
95
123
Allotment for cash of equity securities
309
Waiver of dividends
80
Section 414A of the Companies Act 2006
requires the Directors to present a Strategic
Report in the Annual Report. The information
can be found on pages 1 to 43.
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 Group since the financial year-end can be
found in the Strategic Report and Note 26,
Legal, competition and regulatory matters.
Profit and dividends
Statutory profit after tax for 2019 was
£3,354m (2018: £2,583m). The 2019 full year
dividend of 6.0p per share will be paid on
3 April 2020 to shareholders whose names are
on the Register of Members at the close of
business on 28 February 2020. With the 2019
half year dividend totalling 3.0p per ordinary
share, paid in September 2019, the total
distribution for 2019 is 9.0p (2018: 6.5p) per
ordinary share. The half year and full year
dividends for 2019 amounted to £1,201m
(2018: £768m).
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 Group’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 2019 was
£1.58m (2018: £0.85m).
The Company understands the importance
of delivering attractive cash returns to
shareholders. The Company 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, the Company intends to pay a
progressive ordinary dividend taking into
account these objectives, and the earnings
outlook of the Group. It is also the Board’s
intention to supplement the ordinary
dividends with additional cash returns,
including share buy-backs, 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 44 to 46 and are
incorporated into this report by reference.
Changes to Directors during 2019 are set out
below.
Name
Role
Nigel
Higgins
Non-Executive
Director &
Chairman
John
McFarlane
Chairman
Sir Gerry
Grimstone
Non-Executive
Director
Effective
date of
appointment/
resignation
Appointed
1 March 2019
Resigned
2 May 2019
Resigned
28 February
2019
Reuben
Jeffery
Non-Executive
Director
Resigned
2 May 2019
Dambisa
Moyo
Non-Executive
Director
Resigned
2 May 2019
Mike
Turner
Non-Executive
Director
Resigned
2 May 2019
Dawn
Fitzpatrick
Non-Executive
Director
Appointed
25 September
2019
80 Barclays PLC Annual Report 2019
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Appointment and
retirement of Directors
The appointment and retirement of Directors
is governed by the Company’s Articles of
Association, 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 amongst
the Directors. Any such Director holds office
only until the next AGM and may offer
himself/herself for re-election. Consistent
with the recommendation in the Code, all
Directors will stand for election or re-election
at the 2020 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 2019
for the benefit of the then Directors and, at the
date of this report, are in force for the benefit
of the Directors in relation to certain losses
and liabilities which they may incur (or have
incurred) in connection with their duties,
powers or office. In addition, the Group
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 2019 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
that company’s activities as Trustee of the
Barclays Bank UK Retirement Fund.
Similarly, qualifying pension scheme
indemnities were in force during 2019 for
the benefit of directors of Barclays 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 that 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
2019 totalled $46,000 (2018: $140,000).
Country-by-Country reporting
The Capital Requirements (Country-by-
Country reporting) Regulations 2013
require the Company to publish additional
information in respect of the year ended
31 December 2019. This information is
available on the Barclays website:
home.barclays/annualreport.
Environment
Banks have a direct environmental and social
impact through their operational footprint, as
well as indirectly in the way that they mobilise
capital, advise clients and develop products.
Our aim is to help facilitate the transition
to less carbon intensive sources of energy,
while supporting economic development and
growth in society by helping to ensure the
world’s energy needs are met responsibly.
Barclays invests in improving the energy
efficiency of our operational footprint and
offsets the emissions remaining through the
purchase of carbon credits. In 2019, we set
an 80% reduction target from our combined
scope 1&2 emissions aligned to Science Based
Target methodology by 2025, and committed
to procure 100% renewable electricity for all
operational needs by 2030 with an interim
goal of 90% by 2025. At the end of 2019 we
have achieved a 53% emissions reduction and
are currently procuring 60% of our electricity
through renewable means. We also have a
long-standing commitment to managing the
environmental and social risks associated with
our lending practices, which is embedded into
our risk processes. A governance structure is
in place to facilitate clear dialogue across the
business and with suppliers around issues of
potential environmental and social risk.
We have disclosed global greenhouse gas
emissions (GHG) that we are responsible
for as set out by the Companies Act 2006
(Strategic Report and Directors’ Report)
Regulations 2013. We will provide additional
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
Strategic report as set out on page 35
and in Barclays ESG Report which will
be available on our website at
home.barclays/annualreport in March 2020.
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Barclays PLC Annual Report 2019 81
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance DIRECTORS’ REPORT
Other statutory information
Global Green House Gas (GHG) Emissionsb
Total CO2e (tonnes)
Scope 1 CO2e emissions (tonnes)c
Scope 2 CO2e emissions (tonnes)d
Scope 3 CO2e emissions (tonnes)e
Intensity Ratio
Total Full Time Employees (FTE)
Total CO2e per FTE (tonnes)f
Market-based emissions
Scope 2 CO2e market-based emissions (tonnes)d
Total gross Scope 1 & 2 (market-based) emissions (tonnes)
Energy consumption used to calculate above emissions (kWh)g
Current Reporting Yeara
2019
Previous Reporting Year
2018
Global
Green
House
Gas
Emissions
278,156
24,276
185,743
68,137
UK &
Offshore
146,873
17,760
99,276
29,837
Global
Green
House
Gas
Emissions
298,227
25,868
203,126
69,233
UK &
Offshore
164,197
17,576
116,409
30,212
47,800
3.07
80,800
3.44
49,000
3.35
83,500
3.57
7,464
25,224
439,840,511
110,071
134,347
686,138,107
142,107
159,683
449,546,050
260,731
286,599
698,527,190
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. Details of our approach to assurance over the data will be included in the 2019 Barclays ESG report due be released in March 2020.
b The methodology used to calculate our GHG is the Greenhouse Gas Protocol. A Corporate Accounting and Reporting Standard Revised Edition, defined by the World Resources
Institute/World Business Council for Sustainable Development (ERI/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. We continuously review and update our performance data based on updated carbon emission
factors, improvements in data quality and updates to estimates previously applied. For 2019 we have applied the latest emission factors available at the time of reporting. Where our
performance has changed by more than 1% we have restated the balances and baseline. 2018 emissions have been updated to reflect additional consumption data which was not
available at the time of reporting. The previously reported figure was 292,151 tCO2e.
c Scope 1 covers direct combustion of fuels and company owned vehicles (from UK only, which is the most material contributor). Fugitive emissions reported in Scope 1 cover
emissions from UK, Americas, Asia Pacific, India and Europe.
d Scope 2 covers emissions from electricity and steam purchased for own use. Market-based emissions have been reported for 2018 and 2019. We have used a zero emission factor
where we have renewable contracts already in place in the UK, US and Continental Europe.
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 has been 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.
g Energy consumption data is captured through utility billing; meter reads or estimates. In 2019, we have reduced our energy consumption by 1.8% versus 2018. We continue to work
on improving the operational efficiency of our property portfolio and in 2019 conducted a number of projects globally which have achieved a total energy reduction of 2GWH’s since
implementation, enough energy to boil 13 million kettles. In 2019 we have conducted a number of LED installations across our sites in the USA, India and in the UK, saving 490 MWh.
We also saved 180 MWh of electricity globally through our switch off campaign as part of Earth Hour 2019. Across a number of our large buildings we have conducted improvements
to the building management systems to ensure efficient plant run times and aligning heating and air conditioning to the occupancy of our buildings, saving 1,300 MWh. Globally, we
have conducted end of life asset replacement installing more energy efficient plants in our buildings and achieving a 200MWh saving. Finally, we have continued with Server
Decommissioning in the UK and completed cold aisle containment as well as LED lighting retrofits at our Cranford data centre in the USA saving circa 260MWh.
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 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 11 February
2020 (the latest practicable date for inclusion
in this report). Ordinary shares therefore
represent 100% of the total issued share
capital as at 31 December 2019 and as at
11 February 2020 (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 28 on page 309.
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 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.
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Limitations on foreign shareholders
There are no restrictions imposed by the
Articles 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 2019, 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.
% of total
voting
rights
attaching
to issued
share
capitala
Nature of
holding
(direct or
indirect)
Number of
Barclays Shares
1,039,595,156
6.02 indirect
1,017,455,690
5.87
direct
943,949,089
5.48 indirect
855,511,385
4.96 indirect
Person
interested
BlackRock
Incb
Qatar
Holding
LLCc
Sherborne
Investorsd
The Capital
Group
Companies
Ince
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 Total shown includes 6,950,721 contracts for difference
to which voting rights are attached. Part of the holding
is held as American Depositary Receipts. On 4 February
2020, BlackRock Inc. disclosed by way of a Schedule
13G filed with the Securities Exchange Commission
beneficial ownership of 1,149,011,610 ordinary shares of
the company, representing 6.6% of that class of shares.
c Qatar Holding LLC is wholly-owned by
Qatar Investment Authority.
d We understand from disclosures that the Sherborne
shares are held via three funds ultimately controlled
by Edward Bramson and Stephen Welker in their
capacity as managing directors of Sherborne Investors
Management GP, LLC (Sherborne Management GP),
and Sherborne Investors GP, LLC. Sherborne
Management GP is the general partner of Sherborne
Investors Management LP (Sherborne Investors) which
is the investment manager of each of the three funds
beneficially interested in the Sherborne shares being
Whistle Investors LLC, Whistle Investors II LLC and
Whistle Investors III LLC. Amendment No.2 to a
Schedule 13D filing, filed on 7 November 2019, also
disclosed that certain funded derivative transactions,
which were used to purchase 505,086,254 of such
shares, have been extended to expire on various dates
during the period beginning 14 December 2021
(previously 21 October 2019) and ending 22 July 2022
(previously 16 March 2021).
e The Capital Group Companies Inc (CG) holds its shares
via CG Management companies. Part of the CG holding
is held as American Depositary Receipts.
Transfers
Ordinary shares may be held in either
certificated or uncertificated form.
Certificated ordinary shares may 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
must 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 (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, and in priority to the holders
of the ordinary shares and any other lower
ranking shares in the Company, and pari passu
with any other class of preference shares of
similar ranking, 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.
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Barclays PLC Annual Report 2019 83
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance DIRECTORS’ REPORT
Other statutory information
Between 31 December 2019 and 11 February
2020 (the latest practicable date for inclusion
in this report), the Company was notified that
Capital Group Companies Inc, now holds
863,929,297 Barclays shares, representing
4.99% of the total voting right attached to
the shares and that Norges Bank now holds
525,031,736 Barclays shares, representing
3.03% of the total voting rights attached to
the shares.
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 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 2019 AGM. It will be proposed at the
2020 AGM that the Directors be granted new
authorities to allot and buy back shares.
Repurchase of shares
The Company did not repurchase any of its
ordinary shares during 2019 (2018: none).
As at 11 February 2020 (the latest practicable
date for inclusion in this report) the Company
had an unexpired authority to repurchase
ordinary shares up to a maximum of 1,714m
ordinary shares.
Distributable reserves
As at 31 December 2019, the distributable
reserves of Barclays PLC were £22,457m.
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.
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 Auditors’ report
set out on page 232 to 240, is made with a
view to distinguishing for shareholders the
respective responsibilities of the Directors
and of the auditors in relation to the accounts.
Going concern
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 on a going
concern basis.
In preparing each of the Group and Company
financial statements, the Directors are
required to:
■■ assess the Group and Company’s ability
to continue as a going concern, disclosing,
as applicable, matters related to going
concern
■■ use the going concern basis of accounting
unless they either intend to liquidate the
Group or the Company or to cease
operations, or have no realistic alternative
but to do so.
Preparation of accounts
The Directors are required by the Companies
Act 2006 to prepare Group and Company
accounts 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 accounts
unless they are satisfied that they give a true
and fair view of the state of affairs of the
Group and the Company and of their profit
or loss for that period.
The Directors consider that, in preparing
the financial statements the Group and the
Company have used appropriate accounting
policies, supported by reasonable judgements
and estimates, and that all accounting
standards which they consider to be
applicable have been followed.
The Directors are satisfied that the Annual
Report and Financial Statements, taken as a
whole, are fair, balanced and understandable,
and provide the information necessary for
shareholders to assess the Group and the
Company’s position and performance,
business model and strategy.
Directors are responsible for such internal
control as they determine is necessary to
enable the preparation of financial statements
that are free from material misstatement,
whether due to fraud or error.
Directors’ responsibility statement
The Directors have responsibility for ensuring
that the Company and the 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 to prevent and detect fraud and other
irregularities.
The Directors, whose names and functions are
set out on pages 44 to 46, 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 pages 6 to 42,
which is incorporated in the Directors’
Report, includes a fair review of the
development and performance of the
business and the position of the Company
and the undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks
and uncertainties that they face.
By order of the Board
Stephen Shapiro
Company Secretary
12 February 2020
Registered in England.
Company No. 48839
84 Barclays PLC Annual Report 2019
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REMUNERATION REPORT
Annual statement from the Chairman
of the Board Remuneration Committee
Contents
Annual statement
Group-wide remuneration
philosophy
Remuneration policy for all
employees
Directors’ remuneration policy
Annual report on Directors’
remuneration
Remuneration
Committee members
Page
85
90
92
93
104
Chairman
Crawford Gillies
Members
Tim Breedon
Mary Francis
Dambisa Moyo
(1 January 2019 – 2 May 2019)
Meetings attended/
eligible to attend
5/5
5/5
5/5
2/2
Dear Fellow Shareholders
I am pleased to present the Directors’
Remuneration Report for 2019. The
Committee has had many important matters
to consider during the year. Barclays’ Fair Pay
agenda continues to play an important role in
guiding the Committee in its decision-making,
and we are proud to publish our second Fair
Pay Report. We are also publishing a separate
Pay Gaps Report, so that our pay gaps are
explained as clearly as possible.
As part of this report we are introducing
our new Directors’ remuneration policy (DRP)
for shareholders to consider as part of voting
at the 2020 Annual General Meeting (AGM)
in May. The current DRP was approved
by shareholders in 2017. A summary of the
changes proposed is included in this
statement, and the full policy is detailed
on pages 93 to 103 of this report.
We also met with multiple shareholders
following the voting outcome on the
Directors’ Remuneration Report (Resolution 2)
at the 2019 AGM. The engagement was
constructive, and helped to clarify the reasons
for the outcome of the vote. Following the
engagement, we published a statement
setting out our response to the voting
outcome. The statement is set out on page
121.
Our stakeholders
One of the key principles of our remuneration
philosophy is that stakeholder views are
considered when we design remuneration
policies and determine pay outcomes. In
practice, this means listening to and engaging
with our stakeholders, including our
shareholders, employees and regulators, as
well as considering broader societal factors.
Our Fair Pay agenda helps us to engage with
different stakeholders on pay. Key highlights
for 2019 include the agreement of a new
one-year pay deal with Unite, with an above
inflation budget of 2.75%, and with higher
increases for the most junior entry grades. We
have also started to expand globally our UK
living wage commitment by working with the
Fair Wage Network. Separately, the Committee
has focused on reviewing wider workforce
policies as well as their pay outcomes in more
detail. We have a strong partnership with
Unite in the UK, and actively engage with
Works Councils in other locations.
We discussed our new plans for the DRP with
major shareholders. The discussions were
informative and productive, and we thank our
shareholders for their willingness to engage.
The main change, aligned with our Fair Pay
agenda, is a reduction in pension allowance
for the Executive Directors. This voluntary
change by the Executive Directors is set out
in more detail on page 88.
While we have considered alternative variable
pay structures for the Executive Directors, we
cannot see a superior acceptable approach
and so have decided to retain the existing
structure. We will keep this under review as
market practice develops.
Fair Pay and
Pay Gaps Reports
We have continued to evolve our
Fair Pay agenda during 2019, and
are pleased to publish our second
Fair Pay Report, reporting our
progress against our five themes.
This year we have also published a
Pay Gaps Report, including both our
Gender Pay Gap results and our
Ethnicity Pay Gap disclosure, which
we are making for the second year
on a voluntary basis.
home.barclays/annualreport
Barclays PLC Annual Report 2019 85
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance Annual statement:
Summary of 2019 pay outcomes
Group profit before tax
(excluding L&C)
£6,206m
2018: £5,701m
Group ROTE (excluding L&C)
9.0%
2018: 8.5%
Cost: income ratio (excluding L&C)
63%
2018: 66%
CET1 ratio
13.8%
2018: 13.2%
Group compensation
to income ratioa
33.9%
2018: 34.1%
Group incentive pool
£1,490m
2018: £1,649m
Note
a 2018 Group compensation to income ratio
excludes £140m relating to a GMP charge within
post-retirement benefits.
Using the framework, the annual bonus
outcomes for Jes Staley and Tushar Morzaria
were 83.3% and 84.3% of maximum
respectively. The Committee considered these
outcomes in the context of pay outcomes for
the wider workforce for 2019.
As part of its deliberations, the Committee
noted that the outcomes for the Executive
Directors were increasing at a time when the
overall incentive pool was decreasing. While
recognising that this is not an unusual
outcome given the structured formulaic
approach applied to Executive Directors’
incentives (e.g. in 2018, Executive Directors’
outcomes were down slightly, while the overall
incentive pool was up), the Committee
determined that for 2019 it would be
appropriate to apply a discretionary reduction
to the formulaic Executive Directors’ outcome
in line with the broader pool reduction.
Applying the 10% discretionary reduction
results in a bonus outcome of 75.0% for Jes
Staley and 75.9% for Tushar Morzaria.
Separately, the Committee decided to make an
award under the 2020-2022 Long Term
Incentive Plan (LTIP) cycle to both Executive
Directors with a face value at grant of 120% of
Total fixed pay, reflective of the strong 2019
performance.
The outcome of the 2017-2019 LTIP, which is
due to vest in June 2020, is set out on pages
109 to 111.
Looking ahead
We will continue to focus on our Fair Pay
agenda during 2020, including reviewing
living wages for locations outside of the UK,
US and India. We will also look to further our
work on pay simplification, and will continue
to engage with our shareholders and other
stakeholders on pay.
Crawford Gillies
Chairman,
Board Remuneration Committee
February 2020
Performance and pay
Rewarding sustainable performance is a
crucial aspect of our remuneration philosophy
and so the Committee spent considerable
time understanding performance. While it was
another challenging year with global
macroeconomic and political uncertainties at
play, profit before tax excluding litigation and
conduct (PBT) is up 9% from 2018. Group
return on tangible equity excluding litigation
and conduct (RoTE) is 9.0%, in line with our
target for 2019, and costs are also in line with
our 2019 guidance of less than £13.6bn. Our
capital position is strong, with a CET1 ratio of
13.8%. The Committee recognises that
significant progress on financial performance
has now been achieved over a sustained
period.
Non-financial performance has also been
strong. Customer and client outcomes are
positive, with improvements in Net Promoter
Score® (NPS) for Barclays UK and Barclaycard,
and an increase in the take-up of mobile
banking. Complaints in Barclays UK are down
8% from 2018, though we recognise we need
to go further and faster. Our employee
engagement survey score is down slightly on
2018, driven by various factors including the
tools and resources available to employees.
This is already an area of management focus
and investment for the Group. Considering our
broader impact on society, global carbon
emissions are down by 53%, and we have
helped over 2 million people improve their
employability skills through LifeSkills.
Over the years, we have considered the
appropriate balance between returns to
shareholders and rewarding employees. This
year, the Committee has approved an
incentive pool of £1,490m, down 10% from
2018. After much deliberation, we feel that
this outcome strikes the right balance
between our shareholders and our employees,
enabling us to further improve returns to our
shareholders while also maintaining a
competitive pay opportunity for our wider
workforce.
Executive Director
remuneration outcomes
The annual incentive outcomes for Jes Staley
and Tushar Morzaria are assessed with
reference to a set framework against
pre-determined financial, strategic and
personal measures and objectives. For 2019,
performance against the financial objectives
(representing 60% of the overall measures)
has been very strong, with targets exceeded.
Strategic and personal performance has also
been strong – full details of this assessment
are set out on pages 104 to 109.
86 Barclays PLC Annual Report 2019
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REMUNERATION REPORT Annual
bonus
Jes Staley
£1,647k
75.0% of maximum
2017-2019 Long Term
Incentive Plan (LTIP)
Jes Staley
£1,478k
48.5% of maximum
2019
75.0%
2019
48.5%
Tushar Morzaria
£1,123k
75.9% of maximum
Tushar Morzaria
£942k
48.5% of maximum
2019
75.9%
2019
48.5%
Annual bonus performance
measures (% weighting)
LTIP performance
measures (% weighting)
Financial (60%)
Profit before tax
excluding L&C and material items (50%)a
Financial (70%)
RoTE
excluding material items (25%)
91%
2019
32%
Cost: income ratio
excluding L&C and material items (10%)a
CET1 ratio (25%)
80%
2019
78%
Strategic non-financial (20%)
Cost: income ratio
excluding material items (20%)
70%
0%
2019
Personal objectives (20%)
Jes Staley
Risk Scorecard (15%)
80%
2019
73%
Tushar Morzaria
Strategic non-financial (15%)
85%
2019
67%
2019
2019
2019
2019
2019
Notes
The Committee applied a discretionary reduction of 10%
(in line with the broader pool reduction) to the formulaic
outcome outlined above, which resulted in an overall outcome
of 75.0% for Jes Staley and 75.9% for Tushar Morzaria.
a No material items.
Executive Directors:
remuneration outcomes
Jes Staley
£m
2019
2018
Max
5.93
3.86a,b
8.30
Fixed Pay
Pension and benefits
Annual bonus
LTIP
a Jes Staley was not a participant in the 2016-2018
LTIP cycle; the LTIP figure for 2018 is therefore zero
for him.
b This outcome does not reflect the malus applied
to Jes Staley’s 2016 variable compensation, which
is required to be included in the 2018 single total
figure table.
Tushar Morzaria
£m
2019
2018
Max
3.97
3.47
5.60
Fixed Pay
Pension and benefits
Annual bonus
LTIP
Executive Directors:
share ownership
Actual
Requirement
Jes Staley
Date of appointment: 1 December 2015
£000
9,461
5,492
Tushar Morzaria
Date of appointment: 15 October 2013
£000
6,451
3,700
home.barclays/annualreport
Barclays PLC Annual Report 2019 87
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance
Annual statement:
Key changes to the DRP
Directors’ remuneration policy
Barclays’ policy on remuneration for the Directors was last reviewed in 2016, and approved by 97.91% of the shareholder vote at the
May 2017 AGM.
Overall, the current DRP has served its purpose, enabling the Committee to deploy remuneration in a manner consistent with our philosophy,
while recognising that the Committee is unable to change some aspects of the policy (e.g. because of regulatory requirements).
The review of the DRP by the Committee has provided an opportunity to consider the policy against the Fair Pay agenda and the most recent
guidance from shareholders and proxy agencies.
Following engagement with major shareholders, the Investment Association, ISS and Glass Lewis, the key changes proposed are set out below.
Please see page 93 for the full
Directors’ remuneration policy.
What are the key changes to the DRP?
Key changes
Fixed Pay
In line with the approach outlined at the start of the last DRP, the Committee has reviewed its approach to Fixed Pay for the
Executive Directors. Consequently, having taken into account a number of factors, the following Fixed Pay increases are
proposed:
CEO: An increase of 2.1%, resulting in proposed Fixed Pay of £2,400,000.
Jes Staley joined Barclays in December 2015, and this is the first Fixed Pay increase proposed since that time. His increase
is below the average increase for UK employees, for the 2019/20 annual pay review.
Group Finance Director (GFD): An increase of 4.5%, resulting in proposed Fixed Pay of £1,725,000.
Since the last DRP, Tushar Morzaria has taken on additional responsibilities as a result of our new legal entity structure.
He oversees additional complexities associated with capital management and financial reporting post ring-fencing and
the establishment of the US Intermediate Holding Company. In addition, he has taken accountability for Group Strategy.
This is the first increase for Tushar Morzaria proposed since the last DRP was approved in 2017.
We will continue to deliver Fixed Pay 50% in cash and 50% in shares (delivered quarterly and subject to a holding period
with restrictions lifting over a period of five years). Going forward, it is intended that Fixed Pay for the Executive Directors
is reviewed annually, to align with the employee review cycle, and enhance transparency.
Wider workforce context
The average annual increase for Fixed Pay for UK employees is 2.7%, with differentiation within that based on a number
of factors. We agreed a one-year pay deal with Unite, covering c.45,000 UK employees at junior and middle management
levels with a Fixed Pay increase budget of 2.75%. Over the term of the prior DRP, the average cumulative increase provided
to the UK wider workforce was 10%.
Pension
In our new policy, our Executive Directors have volunteered to reduce their contractual pension allowance to 5% of Fixed
Pay (equivalent to 10% of Fixed cash) – a decrease of £276,000 for the CEO and a decrease of £113,750 for the GFD.
Wider workforce context
For comparison, we operate two pension plans in the UK: Afterwork, a contributory legacy cash balance defined benefit
plan (effective employer contribution cost of 21.2% of salary), and the Barclays Pension Savings Plan, a defined
contribution plan for new joiners (current employer contribution rate of 10% of salary).
The Committee also reviewed the pension arrangements for the wider workforce. The outcome of this review was
to change the employer contribution rate from 10% to 12% for our most junior employees (c.17,500 employees). This will
be implemented during 2020.
In addition, the following actions have already been taken to further improve pensionable pay.
■■ We have rolled all fixed and permanent allowances into pensionable pay.
■■ In BUK, we have transferred a material portion of bonus opportunity into salary for customer-facing staff
(c.19,500 employees), further increasing pensionable pay.
Our policy on pension for any new Executive Director will also be changed to align with the revised approach for existing
Executive Directors.
88 Barclays PLC Annual Report 2019
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REMUNERATION REPORT
What are the key changes to the DRP? continued
Key changes
Variable pay
Going forward we will express the variable pay opportunity as a proportion of Fixed Pay, excluding pension.
This presentational change is required as variable pay opportunity is currently presented as a multiple of Total fixed pay
(i.e. Fixed Pay and pension). This approach was initially adopted to clearly demonstrate compliance with the regulatory 2:1
regime (which classifies pension as fixed remuneration for 2:1 purposes). Without making this change, there would be an
unintended reduction in the maximum variable pay opportunity for the Executive Directors.
This new way of expressing the variable pay opportunity does not affect regulatory compliance.
The maximum variable pay opportunity will therefore be 233% of Fixed Pay for the CEO and 224% for the GFD. The
apportionment between annual bonus and LTIP (currently 40:60) will be maintained, resulting in a maximum annual
bonus opportunity of 93% for the CEO and 90% for the GFD and a maximum LTIP opportunity of 140% and 134%
respectively.
The diagrams below illustrate the maintenance of the variable pay opportunity based on the current level of Fixed Pay.
Jes Staley
Current
approach
Pension £396k
Fixed Pay
£2,350k
200%
Tushar Morzaria
New
approach
Current
approach
New
approach
Max
variable
opportunity
£5,492k
Fixed Pay
£2,350k
233.7%a
Pension £200k
Fixed Pay
£1,650k
200%
Max
variable
opportunity
£3,700k
Fixed Pay
£1,650k
224.2%b
Note
a Rounded down to 233% for the purposes of the DRP.
Note
b Rounded down to 224% for the purposes of the DRP.
Shareholding
requirements
In line with best practice guidance, post-termination shareholding requirements will be increased to align with
requirements during employment. Unvested shares (net of tax) may contribute to meeting this post-termination
requirement provided that there are no outstanding performance conditions.
Shareholding requirements during employment remain unchanged, although going forward we will express them as a
proportion of Fixed Pay only, in line with our approach to variable pay. This also ensures that our shareholding
requirements are not reduced because of the change to pension allowance.
The requirement during employment will therefore be: 233% of Fixed Pay for the CEO and 224% of Fixed Pay for the GFD.
Jes Staley
Current
approach
Pension £396k
Tushar Morzaria
New
approach
Current
approach
New
approach
Fixed Pay
£2,350k
200%
Shareholding
requirement
£5,492k
233.7%a
Fixed Pay
£2,350k
Pension £200k
Fixed Pay
£1,650k
200%
Shareholding
requirement
£3,700k
Fixed Pay
£1,650k
224.2%b
Note
a Rounded down to 233% for the purposes of the DRP.
Note
b Rounded down to 224% for the purposes of the DRP.
Summary
Overall, under the new policy, the net outcome across Fixed Pay and pension is a reduction of £226,000 for the CEO and £38,750 for the GFD.
Maximum total compensation is down 2% for the CEO and up 2% for the GFD.
home.barclays/annualreport
Barclays PLC Annual Report 2019 89
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance Group-wide remuneration philosophy
Remuneration philosophy
While ‘fairness’ has been a consideration and focus when making pay decisions at Barclays for many years, we reported on our approach to pay
fairness for the first time in 2018, when we published our Fair Pay agenda as part of the 2017 Annual Report. Given the importance of our Fair Pay
agenda, we have now formally included ‘fairness’ in our remuneration philosophy. Similarly, we have incorporated our long-held view with regard
to the need to consider the perspectives of all of our stakeholders, not just investors.
To attract and retain the people who can best deliver for our customers and clients, we must pay fairly and appropriately – balancing the interests
of all our stakeholders. Our policies and practices reward sustainable performance in line with our values and risk expectations. They are fair,
transparent and as simple as possible.
This is our remuneration philosophy. It’s how we have continued to make remuneration decisions and set remuneration policies during 2019, and
it applies to all of our employees globally, as well as our Executive Directors.
Barclays’ remuneration philosophy
Attract and retain talent needed
to deliver Barclays’ strategy
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
Align pay with investor and other
stakeholder interests
Remuneration should be designed with appropriate consideration of the views, rights and
interests of stakeholders. This means listening to our shareholders, other investors, regulators,
government, customers and employees and ensuring their views are appropriately considered
in remuneration decision-making
Reward sustainable performance
Sustainable performance means making a positive contribution to stakeholders, in both the
short and longer term, playing a valuable role in society
Support Barclays’ values and culture
Results must be achieved in a manner consistent with our values. Our values and culture
should drive the way that business is conducted
Align with risk appetite, risk exposure
and conduct expectations
Designed to reward employees for achieving results in line with the Bank’s risk appetite and
conduct expectations
Be fair, transparent and as simple
as possible
We are committed to ensuring pay is fair, simple and transparent for all our stakeholders. This
means all employees and stakeholders should understand how we reward our employees and
fairness should be a lens through which we make remuneration decisions
Review of wider workforce policies, practices and pay outcomes
During 2019, the Committee formalised its approach to ensuring consideration of wider workforce interests in remuneration, reviewing both
remuneration policies, practices and pay outcomes for the wider workforce.
Wider workforce remuneration policies were reviewed against the following criteria:
■■ the remuneration philosophy
■■ Barclays’ Fair Pay agenda
■■ Barclays’ purpose, values, conduct expectations and supporting long-term success
■■ Executive Director and senior management remuneration policies.
The policies were found to be well-aligned with the criteria. The remuneration philosophy principles are reflected in the policies, while the themes
of our Fair Pay agenda are embedded in our practices. Barclays’ purpose, values, conduct expectations and long-term success are supported by
our approach to performance management and remuneration. Remuneration is also adjusted to take account of risk and conduct matters.
Wider workforce policies are also well aligned with those for the Executive Directors and senior management, including the setting of Fixed Pay
using market benchmarks and the determination and delivery of annual discretionary incentives. Where differences occur, they are based on
policies that reflect senior management’s ability to influence overall business outcomes (e.g. greater portion of pay delivered through variable pay)
and align senior colleagues more closely with shareholders such as the delivery of some Fixed Pay in shares, delivery of a high proportion of
incentives in shares and the use of LTIP for the Executive Directors.
As outlined earlier, the Executive Directors have voluntarily decided to reduce their contractual pension allowance to 5% of Fixed Pay (equivalent
to 10% of Fixed cash).
The Committee took both top-down and bottom-up approaches to the review of pensions, agreeing to reduce the pension allowance for Executive
Directors, and also reviewing the offering for the wider workforce. As a result, we are enhancing the employer pension contribution for c.17,500 UK
employees, increasing from 10% to 12%, as outlined on page 88.
The Committee also reviewed the 2019 remuneration outcomes for the wider workforce, in particular in comparison with senior management
outcomes. The Committee satisfied itself that there was appropriate alignment. The Committee Chairman provides updates to the Board on these
matters following each meeting.
90 Barclays PLC Annual Report 2019
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REMUNERATION REPORT Be fair, transparent and as simple as possible
Paying fairly and transparently is a key priority at Barclays and updating the Remuneration Philosophy to formalise the link to the Fair Pay agenda
indicates our ongoing commitment to this. The Fair Pay agenda brings together the five themes which explain how we think about fair pay
at Barclays.
Last year we published our first standalone Fair Pay Report, which set out both our achievements and future priorities. In this year’s report,
we provide an update on our progress, and details of our next priorities. We use our Fair Pay Report to engage our employees on pay, explaining
our approach to fair pay, including the alignment of the Executive Directors’ and employee pay.
The infographic below highlights our 2019 achievements. We encourage you to read the full Fair Pay Report and a separate Pay Gaps Report,
setting out our mandatory UK Gender Pay Gap disclosure and voluntary Ethnicity Pay Gap disclosure, which can both be found
on home.barclays/annualreport.
Fair pay for the lowest paid
Equal opportunities to progress
We worked with the Fair Wage Network
to start to implement living wage
benchmarks globally.
In 2020, the employer pension
contribution will increase to 12%
for c. 17,500 employees.
c21k We simplified our pay structures
for c.21,000 employees in the UK,
reclassifying allowances as salary and
increasing pensionable pay.
24/7 We have made plans to provide 24/7
access to a GP via a video or telephone
appointment for all UK employees,
starting later in 2020.
We have invested in data analytics
capabilities to allow leaders to track
female representation in their business,
in particular, the rates of hiring, promotion
and retention.
A dedicated Pay Gaps Report covers our
Gender Pay Gap and voluntary Ethnicity
Pay Gap disclosure.
Parental leave and carers’ policies
externally disclosed for the first time.
25% Our senior leadership is now 25% female,
up 1% from 2018, moving us closer to our
target of 28% by the end of 2021.
Listening to employees
• We agreed a new pay deal with Unite, with a one-year
budget increase of 2.75%, well in excess of inflation.
• We implemented the new Reward strategy in Barclays UK,
which was designed with employee feedback in mind.
• We will check that our approach to Fair Pay is clear
and understandable to employees, through our
regular sentiment tracking and well-established
engagement plans.
“Unite is committed to
fair pay and works in
partnership with Barclays
to negotiate and improve
pay, shape policies and
push for greater equality.”
DOMINIC HOOK, UNITE NATIONAL OFFICER
Alignment of employee and
executive remuneration
Our pay policies are strongly aligned
across the wider workforce, senior
employees and Executive Directors.
The Directors’ Remuneration Policy has
been refreshed taking account of wider
workforce policies.
Equal Pay
We are explicit that pay decisions must
not take into account gender, age,
ethnicity, disability, sexual orientation
or any other protected characteristic.
All grievances raised by employees,
including any issues related to pay,
are investigated.
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Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance Remuneration policy for all employees
As outlined on page 90, Barclays has a clearly articulated remuneration philosophy. This continues to drive our thinking in how we structure and
determine remuneration for all employees from the most senior (e.g. our Executive Directors) to our new apprentices and graduates. This year we
reviewed our remuneration policies and practices for alignment with the Directors’ remuneration policy and approaches for senior management,
the long-term success of Barclays and the Fair Pay agenda.
We continue to ensure that we comply with all prevailing regulation. We identify individuals who may expose Barclays to material risk, and pay
them in a way which encourages alignment of their interests and Barclays. Further information in relation to Material Risk Takers (MRTs) is set out
in Appendix E of the Barclays PLC Pillar 3 Report.
The table below provides a summary of the remuneration approach for employees below the Board, alongside changes made during 2019.
Remuneration features
Changes in 2019
Salary
Salaries reflect individuals’ skills and experience and are reviewed annually.
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.
We have been a real living wage employer in the UK since 2013.
Across the UK, the roll-in of permanent
allowances to salary has increased the
pensionable salary for c.21,000 UK employees.
We have introduced a minimum wage of $15
per hour in the US, and have engaged the Fair
Wage Network to further expand our living
wage coverage to India, covering 93% of our
population globally with ‘living wage’
initiatives.
For c.19,500 customer-facing staff in Barclays
UK, we have rebalanced pay (more Fixed, less
variable) meaning the amount delivered as
pensionable salary has been further increased.
Role Based
Pay (RBP)
A small number of senior employees (c.1% UK employees) receive a class
of Fixed Pay called RBP to recognise the seniority, scale and complexity of
their role. This may change where justified by role or responsibility change
or a change in the appropriate market rate.
No change.
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, health care, life assurance
and Barclays’ share plans as well as other voluntary employee funded
benefits. The cost of providing these benefits is defined and controlled.
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.
All employees are considered, subject to eligibility criteria.
For senior employees, an appropriate proportion of their incentive amount
is deferred to future years. Deferred bonuses are generally delivered in
equal portions as deferred cash and shares. They are subject to either a
three, five or seven-year deferral period (and further holding periods of six
or 12 months for deferrals in shares) in line with regulatory requirements.
Consistent with regulation, the remuneration of MRTs is subject to the 2:1
maximum ratio of variable to fixed remuneration.
The employer pension contribution is set to
increase from 10% to 12% for c.17,500 UK
junior employees, remaining at 10% for more
senior employees.
A new reward strategy for Barclays UK has
aligned a portion of incentives for all
front-office Barclays UK employees, measuring
success against the same customer-focused
metric for all.
Share plans
We encourage wider employee share ownership through the all-employee
share plans.
99% (2018: 98%) of the global employee
population is eligible to participate.
Performance
management
Performance assessment is based on ‘what’ is achieved in relation to
individual, team and business objectives, as well as ‘how’ this is achieved
in the context of Barclays’ values. Both elements are assessed
independently of each other with no requirement to have an overall rating.
This reinforces the equal importance of the ‘what’ and ‘how’.
No change.
Risk and
conduct
Risk and conduct events are taken seriously at Barclays and the Committee
ensures that there are in-year adjustments, malus or clawback applied to
individual remuneration, where appropriate.
For 2019, the impact of collective adjustments
is a reduction of c.£160m.
In addition to individual adjustments, the Committee considers collective
adjustment to the incentive pool for risk and conduct.
More information on our approach to Performance Management, and Risk and Conduct are set out in Appendix E of the Barclays PLC 2019 Pillar 3
Report, which can be found on home.barclays/annualreport.
92 Barclays PLC Annual Report 2019
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REMUNERATION REPORT REMUNERATION REPORT
Directors’ remuneration policy
This section sets out the proposed new Barclays’ forward-looking remuneration policy for Directors, which has evolved from the existing policy
and explains each element of remuneration and how it operates. The policy described in this section is intended to apply for three years
beginning on the date of the 2020 AGM, subject to shareholder approval.
The existing policy can be found on pages 108 to 112 of the 2016 Annual Report or at home.barclays/annualreport
Remuneration policy – Executive Directors
Element and purpose
Operation
Fixed Pay
To reward skills and
experience appropriate for the
scale, complexity and
responsibilities of the role and
to provide the basis for a
competitive remuneration
package
Fixed Pay is determined based on the individual’s role, skills and
experience with reference to market practice and market data (on
which the Committee receives independent advice).
Executive Directors’ total compensation is benchmarked against
comparable roles in the following banks: Bank of America, BNP Paribas,
Citigroup, Credit Suisse, Deutsche Bank, HSBC, JP Morgan Chase & Co,
Lloyds, Morgan Stanley, Standard Chartered and UBS. The Committee
may amend the list of comparator companies to ensure it remains
relevant to Barclays or if circumstances make this necessary (for
example, as a result of takeovers or mergers).
50% of Fixed Pay is delivered in cash (paid monthly), and 50% is
delivered in shares. The shares are delivered quarterly and are subject
to a holding period with restrictions lifting over five years (20% each
year). As the Executive Directors beneficially own the shares, they will
be entitled to any dividends paid on those shares.
Risk and conduct adjustment, malus and clawback provisions do not
apply to Fixed Pay.
Pension
To enable Executive Directors
to build long-term retirement
savings
Executive Directors receive an annual cash allowance in lieu of
participation in a pension arrangement.
Risk and conduct adjustments, malus and clawback provisions do not
apply to pension.
Maximum value and
performance measures
Fixed Pay for Executive Directors
is set within the benchmark range
determined by the Committee
taking into account their skills,
experience and performance.
The Fixed Pay is £2,400,000 for
Jes Staley (Group Chief Executive)
and £1,725,000 for Tushar
Morzaria (Group Finance
Director). Increases will normally
be aligned to the annual increase
for UK employees, and will take
into account changes in
responsibilities and market
conditions. There are no
performance measures.
The maximum annual cash
allowance is 5% of Fixed Pay
(equivalent to 10% of fixed cash).
There are no performance
measures.
Benefits
To provide a competitive
and cost-effective benefits
package appropriate to
the role and location
Executive Directors’ benefits provision includes, but is not restricted to,
private medical cover, annual health check, life and ill health income
protection, and use of a Company vehicle and driver when required for
business purposes (including any tax liabilities that may arise from this
benefit).
The maximum value of benefits
is determined by the nature of
the benefit itself and costs of
provision may depend on external
factors, e.g. insurance costs.
Relocation: If an Executive Director were to relocate to perform their
role, additional support would be provided for a defined and limited
period of time in line with Barclays’ general employee mobility
policy including, but not restricted to, the provision of temporary
accommodation, tax advice, home leave related costs, payment
of removal costs and relocation flights for the Executive Director,
spouse and children. Barclays will pay the Executive Director’s tax
on the relocation costs but will not tax equalise and will also not pay
the tax on any other employment income.
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Element and purpose
Operation
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 holding period increases
alignment with shareholders.
Deferred bonuses
encourage longer term
focus and retention
Determination of annual bonus
Individual bonuses are entirely discretionary and decisions are based on
the Committee’s judgement of Executive Directors’ performance in the
year, measured against Group and personal objectives.
Delivery structure
Annual bonuses are delivered as a combination of cash and shares,
a proportion of which may be deferred and/or subject to a
holding period.
Deferral proportions and vesting profiles will be structured so that,
in combination with any LTIP award, the proportion of variable pay
that is deferred is no less than that required by regulations (currently
60%).
Deferred bonuses are granted by the Committee (or an authorised
sub-committee) at its discretion, subject to the relevant plan rules
as amended from time to time.
The number of deferred bonus shares to be awarded will be based on
a share price discounted by reference to an expected dividend yield
over the vesting period, where dividend equivalents cannot be awarded
due to regulations. In such circumstances, the Committee has
discretion to reduce (not increase) the number of shares that vest
if actual dividends paid over the period are materially lower than the
original dividend assumption.
A notional discount may be applied to the deferred bonus awards for
the purposes of calculating the 2:1 cap to the extent this is permitted
by regulations (currently a discount is permitted on up to 25% of
variable pay where the conditions for applying such a discount
are met).
Timing of receipt
Non-deferred cash components of any bonus are paid following
the performance year to which they relate, normally in March.
Non-deferred share bonuses are also awarded normally in March and
are subject to a holding period (after the payment of tax) in line with
regulations and with release no faster than permitted by regulations
(currently one year).
Deferred share bonuses are structured so that no deferred shares vest
faster than permitted by regulations. Vesting is also subject to the
provisions of the plan rules including employment and the malus and
clawback provisions. Any shares that vest are subject to an additional
holding period (after payment of tax) in line with regulations and with
release no faster than permitted by regulations (currently one year).
Risk and conduct adjustment, malus and clawback provisions apply
to any bonus awards, as set out on page 96.
Maximum value and
performance measures
The maximum annual bonus
opportunity is 93% of Fixed Pay
(cash and shares) for the CEO
and 90% of Fixed Pay (cash and
shares) for the GFD.
The Committee will consider
the previously disclosed financial
and non-financial (including
risk-related measures and
personal objectives) measures
in determining the annual bonus
for the Executive Directors.
Financial factors will guide
at least 60% of the bonus
opportunity.
Any bonus is discretionary and
any amount may be awarded
from zero to the maximum value.
The Committee has the discretion
to vary the measures and their
respective weightings within
each category. The measures
and weightings will be disclosed
annually as part of the annual
report on Directors’
remuneration, at the beginning
of the performance year
(typically February).
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REMUNERATION REPORT Maximum value and
performance measures
The maximum annual LTIP
award for the CEO is 140% of
Fixed Pay (cash and shares) and
134% of Fixed Pay (cash and
shares) for the GFD.
Vesting is dependent on
performance measures
and service.
Forward-looking performance
measures will be based on
financial performance and other
long-term strategic measures.
The Committee has discretion
to change the weightings but
financial measures will be at least
70% of the total opportunity.
Measures and weightings will
be set in advance of each grant.
The threshold and maximum level
of performance for each financial
performance measure will be
disclosed annually as part of
the annual report on Directors’
remuneration. Straight-line
vesting applies between threshold
and maximum for the financial
measures with no more than 25%
vesting at threshold performance.
Element and purpose
Operation
Long Term Incentive Plan
(LTIP) award
To incentivise execution
of Barclays’ strategy over
a multi-year period
Long-term performance
measurement, deferral and
holding periods encourage
a long-term view and align
Executive Directors’ interests
with those of shareholders
Malus and clawback
provisions discourage
excessive risk-taking and
inappropriate behaviours
Determination of LTIP award
LTIP awards are made by the Committee following discussion of
recommendations made by the Chairman (for the Group Chief
Executive’s LTIP award) and by the Group Chief Executive (for other
Executive Directors’ LTIP awards) based on satisfactory performance
over the prior year.
Delivery structure
LTIP awards are granted subject to the plan rules and are satisfied in
Barclays’ shares (although they may be satisfied in other instruments
as may be required by regulation).
LTIP awards are structured so that when combined with the annual
bonus the proportion of variable pay that is deferred is no less than
that required by regulations (currently 60%).
For each award, forward-looking performance measures are set
at grant and there is no retesting allowed of those conditions.
The Committee has, within the parameters set out across, the flexibility
to vary the weighting of performance measures and calibration for
each award prior to its grant.
The Committee has discretion, and in line with the plan rules approved
by shareholders, in exceptional circumstances to amend targets,
measures, or the number of awards if an event happens (for example,
a major transaction) that, in the opinion of the Committee, causes
the original targets or measures to be no longer appropriate or such
adjustment to be reasonable. The Committee also has the discretion
to reduce the vesting of any award, including to nil, if it deems that
the outcome is not consistent with performance delivered.
The number of shares to be awarded will be based on a share price
discounted by reference to an expected dividend yield over the vesting
period, where dividend equivalents cannot be awarded due to
regulations. In such circumstances, the Committee has discretion to
reduce (not increase) the number of shares that vest if actual dividends
paid over the period are materially lower than the original dividend
assumption.
A notional discount may be applied to LTIP awards for the purposes
of calculating the 2:1 cap to the extent this is permitted by regulations
(currently a discount is permitted on up to 25% of variable pay where
the conditions for applying such a discount are met).
Timing of receipt
Barclays LTIP awards are structured so that no award vests before the
third anniversary of grant and an award vests no faster than permitted
by regulations (currently in five equal tranches with the first tranche
vesting on or around the third anniversary of grant and the last tranche
vesting on or around the seventh anniversary of the grant date).
Any shares that vest are subject to an additional holding period
(after payment of tax) in line with regulations, with restrictions lifting
no faster than permitted by regulations (currently one year).
Malus and clawback provisions apply to LTIP awards, as set out on
page 96.
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Element and purpose
Operation
Maximum value and
performance measures
Risk and conduct
adjustment, malus
and clawback
Malus and clawback
provisions discourage
excessive risk-taking and
inappropriate behaviours
All-employee share plans
To provide an opportunity
for Executive Directors to
voluntarily invest in the
Company through UK HMRC
employee tax advantaged
share schemes
Any bonus or LTIP awarded is subject to malus and clawback
provisions.
The malus provisions enable the Committee to reduce the amount
of unvested bonus or LTIP (including to nil) prior to vesting in specified
circumstances, including, but not limited to:
■■ a participant deliberately misleading Barclays, the market and/or
shareholders in relation to the financial performance of the
Barclays Group
■■ a participant causing harm to Barclays’ reputation or where his/her
actions have amounted to misconduct, incompetence or negligence
■■ a material restatement of the financial statements of the Barclays
Group or any subsidiary, or the Group or any business unit suffering
a material downturn in its financial performance
■■ a material failure of risk management in the Barclays Group
■■ a significant deterioration in the financial health of the Barclays
Group.
The clawback provisions enable amounts to be recovered after they
have vested (for a period of seven years from grant/10 years in
circumstances where a relevant investigation is ongoing at the end
of the initial seven-year period) where (i) a participant’s actions or
omissions have amounted to misbehaviour or material error and/or
(ii) Barclays or the relevant business unit has suffered a material failure
of risk management.
Executive Directors are entitled to participate in:
(i) Barclays Sharesave under which they can make monthly savings out
of post-tax pay over a period of three or five years linked to the grant of
an option over Barclays’ shares which can be at a discount of up to
20% on the share price set at the start.
(ii) Barclays Sharepurchase under which they can make contributions
(monthly or lump sum) out of pre-tax pay (if based in the UK) which
are used to acquire Barclays’ shares.
(i) Savings between £5 and the
maximum set by Barclays (which
will be no more than the HMRC
maximum) per month. There are
no performance measures.
(ii) Contributions of between £10
and the maximum set by Barclays
(which will be no more than the
HMRC maximum) per tax year
which Barclays may match up to
HMRC maximum (current match
is £600). There are no
performance measures.
Outside appointments
To encourage
self-development
Executive Directors may accept one Non-Executive Director Board
appointment in another listed company.
Not applicable.
The Chairman’s approval must be sought before accepting an
appointment. Fees may be retained by the Executive Director. Neither
of the Executive Directors currently hold an outside appointment.
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REMUNERATION REPORT Maximum value and
performance measures
Barclays’ shares worth a
minimum of 233% of Fixed Pay
for the CEO and 224% of Fixed
Pay for the GFD must be held
within five years, as well as for
two years post-termination
(or pro rata thereof ) commencing
from last day in office.
Element and purpose
Operation
Shareholding
requirement
To further enhance the
alignment of shareholders’
and Executive Directors’
interests in long-term
value creation
Executive Directors have a contractual obligation to build up a
shareholding equivalent to the maximum variable pay opportunity
within five years from the date of appointment as Executive Director,
i.e.:
■■ Group Chief Executive: 233% of Fixed Pay
■■ Group Finance Director: 224% of Fixed Pay
Executive Directors will have a reasonable period to build up to this
requirement again if it is not met because of a significant share price
depreciation.
Executive Directors also have a contractual obligation to maintain their
shareholding for two years following the last day of active service as
follows:
(i) if the Executive Director has been employed for more than five
years: 233% of Fixed Pay for the CEO and 224% of Fixed Pay for the
GFD; or
(ii) if the Executive Director has been employed for less than five years:
either
(a) grow their holding to the pro-rated requirement if the pro-rated
requirement has not been met. Directors would only be allowed
to sell shares to pay for tax liabilities which crystallise when
deferred awards vest on or after termination; or
(b) if the pro-rated requirement has been exceeded, Executive
Directors would be allowed to sell shares above this requirement
and also sell shares to pay for tax liabilities which crystallise
when deferred awards vest on or after termination.
Shares that count towards the requirement are beneficially owned
shares including any vested share awards subject only to holding
periods (including vested LTIPs, vested deferred share bonuses,
Fixed Pay shares, and any legacy RBP shares). Shares from unvested
deferred share bonuses and unvested LTIPs do not count towards
the requirement during employment, but will count towards
post-termination requirements (net of tax) provided that there
are no remaining untested performance conditions.
Performance measures and targets
The Committee selects financial performance measures which are fundamental to delivery against the Bank’s strategy and are considered to be
the most important financial measures used by the Executive Directors to oversee the direction of the business. The non-financial performance
measures and sources of data are chosen to represent key indicators of sustainable performance, aligned with strategy and culture, that are
robustly monitored and reported on to management. The measures are determined in consultation with major shareholders.
Financial targets are set to be stretching but achievable and are aligned to enhancing shareholder value. In respect of the LTIP, the financial
measures, weightings and targets will be disclosed at the start of the relevant performance period. In respect of the annual bonus, the financial
measures and weightings will be disclosed at the start of the relevant performance year. The Committee is of the opinion that the financial targets
for the annual bonus are commercially sensitive in respect of the Company and that it would be detrimental to disclose details at the start of the
relevant performance year. Performance against the targets will be disclosed at the end of the relevant performance year in that year’s
remuneration report, subject to commercial sensitivity no longer remaining.
The Performance Measurement Framework assesses progress against our key strategic and non-financial goals. The evaluation will focus on key
performance measures with a detailed retrospective disclosure on progress throughout the period against each category, together with
supporting rationale for payments.
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Directors’ remuneration policy
Alignment between the Executive Directors’ remuneration policy and all employees’ policy
of the Group
The structure of remuneration packages for Executive Directors is closely aligned with that for the broader employee population. Employees
receive salary, pension and benefits and are eligible to be considered for a bonus and to participate in all-employee share plans. The broader
employee population typically does not have a contractual limit on the quantum of remuneration and does not receive Role Based Pay (RBP)
which is paid only to some, but not all, MRTs and other senior employees.
As with Executive Directors, variable pay for the broader employee population is performance based. Variable pay for Executive Directors and the
broader employee population is subject to deferral requirements. Executive Directors and other MRTs are subject to deferral at a minimum rate of
40% (for variable pay of less than £500,000) or 60% (for variable pay between £500,000 and £1,000,000). For non-MRTs, bonuses in excess of
£65,000 are currently subject to a graduated level of deferral. The terms of deferred bonus awards for Executive Directors and the wider employee
population are broadly the same, in particular the vesting of all deferred bonuses is subject to service and malus conditions. The broader employee
population does not participate in the Barclays LTIP.
While we have not sought employee views on the DRP, we have considered all employee policies when reviewing the DRP and have explained the
DRP changes in our Fair Pay Report.
How shareholder views are taken into account by the Committee in setting the policy
We recognise that remuneration is an area of particular interest to shareholders and that in setting and considering changes to remuneration, it is
important that we listen to and take into account their views. Accordingly, a series of meetings are held each year with major shareholders and
shareholder representative groups. The Committee Chairman attended these meetings, accompanied by senior Barclays’ employees (including the
Group Reward and Performance Director and the Group Company Secretary).
In developing the new policy, we consulted shareholders during 2019. The Committee notes that shareholder views on some matters are not
always unanimous; however, the interactions are constructive and insightful. The engagement is meaningful and helpful to the Committee in its
work and contributes directly to the decisions made by the Committee.
Discretion
In addition to the various operational discretions that the Committee can exercise in the performance of its duties (including those discretions set
out in the Company’s share plans), the Committee reserves the right to make either minor or administrative amendments to the policy to benefit
its operation or to make more material amendments in order to comply with new laws, regulations and/or regulatory guidance. The Committee
would only exercise this right if it believed it was in the best interests of the Company to do so and where it is not possible, practicable or
proportionate to seek or await shareholder approval in a General Meeting.
Provisions of previous policy which will continue to apply
For the avoidance of doubt, any awards granted under the previous Directors’ remuneration policy which have not yet vested shall continue to be
capable of vesting on their normal vesting schedule.
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REMUNERATION REPORT Executive Directors’ policy on recruitment
Barclays operates in a highly specialised sector and many of its competitors for talent are outside of the UK. The Committee’s approach to
remuneration on recruitment is to pay the amount necessary to attract the best candidates to the role.
Approval of the remuneration packages offered on appointment to any new Executive Director is a specific requirement of the Committee’s Terms
of Reference. The terms of such packages must be approved by the Committee in consultation with the Chairman and (except for the terms of his
own remuneration) the Group Chief Executive.
Any new Executive Director’s package would include the same elements as those of the existing Executive Directors, as shown below.
Element and purpose
Commentary
Maximum value
Fixed Pay
Determined by skills,
experience, market practice,
market conditions and ability
to recruit
Pension
Benefits
Annual bonus
Long Term Incentive Plan
(LTIP) award
Buy-out
As determined by the Committee with reference
to these factors. Fixed Pay will only exceed amounts
paid to current Executive Directors, as considered
reasonable by the Committee, by reference to
these factors.
Once appointed, increases will normally be aligned to
the annual increase for UK employees, and will take
into account changes in responsibilities and market
conditions.
Determined by skills and experience appropriate
for the scale, complexity and responsibilities of the
role, and by market practice, market conditions
and ability to recruit.
In line with financial regulations, Fixed Pay is a
derivative of total compensation. Executive
Directors’ total compensation is benchmarked
against comparable roles in the following banks:
Bank of America, BNP Paribas, Citigroup, Credit
Suisse, Deutsche Bank, HSBC, JP Morgan Chase &
Co, Lloyds, Morgan Stanley, Standard Chartered
and UBS. The Committee may amend the list of
comparator companies to ensure it remains
relevant to Barclays or if circumstances make this
necessary (for example, as a result of takeovers or
mergers).
In line with policy
In line with policy
In line with policy
In line with policy
In line with policy
In line with policy
In line with policy
In line with policy
The value of any buy-out is not included within the
maximum incentive levels above since it relates to a
buy-out of forfeited bonus opportunity or incentive
awards from a previous employer.
The Committee can consider buying out forfeited
bonus opportunity or incentive awards that the
new Executive Director has forfeited as a result
of accepting the appointment with Barclays,
subject to proof of forfeiture where applicable.
As required by the PRA Remuneration Rules,
any award made to compensate for forfeited
remuneration from the new Executive Director’s
previous employment may not be more generous
than, and must mirror as far as possible the
expected value, timing and form of delivery of,
the terms of the forfeited remuneration and must
be in the best long-term interests of Barclays.
Barclays’ deferral policy shall however apply
as a minimum to any buy-out of annual
bonus opportunity.
Where a senior executive is promoted to the Board, his or her existing contractual commitments agreed prior to his or her appointment may
still be honoured in accordance with the terms of the relevant commitment, including vesting of any pre-existing deferred bonus or long-term
incentive awards.
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Executive Directors’ policy on payment for loss of office (including or following a takeover)
The Committee’s approach to payments in the event of termination is to take account of the individual circumstances including the reason for
termination, individual performance, contractual obligations and the terms of the deferred bonus plans and LTIPs in which the Executive Director
participates.
Provisions relating to Executive Directors’ termination
Standard provision
Commentary
Maximum value
Notice periods in
Executive Directors’
service contracts
For existing Executive Directors, 12 months’ notice from the
Company and six months’ notice from the Executive Director.
For new Executive Director hires, six months’ notice from the
Company and six months’ notice from the Executive Director.
Pay during notice
period or payment
in lieu of notice per
service contracts
Fixed Pay payable and continuation of pension allowance and
other contractual benefits while an employee during notice
period.
Treatment of
annual bonus
on termination
No automatic entitlement to bonus on termination, but may be
considered at the Committee’s discretion, pro-rated for service,
and subject to performance measures being met.
No bonus would be payable in the case of gross misconduct
or resignation.
Executive Directors may be required to work
during the notice period or may be placed
on garden leave or, if not required to work
the full notice period, may be provided with
pay in lieu of notice (subject to mitigation
where relevant).
Fixed Pay delivered in cash is payable in
phased instalments (or lump sum) and
subject to mitigation if paid in instalments
and Executive Director obtains alternative
employment during the notice period or while
on garden leave.
Fixed Pay delivered in shares is delivered on
the next quarterly delivery date and is
pro-rated for the number of days from the
start of the relevant quarter to the termination
date. Where Barclays elects to terminate the
employment with immediate effect by making
a payment in lieu of notice, the Executive
Director will not receive any shares that would
otherwise have been payable during the
period for which the payment in lieu is made
(unless required otherwise by regulations or
local law).
In the event of termination for gross
misconduct neither notice nor payment in lieu
of notice is given.
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REMUNERATION REPORT Standard provision
Commentary
Maximum value
In an ‘eligible leaver’ situation, deferred bonus
awards may be considered for release in full
on the scheduled release dates unless the
Committee determines otherwise in
exceptional circumstances. On death, awards
are accelerated and released in full. After
release, the shares are subject to an additional
holding period to the extent required by
regulations (currently a minimum 12-month
holding period applies).
In an ‘eligible leaver’ situation awards may be
considered for release on the scheduled
release date. On death, awards are
accelerated. In both cases, awards are
pro-rated for time (over the whole
performance period, including the assessment
period prior to grant) and performance,
subject to the Committee’s discretion to
determine otherwise, in accordance with the
plan rules, as amended from time to time.
After release, the shares are subject to an
additional holding period to the extent
required by regulations (currently a minimum
12-month holding period applies).
Treatment of
unvested deferred
bonus awards
Treatment of
unvested awards
under the LTIP
In the case of death or if the Executive Director is an ‘eligible
leaver’ the Executive Director would continue to be eligible to be
considered for unvested portions of deferred awards, subject to
the rules of the relevant plan, unless the Committee determines
otherwise in exceptional circumstances. ‘Eligible leaver’ is defined
as leaving due to injury, disability or ill health, retirement,
redundancy, the business or company which employs the
Executive Director ceasing to be part of the Group or the
employer terminating employment, other than in circumstances
which amount to gross misconduct or dismissal for cause.
In addition, the Committee will apply its discretion to treat
resignation on or after the fifth anniversary of the date of grant as
‘eligible leaver’ status. Outstanding deferred bonus awards would
lapse if the Executive Director leaves by reason of resignation
prior to fifth anniversary, is terminated for gross misconduct or
cause, or is otherwise not designated an ‘eligible leaver’.
Deferred awards are subject to malus provisions which enable
the Committee to reduce the vesting level of deferred bonuses
(including to nil) and once vested are subject to clawback
provisions (as described above).
In the event of a takeover or other major corporate event, the
Committee has absolute discretion to determine whether all
outstanding awards would vest early or whether they should
continue in the same or revised form following the change of
control. The Committee may also determine that participants
may exchange existing awards for awards over shares in an
acquiring company with the agreement of that company.
In the case of death or if the Executive Director is an ‘eligible
leaver’ the Executive Director would continue to be entitled to
be considered for an award. ‘Eligible leaver’ is defined as leaving
due to injury, disability or ill health, retirement, redundancy,
the business or company which employs the Executive Director
ceasing to be part of the Group or for any other reason if the
Committee decides at its discretion. In addition, the Committee
will apply its discretion to treat resignation on or after the
fifth anniversary of the date of grant as ‘eligible leaver’ status.
Outstanding unvested awards under the LTIP would lapse if the
Executive Director leaves by reason of resignation prior to fifth
anniversary, is terminated for gross misconduct, or is otherwise
not designated an ‘eligible leaver’.
Awards are subject to malus provisions which enable the
Committee to reduce the vesting level of awards (including to nil)
and once vested, awards are subject to clawback provisions
(as described above).
In the event of a takeover or other major corporate event
(but excluding an internal reorganisation of the Group),
the Committee has absolute discretion to determine whether
all outstanding awards vest subject to the achievement of any
performance conditions. The Committee has discretion to apply
a pro rata reduction to reflect the unexpired part of the vesting
period. The Committee may also determine that participants
may exchange awards for awards over shares in an acquiring
company with the agreement of that company. In the event of
an internal reorganisation, the Committee may determine that
outstanding awards will be exchanged for equivalent awards
in another company.
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Barclays PLC Annual Report 2019 101
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance Directors’ remuneration policy
Standard provision
Commentary
Maximum value
Repatriation
Other
Except in the case of gross misconduct or resignation, where an
Executive Director has been relocated at the commencement of
employment, the Company may pay for the Executive Director’s
repatriation costs in line with Barclays’ general employee mobility
policy including temporary accommodation, payment of removal
costs and relocation flights for the Executive Director, spouse
and children. The Company will pay the Executive Director’s tax
on the relocation costs but will not tax equalise and will also not
pay tax on his or her other income relating to the termination
of employment.
Except in the case of gross misconduct or resignation, the
Company may pay for the Executive Director’s legal fees and tax
advice relating to the termination of employment and provide
outplacement services. The Company may pay the Executive
Director’s tax on these particular costs.
Illustrative scenarios for Executive Directors’ remuneration
The charts below show the potential value of the current Executive Directors’ 2020 total remuneration in three main scenarios: ‘Minimum’
(i.e. Fixed Pay, Pension and benefits), ‘Mid-point’ (i.e. Fixed Pay, Pension, benefits and 50% of the maximum variable pay that may be awarded)
and ‘Maximum’ (i.e. Fixed Pay, Pension, benefits and 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 2020 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.
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. In line with the new reporting requirements, we have provided an indication of the
maximum remuneration receivable, assuming share price appreciation of 50% on the LTIP.
Total remuneration opportunity:
Group Chief Executive
£m
Minimum
Total 2.58
93%
7%
Mid-point
Total 5.37
45%
3%
21%
31%
Total remuneration opportunity:
Group Finance Director
£m
Minimum
Total 1.86
93%
7%
Mid-point
Total 3.80
45%
4%
21%
30%
Maximum
Total 8.17
Maximum
Total 5.73
30%
2%
27%
Maximum with share price increase
24%
2%
23%
41%
34%
30%
3%
27%
40%
Total 9.85
Maximum with share price increase
Total 6.88
17%
25%
2%
22%
0
2
4
6
8
10
0
2
34%
4
17%
6
8
10
Fixed Pay
Pension and benefits
Annual bonus
LTIP
Potential outcome of a 50%
share price increase
Fixed Pay
Pension and benefits
Annual bonus
LTIP
Potential outcome of a 50%
share price increase
102 Barclays PLC Annual Report 2019
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REMUNERATION REPORT Remuneration policy – Non-Executive Directors
Element and purpose
Operation
Maximum value
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
and Non-Executive Directors
Benefits
To provide a competitive and
cost-effective benefits package
appropriate to the role
and location
The Chairman is paid an all-inclusive fee for all Board
responsibilities. The Chairman has a time commitment
equivalent of up to 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 against those for Non-
Executive Directors in companies of similar
size and complexity. Other than in exceptional
circumstances, fees will not increase by more
than 20% above the current fee levels during
this policy period.
Fees are periodically reviewed by the Board.
Some Non-Executive Directors may also receive fees as
directors of subsidiary companies of Barclays PLC. In the
case of certain subsidiary appointments, such additional
remuneration is approved by the Barclays PLC Board
Remuneration Committee.
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 (including settlement of any tax liabilities that may arise from this benefit).
Benefits which are minor in nature and in any event do not exceed a cost of £500 may be provided to
Non-Executive Directors in specific circumstances.
Non-Executive Directors are not eligible to join Barclays’ pension plans.
Expenses
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.
Bonus and share plans
The Chairman may be invited to participate in Sharesave, an HMRC employee tax advantaged share scheme,
due to the level of his time commitment to the role. The Chairman is not eligible to participate in any other
Barclays’ cash, share or long-term incentive plans.
All other Non-Executive Directors are not eligible to participate in Barclays’ cash, share or long-term incentive
plans.
Shareholding requirements
Chairman: £100,000 (Non-Executive Directors: £30,000) gross before deduction of tax and other statutory
deductions 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.
Notice and termination
provisions
Each Non-Executive Director’s appointment is for an initial three-year term, renewable at Barclays’ discretion
for a further term of three years thereafter and subject to annual re-election by shareholders. Non-Executive
Directors appointed beyond six years will be at the discretion of the Board Nominations Committee.
Notice period
Chairman: Six months from the Company (six months from the Chairman).
Termination payment policy
The Chairman’s appointment may be terminated by Barclays on six months’ notice or immediately in
which case six months’ fees are payable in instalments at the times they would have been received had the
appointment continued, but subject to mitigation if he or she were to obtain alternative employment. No
continuing payments of fees (or benefits) are due if a Non-Executive Director is not re-elected by
shareholders at the Barclays AGM.
In accordance with the policy table above, any new Chairman would be paid an all-inclusive fee only and any new Non-Executive Director would
be paid a basic fee for their appointment as a Non-Executive Director, plus fees for their participation on and/or chairing of any Board committees,
time apportioned in the first year as necessary. No sign-on payments are offered to Non-Executive Directors.
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Barclays PLC Annual Report 2019 103
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance REMUNERATION REPORT
Annual report on
Directors’ remuneration
This section explains how our Directors’ remuneration policy was implemented for 2019.
Executive Directors
Executive Directors: Single total figure for 2019 remuneration (audited)
The following table shows a single total figure for 2019 remuneration in respect of qualifying service for each Executive Director together with
comparative figures for 2018.
Jes Staley
Tushar Morzaria
1) Fixed Pay
£000
2) Pension
£000
3) Taxable
benefits
£000
2019
2018
2019
2018
2,350
2,350
1,650
1,650
396
396
200
200
58
55
53
49
Total
Fixed
Pay
£000
2,804
2,801
1,903
1,899
4) Annual
bonus
£000
1,647
1,061
1,123
729
6) Reduction
of unvested
deferred awards
£000
–
(500)d
–
–
5) LTIP
£000
1,478a
–
942a
845b,c
Total
variable
pay
£000
3,125
561
2,065
1,574
Total
£000
5,929
3,362
3,968
3,473
Notes
a The LTIP amounts include a 14% share price depreciation between date of grant and vesting date (based on Q4 2019 average price).
b The LTIP amount includes a 4% share price depreciation between date of grant and vesting date.
c LTIP and dividend equivalent figures for 2018 have been adjusted to reflect the share price on the date of vesting (1.60p) rather than the Q4 2018 average price and additional
dividend paid in February 2019.
d As previously disclosed, malus was applied to Jes Staley’s 2016 variable compensation.
Additional information in respect of each element of pay for the Executive Directors (audited)
1) Fixed Pay
Fixed Pay is delivered 50% in cash and 50% in shares (subject to a five-year holding period lifting pro rata).
2) Pension
Executive Directors are paid cash in lieu of pension contributions. The pension cash allowance in 2019 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 plan.
3) Taxable benefits
Taxable benefits include private medical cover, life assurance, income protection, tax advice, car allowance and the use of a Company vehicle and
driver when required for business purposes.
4) Annual bonus
The bonus amount included in the single total figure is the value awarded or scheduled to be awarded in Q1 following the financial year to which it
relates. 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 2019. Performance against their individual personal
objectives (20% weighting) was assessed on an individual basis.
The approach taken to assessing financial performance against each of the financial measures was based on a straight-line outcome between
20% for threshold performance and 100% applicable to each measure for achievement of maximum performance. A summary of the assessment
is provided in the following table:
Performance measure
Profit before tax excluding L&C and other
material itemsa with CET1 ratio underpin
Cost: income ratio excluding L&C and other
material items
Weighting
50%
10%
Threshold
(20%)
£5.5bn
Maximum
(100%)
£6.3bn
2019
Actual
2019 Outcome
Jes
Staley
Tushar
Morzaria
£6.2bn
45.3%
45.3%
64.6%
62.2%
62.8%
8%
8%
Strategic
Personal
Total
20% Performance against strategic measures, organised around
14%
14%
three main categories: Customers and Clients, Colleagues
and Society.
20% Individual performance against each of the Executive
16%
17%
Directors’ personal objectives assessed by the Committee.
83.3%
84.3%
75.0%
75.9%
Final outcome following Remuneration Committee discretion
Note
a No other material items in 2019.
104 Barclays PLC Annual Report 2019
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REMUNERATION REPORT Strategic (20% weighting)
Progress in relation to each of the strategic measures, organised around three main categories, was assessed by the Committee. Within each of
the three categories, the overall outcome was assessed based on the following scale: 0% to 1%: Behind track on most measures, 1.5% to 3%:
Slightly behind track on most measures, 3.5% to 5.5%: On track or slightly ahead of track for most measures, and 6% or 7%: Ahead of track on
most measures. On this basis, the Committee agreed an overall outcome of 14% out of a maximum of 20%. The detail supporting this assessment
is provided in the table below:
Customers and clients
Measure
Criteria
Performance
Commentary
Net Promoter
Scores® (NPS)
Barclays UK: +18
Barclaycard UK:
+10
Global Markets
ranking
Continued
improvement
Barclays UK: +18 (+17 in 2018 and
+14 in 2017)
■■ Further positive progress made in Barclays UK
■■ Barclaycard UK progressed significantly
Barclaycard UK: +11(+9 in
2017/18)
6th (up from 7th in 2018)
■■ In FY2019, Barclays increased its market share
across Global Markets and gained a rank to #6
globally from #7 in FY18 per Coalition
Institutional Client Analytics (Source: Coalition
FY19 vs FY18 Preliminary Competitor Analysis.
Market share represents Barclays’ share of the
total industry revenue pool)
Outcome
On track
On track
UK and US
investment
banking division
ranking
Complaints
Lending volumes
5th
5th, improving one rank on 2018
■■ Ongoing progress in gaining fee share and
On track
revenue in both Advisory and Equity
Underwriting (Dealogic)
Down 10%
excluding PPI in
Barclays UK
£25.5bn
completed
mortgages
Down 8% excluding PPI in
Barclays UK
■■ Continued reduction in customer pain points,
leading to a significant reduction in complaint
volumes, just below target level
Slightly
behind
track
£25.5bn completed mortgages
(£23bn+ in 2018)
■■ Achieved desired lending volumes despite
On track
challenging environment
Digital
Increase digitally
active customers
Barclays UK: 11.4m digitally active
customers (10.8m in 2018)
■■ The Barclays App is the most used mobile
banking app in UK
Ahead of
track
Consumer, cards and payments:
71% (2018: 66%)
Total Customers and Clients : 4.5%
Colleagues
Measure
Diversity
28% women in
senior leadership
by 2021
25% in 2019, increasing one
percentage point from 2018 and
two points from 2017
Criteria
Performance
Commentary
Outcome
■■ Percentage of women on Board at 33%, in line
On track
with 2020 target
■■ 34% female graduate hires
■■ Awards include The Times Top 50 Employers
for Women, Stonewall Top Global Employer for
LGBT Colleagues and the National Organization
on Disability Leading Disability Employer’s Seal
(US)
■■ ‘Inclusion’ was in the top six terms used by
colleagues to describe Barclays in our Your
View survey
On track
Inclusion
Performance
assessed in light
of broader
context
80% of respondents in our Your
View survey would recommend
Barclays as a good place to work
and 85% said they felt included
in their team
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Barclays PLC Annual Report 2019 105
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance Colleagues
Measure
Criteria
Performance
Commentary
Engagement
Performance
assessed in light
of broader
context
Overall engagement score from
Your View survey 77%, down
2% from 2018
80% would recommend Barclays
as a good place to work
Conduct and
culture
Performance
assessed in light
of broader
context
92% of employees in Your View
survey believe that they and their
teams demonstrate the values
87% of colleagues believe
strongly in the goals and
objectives of Barclays
■■ While a small decline is not what we want to
see, this reduction in a challenging year is
driven by lower scores relating to tools and
resources, an area of significant ongoing focus
and investment
■■ Other indicators were very positive, for
example, 86% of colleagues are proud of our
contribution to the community and society
■■ The ‘supporting well-being’ category also
received positive feedback, with 74% saying
that Barclays supports employee efforts to
enhance their well-being, and 80% that
managers also support these efforts
■■ The top ten terms used by colleagues in the
Your View survey to describe Barclays are all
positive, with the number one term being
‘customer satisfaction’. We also have three new
entries which are ‘inclusion’, ‘personal
accountability’ and ‘ethical’
■■ 89% of employees believe that Barclays is
focused on good customer and client
outcomes
Outcome
Behind track
On track
Total Colleagues : 3.5%
Society
Measure
Environmental
and social
financing
Global carbon
emissions
reduction
LifeSkills
Connect with
Work
Unreasonable
Impact
(partnership
with the
Unreasonable
Group)
Criteria
Performance
Commentary
Outcome
£150bn by 2025
£34.8bn (£28.5bn in 2018)
■■ Good progress toward our environmental
On track
80% reduction by
2025
53% reduction against the 2018
baseline
and social financing commitment
■■ Environmental financing grew by 45%
year-on-year to a total of £7.8bn (2017:
£5.3bn).
■■ Performance driven by the purchase of
renewable energy contracts across our
operations in the UK and Europe and is in line
with our RE100 commitment.
10 million people
upskilled 2018-
2022, 2 million in
2019
250,000 people
placed into work
2018-2022, 62,500
in 2019
Support 250
businesses solving
social and
environmental
challenges
(2016-2022)
2.3 million
■■ Good progress towards 2022 target
66,000 people helped into work
■■ Connect with Work supports people who
face barriers getting into work
124 growth-stage ventures had
joined the programme by end
2019
■■ The programme provides advice and
guidance from a community of world-class
mentors and industry specialists, including
Barclays colleagues.
Ahead of
track
Ahead of
track
Ahead of
track
Ahead of
track
Building Thriving
Local Economies
2022 target of four
pilot studies
Three pilots launched 2018-2019
■■ On track to deliver against 2022 target
On track
Further details on the Performance Measurement Framework can be found on pages 18 and 19.
106 Barclays PLC Annual Report 2019
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Overall (out of a maximum possible 20%) : 14%
Total Society : 6%
Annual report on Directors’ remunerationREMUNERATION REPORT Individual outcomes including assessment of personal objectives
Individual performance against each of the Executive Directors’ personal objectives (20% weighting overall) was assessed by the Committee
(objectives as set out on page 121 of the 2018 Annual Report).
The below summarises their performance against the shared personal objectives:
Shared objectives for Jes Staley and
Tushar Morzaria
Outcomes
Continue to deliver improving shareholder
returns, while retaining the focus on
delivering the 2019 and 2020 external targets
and, specifically, profitability of the CIB
Identify opportunities for further cost
efficiencies, enabling reinvestment into
strategic priorities
Leverage the new Barclays Execution Services
platform to drive our technology agenda
across operating businesses to improve
customer and client experience and enhance
value
■■ Strong financial improvements delivered, 2019 RoTE in line with target of 9.0%, while CET1
increased to 13.8%
■■ Continued progress towards target of cost: income ratio below 60%, reducing three
percentage points over the year from 66% to 63%
■■ Material improvement to CIB profitability, with PBT increasing 15%
■■ Returns to shareholders also significantly increased, with total dividend for 2019 of 9p –
up from 6.5p in 2018
■■ Cost guidance of below £13.6bn delivered in 2019
■■ Significant cost focus, with numerous actions taken to drive efficiencies to create capacity
for reinvestment
■■ Reinvestment has been focused in areas such as our long-term technology strategy (including
our focus on ‘becoming more digital’) as well as material growth initiatives in our businesses
■■ We invested nearly twice as much last year in building the Barclays of the future as the
year before
■■ The Barclays Execution Services platform has helped us to reduce duplication, simplify our
operating environment and re-engineer our processes
■■ Changing our businesses to work in a more efficient way has enabled a renewed focus on our
customers and clients and how we serve them
■■ Examples include Corporate Banking, where over 80% of our corporate clients are using our
single digital platform and our retail businesses, where 91% of customer transactions are now
automated across all our channels
■■ This also extends to investment in continuing to protect our customers’ data, and ensuring
that our businesses are better controlled and more resilient, so things are less likely to go
wrong for our customers and clients
Respond to emerging Brexit decisions,
managing risks appropriately for the Group,
while continuing to support our customers
and clients in the UK
■■ Risks associated with Brexit have been proactively managed, with the Bank fully prepared for
different potential scenarios
■■ Barclays Bank Ireland fully established and prepared to transact across European client base
■■ UK customer and client service maintained throughout Brexit preparatory work
In addition to the shared personal objectives described above, the table below summarises Jes Staley’s performance against the objectives specific
to him.
Jes Staley’s objectives
Outcomes
Oversee the effective management of the risk
and controls agenda, including cyber risks
Further improve customer and client
satisfaction, with continued focus on
complaint reduction
■■ Jes has overseen the effective management of the risk and controls agenda. In particular, his
ongoing focus on the Barclays Improved Controls Enhancement Programme (BICEP) has
delivered significant improvements in the control environment and is close to conclusion
■■ There has also been a dramatic year on year reduction in more impactful controls-related
issues, with a corresponding improvement in performance assessments in internal audits
■■ From a cyber perspective, the result of a recent CapGemini Cyber Security Maturity
Assessment was Barclays’ highest score in four years
■■ Jes has worked with the Board to ensure that focusing on customers and clients is a key
strategic pillar for the Group. This focus has led to a number of process improvements while
designing our business around what our customers want and how they would like to
achieve it
■■ Jes has also personally increased his client engagement substantially compared with 2018
■■ He has continued to personally focus on reducing customer complaints volumes, and has
overseen a further reduction in 2019 of 8% (excluding PPI), on top of the 9% reduction
in 2018
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Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance Jes Staley’s objectives
Outcomes
Develop further a high performing culture in
line with our values, continuing to focus on
employee engagement and the talent pipeline
for Group, Business and Functional Executive
Committees with a particular emphasis on
improving the percentage of women in senior
leadership roles
Effectively manage relationships with key
external stakeholders and society more
broadly
■■ As outlined in the 2018 Fair Pay Report, Jes took accountability for increasing female
representation in January 2019
■■ He also personally launched a set of 2019 specific initiatives aiming to make the biggest
difference most quickly to the proportion of women in senior leadership positions. The
outcome has been an improvement to 25% (2018: 24%), with steady progress made towards
the 2021 target
■■ Significant progress has been made in succession planning and the talent pipeline. There are
now succession plans in place for all businesses and functions. Additionally, Jes restructured
the Group Executive Committee to ensure closer business focus
■■ Employee engagement has remained an important focus of Jes and the Executive Committee.
As noted in the non-financial assessment, despite some very positive indicators the overall
engagement score reduced slightly based primarily on views relating to tools and resources.
Investment in technology is underway to address these issues.
■■ Jes has dedicated a significant amount of time to actively engaging with external stakeholders
including regulators, the Government and investors
■■ The impact Jes has had on society more broadly has also been very positive across a large
number of areas. Examples include Barclays becoming a founding member of the UN
Principles for Responsible Banking, as well as being recognised in Fortune Magazine’s 2018
Change the World List for the first time for positive social impact connected to core business
strategy
■■ Overall, external relationships have been effectively managed by Jes, with positive feedback
received, in particular in relation to the delivery and execution of the Bank’s strategy
Recognising his very strong performance against both his individual and shared personal objectives during 2019, the Committee assessed that
an outcome of 16% out of a maximum of 20% was appropriate.
The Committee reflected on the aggregate outcome for Jes Staley under the formulaic components of the annual bonus framework.
The Committee noted that the formulaic outcome of 83.3% was supported by very strong delivery against both the financial and non-financial
performance measures. In finalising the outcome, the Committee considered all relevant factors, including outcomes for the wider workforce.
It noted that overall bonus pool was down 10%. It also observed that the linkage between Executive Director outcomes and those of the wider
workforce is not always correlated, e.g. in 2018 the executive bonus outcomes were slightly down based on their performance against plan
targets, while the overall bonus pool increased. Recognising the different basis of approaches, the Committee reflected on the appropriate final
bonus outcome for the Executive Directors. It decided that to increase alignment with the wider workforce, a discretionary reduction would be
applied to the formulaic outcomes for both Executive Directors in line with the reduction to the overall incentive pool, i.e. a reduction of 10%.
On that basis the outcome for Jes Staley is a bonus of 75.0% or £1,647,000 (of which 76% will be deferred under the Share Value Plan).
The table below summarises Tushar Morzaria’s performance against the objectives specific to him. In addition to his performance against the
objectives below, Tushar successfully led a significant project with the UK regulators to change the capital calculation basis. Additionally, he led
the successful completion of the external stress tests run by the Bank of England, the European Banking Authority and the Federal Reserve
(CCAR). He also continues to oversee the significant additional reporting, capital and liquidity management requirements under the new
subsidiary entity structure (following the establishment of the ring-fenced bank and the US Intermediate Holding Company). During 2019, Tushar
also became accountable for overseeing the Strategy function, and led the enhanced reviews of strategy by the Board.
Tushar Morzaria’s objectives
Outcomes
Demonstrate effective management of
external relationships, particularly regulators
and investors
■■ Feedback continues to indicate that external relationships have been managed very effectively,
including both with regulators and investors
■■ Tushar has been appointed by the Bank of England to Chair the Sterling Risk Free Reference
Rates Working Group, which demonstrates his ongoing positive external impact
Oversee the effective management of the risk
and controls agenda in Group Finance, Tax
and Treasury
■■ The Risk and Controls agenda in Group Finance, Tax and Treasury remains an area of focus,
with progress made in particular in the Treasury function
■■ While progress has been made, there is still more work to do to ensure our rigorous control
environment enables us to deliver the right outcome for all stakeholders
Progress finance transformation programme
and drive benefits across Group Finance, Tax
and Treasury
■■ The transformation programme is complete, with the new operating model fully embedded
across the whole function, including Group Finance, Tax and Treasury
■■ Benefits have included the creation of additional capacity, enabling enhanced focus on
process and technology improvements, e.g. the financial planning and related stress testing
processes
108 Barclays PLC Annual Report 2019
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Annual report on Directors’ remunerationREMUNERATION REPORT Tushar Morzaria’s objectives
Outcomes
Continue to develop talent base, employee
engagement and gender diversity in Group
Finance, Tax and Treasury
■■ Strong progress has been made on the talent pipeline within the Finance function, combining
strategic external hiring with internal talent development. The leadership succession pipeline
has been significantly enhanced, in particular with female talent
■■ Gender diversity has also been increased outside of the management team, with a 2%
increase in senior women across the function (at 26% before transfers)
■■ Levels of employee engagement have increased by 1% to 76% in the Your View employee
survey
The Committee also recognised Tushar Morzaria’s very strong performance against both his individual and shared personal objectives during
2019, assessing that an outcome of 17% out of a maximum of 20% was appropriate. In aggregate, this results in an overall formulaic outcome for
Tushar of 84.3%. On the same basis as described above, the Committee decided that to increase alignment with the wider workforce, a 10%
reduction would be applied to this outcome. On that basis the outcome for Tushar Morzaria is a bonus 75.9% or £1,123,000 (of which 64% will be
deferred under the Share Value Plan).
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 two equal tranches on the first and
second 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. 2019 bonuses are subject to clawback provisions and, additionally, unvested
deferred 2019 bonuses are subject to malus provisions which enable the Committee to reduce the vesting level of deferred bonuses (including
to nil).
5) LTIP
The LTIP amount included in the single total figure is the value of the amount scheduled to be released in relation to the LTIP award granted in
2017 in respect of the performance period 2017-2019 (by reference to Q4 2019 average share price). Release is dependent on, among other things,
performance over the period from 1 January 2017 to 31 December 2019 with straight-line vesting applied between the threshold and maximum
points. The performance achieved against the performance targets is as follows:
Performance measure Weighting Threshold
Maximum vesting
Actual
% of award
vesting
Average return
on tangible equity
(RoTE) excluding
material itemsa
25%
6.25% of award vests for RoTE
excluding material items of 7.5%
RoTE excluding material items of 9.5% 7.7%
8.1%
CET1 ratio had to remain at or above an acceptable level for any of this element to
vest. As CET1 was at or above the end-state target in each year of the period, this
element will vest as indicated
CET1 ratio as at
31 December 2019
25%
6.25% of award vests for CET1 ratio 100
basis points above the mandatory
distribution restrictions (MDR) hurdle
(12.1% as at 31 December 2019)
Cost: income ratio
excluding material
itemsa
20%
5% of award vests for average cost:
income ratio of 63%
CET1 ratio 200 basis points above the
MDR hurdle
13.8%
19.4%
Average cost: income ratio of 58%
66%
0%
Risk Scorecard
15%
Strategic
non-financial
15%
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
Performance is measured against the strategic non-financial measures. The
Committee determined the percentage of the award that may vest between 0% and
15%. The measures are organised around three equally weighted categories:
Customers and Clients, Colleagues and Society
Total
100%
Final outcome approved by the Remuneration Committee
11%
10%
48.5%
48.5%
Note
a Material items include impairment and loss on sale of BAGL and the impact of the remeasurement of US deferred tax assets in 2017, and litigation and conduct in 2017, 2018 and
2019 (including PPI and settlement with regard to RMBS).
home.barclays/annualreport
Barclays PLC Annual Report 2019 109
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance A summary of the Committee’s assessment against the Risk Scorecard performance measure over the three-year performance period
is provided below. Each category is equally weighted at 5%.
Category
Performance
Outcome
Capital
and
Liquidity
■■ Group CET1% grew from 12.4% to 13.8% over the period, and remained comfortably above the regulatory minimum
4%
throughout
■■ Stress test results showed continued improvement over the period. In 2017, the Bank of England recognised that the
increases in CET1 capital and in Tier 1 leverage ratios over the year were sufficient for it to meet the systemic reference
points in the test. Barclays passed the 2018 and 2019 tests
■■ Our liquidity risk appetite measure and the Liquidity Coverage Ratio remained above targets
Controls
■■ The Barclays Internal Control Enhancement Programme (BICEP) was launched in 2017 to transform the Bank’s
4%
approach to the control environment. As at the end of 2019, 99% of BICEP milestones had been achieved
■■ The Bank has now transitioned to a ‘business as usual’ environment. The Barclays Control Framework has been
implemented, enhancing visibility on controls and risks. Assessments of the control environment have continued to
improve, reflecting continued focus on identifying and resolving control issues
Conduct
■■ Conduct remains a key focus for Barclays. Senior-level conduct breaches are viewed as a proxy for a culture led ‘from
3%
the top’. Breaches remained low throughout the period
■■ Conduct Profiles across the Group showed a positive trend over the period, particularly in Culture and Strategy,
although a need for continued focus remains
Total
15%
11%
A summary of the Committee’s assessment against the strategic non-financial performance measures over the three-year performance period
is provided below. Each category is equally weighted at 5%.
Category
Customers
and clients
Criteria
Performance
Barclays NPS®
Improve
■■ NPS scores improved consistently year on year, with substantial improvement
in particular in Barclays NPS, up from +10 in 2016 to +18 in 2019. Barclaycard
has increased from +9 to +11 over the period
Outcome
3.5%
Improve
■■ Barclays’ Markets ranking improved from 8th globally in 2017 to 6th in 2019
Barclaycard
NPS®
Markets
ranking
Banking UK+US
ranking
Digitally active
customers
Become more
digital
Barclays App
users
YOY complaints
reduction (ex
PPI)
Reduce
complaints
(Source: Coalition FY19 Preliminary Competitor Analytics. Analysis is based on
Barclays’ internal business structure and internal revenues)
■■ Following our shift in strategy in the Investment Bank, Banking rankings initially
dropped one place from 5th to 6th in 2017, before improving to 5th in 2019
(Dealogic)
■■ 20% increase in digitally active users over the period, steady progress each
year.
■■ Barclays App was the most used banking app in the UK and named Best Mobile
Banking app in 2018
■■ Solid progress in Complaints reduction in Barclays UK, averaging 10% pa over
the period, while recognising there is still more to do
Colleagues % of senior
women
2021 target
of 28%
■■ Women in senior leadership increased from 22% in 2016 to 25% in 2019,
2.5%
making steady progress towards the 2021 target of 28%
Engagement
score (Your
View survey)
Maintain
engagement
at healthy
levels
■■ Engagement scores averaged 78% over the period and were consistently above
the 2016 level (75%), despite significant organisational change. More positive
movement would have been desirable. There is ongoing focus and investment
spend to improve technology and processes to support colleagues in their
work
‘Is it safe to
speak up at
Barclays?’
‘Barclays is
focused on
good customer
and client
outcomes’
Improve from
2016 (81%)
■■ Favourable and increasing in 2017 and 2018. The 2019 score was down on
2018. The average over the period was 83%, two points higher than in 2016
Improve from
2016 (83%)
■■ The percentage of employees agreeing that Barclays is focused on achieving
good customer and client outcomes was at or above 88% throughout the
period (above the 2016 level of 83%)
110 Barclays PLC Annual Report 2019
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Annual report on Directors’ remunerationREMUNERATION REPORT Category
Society
Criteria
Performance
Environmental
and social
financing
Facilitate
£150bn over
2018-25
■■ £95bn of environmental and social financing was facilitated over the period (of
which £63bn in 2018 and 2019), exceeding annual targets. We have seen good
growth across our product set in all our businesses including the investment,
corporate and retail bank
People
upskilled
Carbon
emissions
reduction
Upskill
10 million
from 2018-22
30% by 2018
80% by 2025
■■ 6.5 million people were upskilled through our LifeSkills programme (of which
4.6 million in 2018 and 2019), consistently exceeding annual targets and
making good progress towards our aspiration of helping 10 million people by
2022
■■ Carbon emissions reduced by 38% by 2018 (over 2015 baseline), exceeding the
original 2018 target (-30%). Further year-on-year reduction of 53% in 2019,
making very good progress towards the new target of 80% reduction vs 2018
baseline by 2025
Outcome
4%
Total
15%
10%
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 vest at 48.5% of the
maximum number of shares under the total award, to be released in five equal tranches annually, starting from June 2020. After release, the shares
are subject to an additional six-month holding period.
Outstanding LTIP awards
LTIP awards granted during 2018
The performance measures for the awards made under the 2018-2020 LTIP cycle are as follows:
Performance measure Weighting Threshold
50%
10% of award vests for RoTE of 7.75%
(based on an assumed CET1 ratio at the target of c.13.5%)
Maximum vesting
RoTE of 10.25%
Vesting of this element will depend on CET1 levels during the performance period:
■■ if CET1 goes below the MDR hurdle (12.1% as at 31 December 2019) in any year of the 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.
20%
4% of award vests for average cost: income ratio of 62.5% Average cost: income ratio of 58%
Average return
on tangible equity
(RoTE) excluding
material items
Average cost: income
ratio excluding
material items
Risk Scorecard
15%
Strategic
non-financial
15%
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 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: Customers and Clients, Colleagues and Society. Each of the three main categories has equal
weighting. Measures will likely include, but will not be limited to, the following:
■■ Customers and Clients: NPS for consumer businesses, client rankings and market shares for the CIB,
complaints performance and volume of lending provided to customers and clients
■■ Colleagues: Diversity and Inclusion statistics (including women in senior leadership), Employee
sustainable engagement survey scores and conduct and culture measures
■■ Society: Delivery against our Shared Growth Ambition, Colleague engagement in Citizenship activities and
external benchmarks and surveys.
Straight-line vesting applies between the threshold and maximum points in respect of the financial measures.
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Barclays PLC Annual Report 2019 111
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance LTIP awards granted during 2019
An award was made to Jes Staley and Tushar Morzaria on 8 March 2019 under the 2019-2021 LTIP at a share price of £1.2288, which has been
discounted to reflect the absence of dividend equivalents during the vesting period, in accordance with our DRP. This is the price used to calculate
the number of shares below.
% of Total
fixed pay
Number of
shares
Face value
at grant
Performance
period
120%
120%
2,681,618
3,295,200 2019-2021
1,806,625 2,220,000 2019-2021
Jes Staley
Tushar Morzaria
The performance measures for the 2019-2021 LTIP awards are as follows:
Performance measure Weighting Threshold
50%
10% of award vests for RoTE of 8.5%
(based on an assumed CET1 ratio at the target of c.13.5%)
Maximum vesting
RoTE of 10.5%
Vesting of this element will depend on CET1 levels during the performance period:
■■ if CET1 goes below the MDR hurdle (12.1% as at 31 December 2019) in any year of the performance
period, no part of the RoTE element will vest
■■ if CET1 goes below the target (c.13.5%) but remains above the hurdle during the year, the Committee will
exercise its discretion to determine what portion of the RoTE element should vest, based on the causes of
the CET1 reduction.
20%
4% of award vests for cost: income ratio of 60%
Cost: income ratio of 58.5%
Average return on
tangible equity (RoTE)
ex litigation and
conduct and other
material items
2021 Cost: income
ratio ex litigation and
conduct and other
material items
Risk Scorecard
15%
Strategic
non-financial
15%
The Risk Scorecard captures a range of risks and is aligned with the annual incentive risk alignment framework
shared 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 2021 Remuneration Report, subject to commercial sensitivity no longer remaining
The evaluation will focus on key performance measures from the 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: Customers and Clients, Colleagues and Society. Each of the three main categories has equal
weighting. Measures will likely include, but not be limited to, the following:
■■ Customers and clients: 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
■■ Colleagues: Diversity and Inclusion statistics (including women in senior leadership), Employee
sustainable engagement survey scores and conduct and culture measures
■■ Society: Delivery against our Shared Growth Ambition, Colleague engagement in Citizenship activities and
external benchmarks and surveys.
Straight-line vesting applies between the threshold and maximum points in respect of the financial measures.
112 Barclays PLC Annual Report 2019
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Annual report on Directors’ remunerationREMUNERATION REPORT LTIP awards to be granted during 2020
The Committee decided to make an award under the 2020-2022 LTIP cycle to Jes Staley and Tushar Morzaria (based on their performance in 2019)
with a face value at grant of 120% of their respective Total fixed pay at 31 December 2019.
The key objective of the LTIP is to incentivise the Executive Directors to deliver on the long-term strategy. The LTIP should support a competitive
pay package for achieving good performance, while the calibration maximum should incentivise a stretch level of performance without
encouraging excessive risk-taking.
In its deliberations on the threshold and maximums for the LTIP financial measures, the Committee considered progress against the external
targets. The Committee increased the threshold for the RoTE measure from 8.5% to 9%.
The 2020-2022 LTIP award will be subject to the following forward-looking performance measures:
Performance measure Weighting Threshold
50%
10% of award vests for RoTE of 9.0%
(based on an assumed CET1 ratio at the target of c.13.5%)
Maximum vesting
RoTE of 10.5%
Vesting of this element will depend on CET1 levels during the performance period:
■■ in line with regulatory requirements, if the CET1 ratio goes below the MDR hurdle during the performance
period, the Committee will consider what part, if any, of this element should vest.
20%
4% of award vests for cost: income ratio of 60%
Cost: income ratio of 58.5%
Average return
on tangible equity
(RoTE) ex litigation
and conduct and
other material items
Average cost: income
ratio ex litigation and
conduct and other
material items
Risk Scorecard
15%
Strategic non-financial 15%
The Risk Scorecard captures a range of risks and is aligned with the annual incentive risk alignment
framework shared 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 2022 Remuneration Report, subject to commercial sensitivity
no longer remaining
The evaluation will focus on key performance measures from the Performance Measurement Framework,
with a detailed retrospective narrative on progress throughout 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 15%. The measures are organised around three main
categories: Customer and Client, Colleagues and Society. Each of the three main categories has equal
weighting. Measures will likely include, but not be limited to, the following:
■■ Customers and Clients: Improve Net Promoter Scores, Reduce UK customer complaints, Increase digital
engagement, Maintain client rankings and increase market shares within CIB
■■ Colleagues: Continue to increase the % of women in leadership roles, Maintain engagement at healthy
levels, Improve key metrics from 2019, including Enable scores
■■ Society: Grow social and environmental financing, Reduce carbon footprint and increase use of renewable
energy, Continue investing in our communities.
home.barclays/annualreport
Barclays PLC Annual Report 2019 113
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance Executive Directors: Statement of implementation of remuneration policy in 2020
The following chart provides an illustrative indication of how 2020 remuneration will be delivered to the Executive Directors.
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Implementation in 2020
Fixed
Pay
Cash
Shares
Pension Cash in lieu
of pension
Annual
bonus
LTIP
P
e
r
f
o
r
m
a
n
c
e
p
e
r
i
o
d
p
e
r
f
o
r
m
a
n
c
e
p
e
r
i
o
d
P
r
e
l
i
i
m
n
a
r
y
Released in equal tranches over 5 years
Cash
Shares
Holding
period
Shares
Holding
period
Shares
P
e
r
f
o
r
m
a
n
c
e
p
e
r
i
o
d
Holding
period
Shares
Holding
period
Shares
Holding
period
Shares
Holding
period
Shares
Holding
period
Shares
Holding
period
■■ Jes Staley £2,400,000
■■ Tushar Morzaria £1,725,000
■■ Jes Staley £120,000
■■ Tushar Morzaria £86,250
■■ Jes Staley 93%
■■ Tushar Morzaria 90%
■■ Jes Staley 140%
■■ Tushar Morzaria 134%
2020 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)
A performance target
range has been set for
each financial measure
Strategic non-
financial
(20% weighting)
■■ Profit before tax excluding litigation and conduct and other material items (50% weighting).
Payout of this element will depend on the CET1 ratio during the performance year:
– in line with regulatory requirements, if the CET1 ratio goes below the MDR hurdle during the performance year,
the Committee will consider what part if any of this element should pay out.
■■ Cost: income ratio excluding litigation and conduct and other material items (10% weighting).
The evaluation will focus on key performance measures from the Performance Measurement Framework, with a detailed
retrospective narrative on progress throughout 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, Colleagues and
Society. Each of the three main categories has equal weighting. Measures will likely include, but not be limited to, the
following:
■■ Customers and Clients: Improve Net Promoter Scores, Reduce UK customer complaints, Increase digital engagement,
Maintain client rankings and increase market shares within CIB
■■ Colleagues: Continue to increase the % of women in leadership roles, Maintain engagement at healthy levels,
Improve key metrics from 2019, including scores relating to tools and resources
■■ Society: Grow social and environmental financing, Reduce carbon footprint and increase use of renewable energy,
Continue investing in our communities.
114 Barclays PLC Annual Report 2019
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Annual report on Directors’ remunerationREMUNERATION REPORT
Personal
(20% weighting)
The Executive Directors have the following joint personal objectives for 2020:
■■ Continue to deliver improving shareholder returns, including a focus on delivering a RoTE improvement versus 2019
■■ Maintain robust capital ratios across the Group and within the main operating entities
■■ Seek opportunities for further cost efficiencies, enabling reinvestment into strategic priorities and growth initiatives
■■ Continue to drive our technology agenda across the Group, to support improving customer and client experience
■■ Continue to focus on external societal and environmental stewardship
Jes Staley
■■ Oversee the effective management of the risk and controls agenda, including cyber risks
■■ Ensure continued focus on customer and client outcomes, in particular further reductions in complaints
■■ Continue to develop a high-performing culture in line with our values, with a focus on employee engagement,
succession planning, talent and diversity
■■ Drive growth in fee-based, technology-led annuity businesses with lower capital intensity
■■ Effectively manage relationships with all external stakeholders
Tushar Morzaria
■■ Continue to optimise financial management and reporting (particularly through technology) to drive benefits across
the Group
■■ Further improve capital productivity through enhancing capital allocation and the measurement of capital returns
■■ Oversee the effective management of the risk and controls agenda in Group Finance, Strategy, Tax and Treasury
■■ Continue to focus on employee engagement, talent and diversity in Group Finance, Strategy, Tax and Treasury
■■ Effectively manage relationships with key stakeholders including regulators and investors
Additional remuneration disclosures
Group performance graph and Group CEO remuneration
The performance graph below illustrates the performance of Barclays over the financial years from 2009 to 2019 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 100 in 2009
Year ended 31 December
100
100
113
96
110
66
121
101
144
116
145
107
143
99
170
104
191
95
204
90
174
72
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Barclays
FTSE100
The table below presents the single figure for remuneration and annual incentive and long-term incentive plan outcomes for the Group Chief
Executive over the past 10 years.
Year
Group Chief Executive
Single total remuneration
figure CEO
Annual bonus award
as a % of maximum
Long-term incentive plan
vesting as a % of maximum
2010
John
Varley
2011
Robert
Diamond
2012
Robert
Diamond
Antony
Jenkins
2013
Antony
Jenkins
2014
Antony
Jenkins
2015
Antony
Jenkins
John
McFarlane
Jes
Staley
2016
Jes
Staley
2017
Jes
Staley
2018
Jes
Staley
2019
Jes
Staley
4,567 11,070a
1,892
529
1,602
5,467c
3,399
305
277
4,233
3,873
3,362
5,929
100%
80%
0%
0%
0%
57%
48%
N/A
N/A
60% 48.5% 48.3% 75.0%
16% N/Ab
0% N/Ab
N/Ab
30%
39% N/Ab
N/Ab
N/Ab
N/Ab
N/Ab 48.5%
Notes
a This figure includes £5,745k tax equalisation as set out in the 2011 Remuneration Report. Robert Diamond was tax equalised on tax above the UK rate where that could not be offset
by a double tax treaty.
b Not a participant in a long-term incentive award which vested in the period.
c 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.
home.barclays/annualreport
Barclays PLC Annual Report 2019 115
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance Group Chief Executive Pay ratio
The table below shows the ratios of the Group Chief Executive’s total remuneration to the remuneration of UK employees since 2017. The change
in the pay ratios for 2019 is explained in more detail below.
2019
2018
2017
Option
25th percentile
A
A
A
213 x
126 x
153 x
Median
140 x
85 x
106 x
75th percentile
77 x
45 x
54 x
The regulations provide three options which may be used to calculate the pay for the employees at the 25th percentile, median and 75th
percentile. We have used Option A, following guidance issued by some proxy advisers and institutional shareholders. Option A calculates pay for
all employees on the same basis as the single figure for remuneration calculated for Executive Directors. The period for which employee pay has
been calculated under Option A is the 2019 calendar year. The CEO pay ratios published in 2017 and 2018 were calculated using the year-end
salary and bonus for the relevant performance year only. These have now been recalculated using Option A methodology.
The single figure for remuneration for each employee includes earned salary and allowances, annual incentive awarded for the 2019 calendar year,
and an estimate of pension and benefits for 2019. Other elements of pay such as overtime and shift allowances have been excluded on the basis
that they are not comparable with the pay structure for the CEO. The estimate of pension for each employee is based on 10% of salary, given that
this is the percentage currently available to new hires in the UK. The estimate of benefits is based on the cost of core benefits available at each
Corporate Grade, being private medical insurance, income protection and life assurance. The pay for part-time employees has been grossed-up to
one FTE.
The pay at each quartile is set out in the table below:
2019
2018
2017
25th percentile
Median
75th percentile
Total pay
Of which is salary
Total pay
Of which is salary
Total pay
Of which is salary
27,875
26,587
25,341
23,000
21,624
20,223
42,362
39,390
36,568
34,432
31,461
28,978
77,488
74,685
71,628
61,158
57,466
55,000
The pay ratios have increased between 2018 and 2019, due to an increase in the CEO single figure of remuneration, though employee pay at the
LQ, median and UQ has also increased (up 5%, 8% and 4% respectively).
The CEO single figure of remuneration for 2019 is increased significantly, largely as a result of two exceptional circumstances:
■■ due to the long-term nature of LTIP awards, the CEO has not received any vesting LTIP for his first four years of service at Barclays. He will
receive an LTIP payout for the first time in respect of 2019. This forms part of his remuneration package, as approved by shareholders. In 2019
the LTIP vested at 48.5% of maximum. Going forward, any change in LTIP will be as a result of changes in the amount vesting, rather than
entitlement to receive an award
■■ in 2018, there was a reduction of £500,000 applied to the single figure of remuneration as a result of malus adjustment made to the CEO’s
2016 incentive award during 2018. This decreased the CEO pay ratio in 2018.
Excluding these items, the median pay ratios would be 105x in 2019 and 98x in 2018.
The annual bonus for the CEO has also increased during 2019, while the overall incentive pool has decreased. While recognising that this was not
an unusual occurrence, given the structured formulaic approach applied to Executive Directors’ incentives (e.g. in 2018, Executive Directors’
outcomes were down slightly on 2017 and the overall incentive pool was up over the same period), the Remuneration Committee reduced the
formulaic bonus outcome against pre-determined performance measures by 10%.
Over the period 2017 to 2019, median employee pay has gone up from £36,568 in 2017 to £42,362 in 2019, up almost 16%. This is aligned with
the CEO increase over the same period, excluding the LTIP (up 15%).
Barclays remuneration philosophy is set out earlier in this report, and all remuneration decisions for Executive Directors and the wider workforce
are made within this framework. The CEO pay ratio is one of the outcomes of these decisions, which are explained in more detail in the
Chairman’s statement.
116 Barclays PLC Annual Report 2019
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Annual report on Directors’ remunerationREMUNERATION REPORT Total remuneration of the employees in the Barclays Group
The table shows the number of employees in the Barclays Group as at 31 December 2018 and 2019 in bands by reference to total remuneration.
Total remuneration comprises salary, RBP, other allowances, bonus and the value at award of LTIP awards.
Barclays is a global business. Of those employees earning above £1m in total remuneration for 2019 in the table below, 56% are based in the US,
36% in the UK and 8% in the rest of the world.
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
2019
2018
26,706
26,989
18,266
11,428
2,259
884
290
68
23
5
11
2
31,846
25,770
18,478
10,804
2,197
916
306
82
19
6
11
6
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 2018 and 2019 compared
with the percentage change in the average of each of those components of pay for UK based employees.
We have chosen UK based employees as the comparator group as it is the most representative for pay structure comparisons.
2019
Group CEO
Average employee
Fixed Pay
0%
5%
Benefits
5%
0%
Annual
bonus
55%
-12%
The percentage change in the average fixed pay and the average annual bonus for UK employees is impacted by the rebalancing of a proportion of
annual bonus into fixed pay for c.19,500 customer facing staff in Barclays UK. Without this rebalancing, the percentage change is +4% for fixed pay
and -10% for annual bonus. While the average bonus is down by 10%, junior populations have been protected in line with our Fair Pay agenda.
Relative importance of spend on pay
A year on year comparison of Group compensation costs and distributions to shareholders are shown below.
Group compensation costs
£m
Dividends to shareholders
£m
2019
2018
7,343
7,346
2019
2018
1,201
768
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Barclays PLC Annual Report 2019 117
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance Chairman and Non-Executive Directors
Remuneration for Non-Executive Directors reflects their responsibilities, time commitment and the level of fees paid to Non-Executive Directors
of comparable major UK companies.
Non-Executive Directors are reimbursed expenses that are incurred for business reasons. Any tax that arises on these reimbursed expenses
is paid by Barclays.
Chairman and Non-Executive Directors: Single total figure for 2019 fees (audited)
Chairman
Nigel Higginsa
John McFarlaneb
Non-Executive Directors
Mike Ashleyc, d, e
Tim Breedond, e
Sir Ian Cheshire f
Mary Anne Citrinod
Dawn Fitzpatrickd, g
Mary Francisd, h
Crawford Gillies
Sir Gerry Grimstonei
Reuben Jeffery IIIj
Matthew Lesterk
Dambisa Moyoj
Diane Schuenemand, l
Mike Turnerj
Total
Fees
2019
£000
541
272
222
238
480
113
29
155
231
80
41
143
46
377
36
2018
£000
–
800
215
225
480
39
–
154
222
498
120
135
135
337
105
3,004
3,465
Benefits
2019
£000
2018
£000
Total
2019
£000
3
6
–
–
–
–
–
–
–
–
–
–
–
–
–
9
–
1
–
–
–
–
–
–
–
–
–
–
–
–
–
1
544
278
222
238
480
113
29
155
231
80
41
143
46
377
36
2018
£000
–
801
215
225
480
39
–
154
222
498
120
135
135
337
105
3,013
3,466
Notes
a Nigel Higgins joined the Board as a Non-Executive Director on 1 March 2019 and assumed the role of Chairman with effect from the conclusion of the 2019 AGM on 2 May 2019.
Nigel Higgins was paid an annual fee of £80,000 for the period from 1 March 2019 to 2 May 2019, and an all-inclusive annual fee of £800,000 with effect from 3 May 2019. He was
provided with private medical cover and the use of a Company vehicle and driver when required for business purposes during 2019. He does not receive a fee in respect of his role
as Chairman of Barclays Bank PLC.
b John McFarlane retired from the Board with effect from the conclusion of the AGM on 2 May 2019.
c Mike Ashley was a member of the Board Reputation Committee until 25 September 2019, when the Committee was disbanded. His additional fee in respect of the Board
Reputation Committee is therefore pro-rated for the period of his service in 2019.
d These Non-Executive Directors were appointed to the Board of Barclays Bank PLC from 25 September 2019. They receive an additional annual fee of £30,000, paid by Barclays Bank
PLC in respect of this appointment (pro rata for 2019). From 25 September 2019, all Non-Executive Directors of Barclays Bank PLC are also Directors of Barclays PLC. Until that date,
Non-Executive Directors of Barclays Bank PLC served only on that Board and received a base fee of £75,000 in respect of that role.
Sir Ian Cheshire’s figures include fees of £400,000 for his role as Chairman of Barclays Bank UK PLC.
e With effect from 25 September 2019 these Non-Executive Directors received a fee of £20,000 for their services to Barclays Capital Securities Limited (pro rata for 2019).
f
g Dawn Fitzpatrick joined the Board as a Non-Executive Director with effect from 25 September 2019. Her fees are pro-rated for the period of her appointment during 2019.
h Mary Francis was the Chair of the Board Reputation Committee until 25 September 2019, when the Committee was disbanded. Her additional fee in respect of the Board
i
Reputation Committee is therefore pro-rated for the period of her service in 2019.
Sir Gerry Grimstone retired from the Board with effect from 28 February 2019. His fee is pro-rated for the period of his service and includes an annual fee of £400,000 for his role as
the Chairman of Barclays Bank PLC.
These Non-Executive Directors retired from the Board with effect from 2 May 2019.
j
k Matthew Lester retired from the Board with effect from 1 January 2020.
l Diane Schueneman is Chair of Barclays Execution Services Limited (the Group Service Company) and is a member of the Barclays US LLC (the US Intermediate Holding Company)
Board. The 2019 figure includes fees of £70,000 for her role on the Barclays Execution Services Limited Board and $210k (£164k) for her role on the Barclays US LLC Board.
118 Barclays PLC Annual Report 2019
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Annual report on Directors’ remunerationREMUNERATION REPORT Chairman and Non-Executive Directors: Statement of implementation of remuneration policy in 2020
Fees for the Chairman and Non-Executive Directors for 2020 are shown below. The Board approved increases to the fees for Board members, the
Chair of the Audit and Risk Committees and the members of the Board Risk Committee to take effect from1 January 2020. These increases were
made in line with policy and following careful review of time spent on Board and Committee matters, to reflect increased time commitment and
responsibilities. The basic Board fee was last revised in 2011.
Chairmana
Board member
Additional responsibilities
Senior Independent Director
Chairman of Board Audit or Risk Committee
Chairman of Board Remuneration Committee
Chairman of Board Reputation Committee
Membership of Board Audit or Remuneration Committee
Membership of Board Risk Committee
Membership of Board Nominations Committee
Membership of Board Reputation Committee
Notes
a The Chairman does not receive any fees in addition to the Chairman fees.
1 January 2020
£000
1 January 2019
£000
800
90
36
80
70
–
30
30
15
–
800
80
36
70
70
50
30
25
15
25
Directors’ shareholdings and share interests
Interests in Barclays PLC shares (audited)
The table below shows shares owned beneficially by all the Directors (including any shares owned beneficially by their connected persons) 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
Nigel Higgins
John McFarlane
Non-Executive Directors
Mike Ashley
Tim Breedon
Sir Ian Cheshire
Mary Anne Citrino
Dawn Fitzpatrick
Mary Francis
Crawford Gillies
Sir Gerry Grimstone
Reuben Jeffery III
Matthew Lester
Dambisa Moyo
Diane Schueneman
Mike Turner
Owned
outright as at
31 December 2019
(or date of
retirement
from the Board, if
earlier)
Unvested
Subject to
performance
measures
Not subject to
performance
measures
Total as at
31 December 2019
(or date of retirement
from the Board, if earlier)
Total as at
11 February
2020
5,284,924
3,603,326
6,221,464
4,130,048
999,491
638,569
12,505,879
8,371,943
12,505,879
8,371,943
1,010,092
119,279
130,858
112,475
103,530
13,700
909,000
33,251
127,463
125,643
308,553
29,222
73,977
56,477
71,947
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,010,092
119,279
1,010,092
–
130,858
112,475
103,530
13,700
909,000
33,251
127,463
125,643
308,553
29,222
73,977
56,477
71,947
130,858
112,475
103,530
13,700
909,000
33,251
127,463
–
–
–
–
56,477
–
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Barclays PLC Annual Report 2019 119
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance 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 11 February 2020 that count towards
the shareholding requirement of, as a minimum, Barclays’ shares worth 200% of Total fixed pay (Fixed Pay and pension). The current Executive
Directors have five years from their respective dates of appointment to meet this requirement. At close of business on 11 February 2020, the
market value of Barclays’ ordinary shares was £1.79.
Jes Staley
£000
Requirement
Actual
Tushar Morzaria
£000
5,492
9,461
Requirement
Actual
3,700
6,451
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 effective dates of the current Directors’
appointments disclosed in their service contracts or letters of appointment are shown in the table below.
As stated in the letters of appointment, the Chairman and Non-Executive Directors are appointed for an initial term of three years and are subject
to annual re-election by shareholders. On expiry of the initial term and subject to the needs of the Board, Non-Executive Directors may be invited
to serve a further three years. Non-Executive Directors appointed beyond six years will be at the discretion of the Board Nominations Committee.
Chairman
Nigel Higgins
Executive Directors
Jes Staley
Tushar Morzaria
Non-Executive Directors
Mike Ashley
Tim Breedon
Sir Ian Cheshire
Mary Anne Citrino
Mohamed A El-Erian
Dawn Fitzpatrick
Mary Francis
Crawford Gillies
Dr Brian Gilvary
Diane Schueneman
Effective date of appointment
1 March 2019 (Non-Executive Director),
2 May 2019 (Chairman)
1 December 2015
15 October 2013
18 September 2013
1 November 2012
3 April 2017
25 July 2018
1 January 2020
25 September 2019
1 October 2016
1 May 2014
1 February 2020
25 June 2015
Payments to former Directors (audited)
Former Group Finance Director: Chris Lucas
In 2019, 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 2019.
Former Chairman: John McFarlane
John McFarlane stepped down as Chairman on 2 May 2019. In accordance with his letter of appointment John McFarlane continued to receive
monthly payments equivalent to his monthly fees until 7 November 2019 (being the date his notice period would have ended). These payments
were made in monthly cash instalments and were subject to mitigation in the event that he obtained alternative employment and/or
appointments. He also received benefits in accordance with his appointment letter for the same period.
Former Non-Executive: Sir Gerry Grimstone
Sir Gerry Grimstone stepped down as Non-Executive Director of Barclays PLC and Chairman of Barclays Bank PLC on 28 February 2019. In relation
to his role as Chairman of Barclays Bank PLC and under the terms of his appointment letter, a payment of six months’ fees was paid to him in lieu
of notice in March 2019. No payment in lieu of notice was made in relation to his role as Director of Barclays PLC.
120 Barclays PLC Annual Report 2019
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Annual report on Directors’ remunerationREMUNERATION REPORT Former Non-Executive: Reuben Jeffery III
Reuben Jeffery III was appointed as a member of the Barclays US LLC (the US Intermediate Holding Company) Board on 15 October 2019.
He received fees of $150,000 per annum for his role on the Barclays LLC Board, pro-rated for his period of service in 2019.
AGM Statement
At the 2019 AGM, the vote on the 2018 Directors’ Remuneration Report (Resolution 2) was passed with 70.79% of votes cast in favour.
We describe below what we have done to identify and address the concerns of shareholders who voted against this resolution last year.
We offered to engage with those of our top 30 shareholders who voted against Resolution 2, or who withheld their vote in relation to it, and were
able to meet with a significant proportion of those shareholders. We understand from those shareholders who we have spoken to that they voted
against Resolution 2 because of concerns over the malus adjustment applied in relation to the 2016 incentive award for the Group CEO,
particularly in light of the penalty levied against the Company by the New York Department for Financial Services (NYDFS).
Having reflected on the views expressed by the relevant shareholders, and as discussed with them during engagement, we are satisfied that the
malus adjustment was appropriate. However, in light of the feedback from our shareholders, we acknowledge that we could have provided further
information regarding the factors the Board and Remuneration Committee took into account. In particular, this could have addressed the fact that
no material new facts came to light through the investigations conducted by the regulators that had not been taken into account by the Board in
its determination of the appropriate malus adjustment, and the fact that the NYDFS penalty was directed against the Bank in relation to failings in
its controls, and not against the individual in question.
We will take this into account in all of our external disclosures going forward, to ensure that we provide all of the information needed to properly
explain our decisions.
Previous AGM voting outcomes
Shareholder votes on remuneration
Vote on the 2018 Remuneration Report
at the 2019 AGM
Vote on the Directors’ remuneration policy
at the 2017 AGM
For % of votes cast
Number
Against % of votes cast
Number
70.79%
8,849,675,682
97.91%
12,062,616,141
29.21%
3,652,341,337
2.09%
257,416,828
Withheld
Number
477,285,142
51,369,054
At the AGM held on 24 April 2014, 96.02% (10,364,453,159 votes) of shareholders of Barclays PLC voted 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 of their MRTs that exceeds 1:1, provided the ratio does not exceed 1:2.
On 15 November 2018, the Board of Barclays PLC as shareholder of Barclays Bank UK PLC approved an equivalent resolution in relation to MRTs
within Barclays Bank UK PLC and any of its subsidiaries.
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 the overarching objectives, principles and parameters of remuneration policy across the Group to ensure it is adopting
a coherent approach in respect of all employees. In discharging this responsibility the Committee seeks to ensure that the policy is fair and
transparent, avoids complexity and assesses, among other things, the impact of pay arrangements in supporting the Group’s culture, values and
strategy and on all elements of risk management. The Committee also approves incentive pools for each of the Group, Barclays Bank PLC, Barclays
Bank UK PLC and operations and functions, periodically reviews (at least annually) all material matters of retirement benefit design and governance,
and exercises judgement in the application of remuneration policies to promote the long-term success of the Group for the benefit of
shareholders. 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
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Barclays PLC Annual Report 2019 121
Financial reviewFinancial statementsShareholder informationRisk reviewStrategic reportGovernance
Remuneration Committee in 2019
The performance of the Committee was assessed internally as part of the annual effectiveness review of the Board of Barclays PLC. In line with the
approach adopted for all Board Committees in 2019, the process involved completion of a tailored questionnaire by Committee members and
standing attendees.
The results confirm that the Committee is operating effectively. The Committee continues to be well constituted and provides an effective level of
challenge and oversight of the areas within its remit. Consideration will be given to adding an additional member of the Committee following the
departure of Dr Dambisa Moyo earlier in the year.
The Committee’s focus has moved towards oversight of an existing and effective policy and management system, having addressed a number of
important remuneration related issues in prior years.
The Committee’s interaction with the Board, Board Committees and senior management is considered effective. In response to a request to
provide feedback on interaction with subsidiary committees, the Committee’s interaction with the principal subsidiary remuneration committees
was also considered effective, and in line with regulatory requirements.
Advisers to the Remuneration Committee
The Committee appointed PricewaterhouseCoopers (PwC) as the independent adviser in October 2017. 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.
PwC was paid £112,000 (excluding VAT) for their advice to the Committee in 2019 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 strategic advice on business, operational models and cost, corporate taxation, climate-related financial
disclosures, data strategy, technology consulting and internal audit.
Throughout 2019, Willis Towers Watson (WTW) continued to provide the Committee with market data on compensation when considering
incentive levels and remuneration packages. WTW were paid £66,000 (excluding VAT) in fees for their services. In addition to the services provided
to the Committee, WTW also provides pensions and benefits advice, insurance brokerage and pensions advice and administration services to the
Barclays Bank UK Retirement Fund.
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 profiles 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.
122 Barclays PLC Annual Report 2019
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Annual report on Directors’ remunerationREMUNERATION REPORT Remuneration Committee activity in 2019
The following provides a summary of the Committee’s activity during 2019 and at the January and February 2020 meetings at which 2019
remuneration decisions were finalised. The Committee is also provided with updates at each scheduled meeting on: operation of the Committee’s
Control Framework on hiring, retention and termination, headcount and employee attrition, and extant LTIP performance.
Overall
remuneration
Incentive funding proposals including
risk adjustments
2018 Remuneration Report
Group Fixed Pay budgets
Finance and Risk updates
Incentive funding approach
Barclays’ Fair Pay agenda and Report
2019 Remuneration Report
Wider workforce considerations
Executive
Directors’ and
senior executives’
remuneration
Executive Directors’ and senior executives’
bonus outcomes
Review of Directors’ remuneration policy
Annual bonus and LTIP performance measures
and target calibration
Governance
Regulatory and stakeholder matters
Discussion with independent adviser
Remuneration Review Panel update
Review of Committee effectiveness
January
2019
February
2019
June
2019
October
2019
December
2019
January
2020
February
2020
l
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There were two additional Remuneration Committee meetings during the course of 2019. The Committee met on 25 March 2019 and on 31 May
2019 to consider leadership changes across the organisation.
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Barclays PLC Annual Report 2019 123
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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 2019.
Annual
Report
Pillar 3
Report
Risk management strategy
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 the Barclays PLC Pillar 3 Report 2019 or at
barclays.com
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.
Climate change risk management
Overview of Barclays’ approach to managing
climate change risk.
■■ Enterprise Risk Management Framework (ERMF)
■■ Segregation of duties –
the “Three Lines of Defence” model
■■ Principal risks
■■ Risk appetite for the principal risks
■■ Risk committees
– 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 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
■■ Overview, organisation and structure
■■ Risk management policy
Principal risk management
Barclays’ approach to risk management for each principal
risk with focus on organisation and structure and roles
and responsibilities.
■■ Credit risk management
– Management of credit risk mitigation techniques
and counterparty credit risk
■■ Market risk management
– Management of securitisation exposures
Risk performance
Credit risk: The risk of loss to the Group from the failure of
clients, customers or counterparties, including sovereigns,
to fully honour their obligations to the Group, including the
whole and timely payment of principal, interest, collateral
and other receivables.
■■ 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
■■ Maximum exposure and effects of netting, collateral
and risk transfer
■■ Expected Credit Losses
■■ Movements in gross exposure and impairment
allowance including provisions for loan commitments
and financial guarantees
■■ Management adjustments to models for impairment
■■ Measurement uncertainty and sensitivity analysis
■■ Analysis of the concentration of credit risk
■■ The Group’s approach to management and
representation of credit quality
■■ Analysis of specific portfolios and asset types
■■ Forbearance
■■ Analysis of debt securities
■■ Analysis of derivatives
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Barclays PLC Annual Report 2019 125
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Contents
Risk performance continued
Market risk: The risk of a loss arising from potential
adverse changes in the value of the Group’s assets and
liabilities from fluctuation in market variables including,
but not limited to, interest rates, foreign exchange,
equity prices, commodity prices, credit spreads,
implied volatilities and asset correlations.
Treasury and capital risk – Liquidity: The risk that the Group
is unable to meet its contractual or contingent obligations
or that it does not have the appropriate amount, tenor and
composition of funding and liquidity to support its assets.
Treasury and capital risk – Capital: The risk that the Group
has an insufficient level or composition of capital to support
its normal business activities and to meet its regulatory
capital requirements under normal operating environments
or stressed conditions (both actual and as defined for
internal planning or regulatory testing purposes). This also
includes the risk from the Group’s pension plans.
Treasury and capital risk – Interest rate risk in the banking
book: The risk that the Group 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 Group from
inadequate or failed processes or systems, human factors
or due to external events (for example, fraud) where the
root cause is not due to credit or market risks.
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, effective 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, event, decision, or business relationship will
reduce trust in the Group’s integrity and/or competence.
Legal risk: The risk of loss or imposition of penalties, damages
or fines from the failure of the Group to meet its legal
obligations including regulatory or contractual requirements.
Supervision and regulation
The Group’s operations, including its overseas offices,
subsidiaries and associates, are subject to a significant
body of rules and regulations.
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.
■■ Market risk overview and summary of performance
– Balance sheet view of trading and banking books
■■ Review of management measures
– Review of regulatory measures
■■ Liquidity risk overview and summary of performance
■■ Liquidity risk stress testing
■■ Liquidity pool
■■ Funding structure and funding relationships
■■ Credit ratings
■■ Contractual maturity of financial assets and liabilities
– Asset encumbrance
■■ Capital risk overview and summary of performance
■■ Regulatory minimum capital and leverage requirements
■■ Analysis of capital resources
■■ Analysis of risk weighted assets
■■ Analysis of leverage ratio and exposures
■■ Minimum requirement for own funds and eligible
liabilities
■■ Foreign exchange risk
■■ Pension risk review
■■ Interest rate risk in the banking book overview
and summary of performance
■■ Net interest income sensitivity
■■ Analysis of equity sensitivity
■■ Volatility of the fair value through other comprehensive
income (FVOCI) portfolio in the liquidity pool
■■ Operational risk overview and summary of performance
■■ Operational risk profile
Annual
Report
Pillar 3
Report
176
n/a
176
n/a
180
180
182
183
185
186
n/a
190
190
191
193
194
195
196
196
198
198
199
199
200
200
122
123
124
125
n/a
n/a
n/a
n/a
n/a
n/a
220
n/a
8
18
26
31
n/a
42
43
44
44
45
46
144
146
■■ Model risk overview and summary of performance
203
n/a
■■ Conduct risk overview and summary of performance
203
n/a
■■ Reputation risk overview and summary of performance
203
n/a
■■ Legal risk overview and summary of performance
203
n/a
■■ Supervision of the Group
■■ Global regulatory developments
■■ Financial regulatory framework
– Summary of risk and capital 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 operational risk
204
204
205
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
3
5
6
16
48
104
122
129
144
126 Barclays PLC Annual Report 2019
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Risk management
Barclays’ risk management
strategy
This section introduces the Group’s approach
to managing and identifying risks, and for
fostering a strong risk culture.
Enterprise Risk Management
Framework (ERMF)
The ERMF sets the strategic approach for risk
management by defining standards, objectives
and responsibilities for all areas of the Group.
It is then approved by the Barclays PLC Board
on recommendation of the Group Chief Risk
Officer. It supports senior management in
effective risk management and developing
a strong risk culture.
The ERMF sets out:
■■ segregation of duties: the ERMF defines
a Three Lines of Defence model
■■ principal risks faced by the Group. This list
guides the organisation of the risk
management function, and the
identification, management and reporting
of risks
■■ risk appetite requirements. This helps
define the level of risk we are willing to
undertake in our business
■■ roles and responsibilities for risk
management: the ERMF sets out the
accountabilities of the Group CEO and
other senior managers, as well as Barclays
PLC committees.
The ERMF is complemented by frameworks,
policies and standards which are mainly
aligned to individual principal risks:
■■ frameworks cover the management
approach for a collection of related
activities and define the associated policies
used to govern them
■■ policies set out principles and other core
requirements for the activities of the
Group. Policies describe ‘what’ must be
done
■■ standards set out the key control
objectives that describe how the
requirements set out in the policy are met,
and who needs to carry them out.
Standards describe ‘how’ controls should
be undertaken.
Segregation of duties – the ‘Three
Lines of Defence’ model
The ERMF sets out a clear lines of defence
model. All colleagues are responsible for
understanding and managing risks within the
context of their individual roles and
responsibilities, as set out below:
■■ first line comprises all employees engaged
in the revenue generating and client facing
areas of the Group and all associated
support functions, including Finance,
Treasury, and Human Resources. The first
line is responsible for identifying and
managing the risks they generate,
establishing a control framework, and
escalating risk events to Risk and
Compliance
■■ second line is comprised of the Risk and
Compliance functions. The role of the
second line is to establish the limits, rules
and constraints under which first line
activities shall be performed, consistent
with the risk appetite of the Group, and to
monitor the performance of the first line
against these limits and constraints.
Note that limits for a number of first line
activities, related to operational risk, will
be set by the first line and overseen by the
Chief Controls Office. These will remain
subject to supervision by the second line
■■ third line of defence is Internal Audit, who
are responsible for providing independent
assurance over the effectiveness of
governance, risk management and control
over current, systemic and evolving risks
■■ the Legal function provides support to all
areas of the bank and is not formally part
of any of the three lines. However, it is
subject to second line oversight.
Principal risks
The ERMF identifies eight principal risks (see
table on page 38 of this report) and sets out
associated responsibilities and expectations
around risk management standards.
Each of the principal risks is overseen by an
accountable executive within the Group who
is responsible for the framework, policies and
standards that detail the related requirements.
Risk reports to executive and Board
committees are clearly organised by principal
risk. In addition, certain risks span more than
one principal risk; these are also subject to the
ERMF and are reported to executive and Board
committees.
Risk appetite for the principal risks
Risk appetite is defined as the level of risk
which the Group’s businesses are prepared
to accept in the conduct of their activities.
It sets the ‘tone from the top’ and provides
a basis for ongoing dialogue between
management and Board with respect to
the Group’s current and evolving risk profile,
allowing strategic and financial decisions
to be made on an informed basis.
Risk appetite is approved by the Barclays PLC
Board and disseminated across legal entities.
Total Group risk appetite is supported by limits
to control exposures and activities that have
material concentration risk implications.
Barclays PLC Board
Board
Committees
Barclays PLC
Board Risk Committee
Barclays PLC
Board Audit Committee
Barclays PLC
Board
Remuneration Committee
Management
Level Committees/
Forums
Barclays Group
ExCo
Group Risk Committee
Group Remuneration
Review Panel
Business Level
Committees/Forums
Barclays Group Product/
Risk Type Committees
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Barclays PLC Annual Report 2019 127
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review RISK REVIEW
Risk management
Risk committees
Various committees also fulfil important roles
and responsibilities. Barclays business level
product/risk type committees consider risk
matters relevant to their business, and
escalate as required to the Group Risk
Committee (GRC), whose Chairman, in turn,
escalates to the Barclays PLC Board
Committees and the Barclays PLC Board.
In addition to setting the risk appetite of the
Group, the Board is responsible for approving
the ERMF, and reviewing all reputation risk
matters. It receives regular information on
the risk profile of the bank, and has ultimate
responsibility for risk appetite and
capital plans.
Further, there are three Board-level
committees which oversee the application of
the ERMF and implementation of key aspects.
Membership of these committees is
comprised solely of Non-Executive Directors
providing independent oversight and
challenge. These are detailed below:
■■ the Barclays PLC Board Risk Committee
(BRC): the BRC monitors the Group’s
risk profile against the agreed appetite.
Where actual performance differs from
expectations, the actions taken by
management are reviewed to ascertain
that the BRC is comfortable with them.
The BRC also reviews certain key risk
methodologies, the effectiveness of risk
management, and the Group’s risk profile,
including the material issues affecting each
business portfolio and forward risk trends.
The committee also commissions in-depth
analyses of significant risk topics, which
are presented by the Group CRO or senior
risk managers
■■ the Barclays PLC 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,
Barclays policies and methodologies.
■■ the Barclays PLC Board Remuneration
Committee (RemCo): the RemCo receives a
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.
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 the Barclays website at:
home.barclays/about-barclays/
barclays-corporate-governance.html
The Group Risk Committee (GRC) is the
most senior executive body responsible for
reviewing and monitoring the risk profile of
the Group. This includes coverage of all
principal risks, and any other material risks, to
which the Group is exposed. The GRC reviews
and recommends the proposed risk appetite
and relative limits to the BRC. The committee
covers all business units and legal entities with
the Group and incorporates specific coverage
of Barclays Bank Group.
Barclays’ risk culture
Risk culture can be defined as the norms,
attitudes and behaviours related to risk
awareness, risk taking and risk management.
This is reflected in how the Group identifies,
escalates and manages risk matters.
Barclays is committed to maintaining a robust
risk culture in which:
■■ management expect, model and reward
the right behaviours from a risk and
control perspective
■■ colleagues identify, manage and escalate
risk and control matters, and meet their
responsibilities around risk management.
Specifically, all employees regardless of their
position, function or location, must play their
part in the Group’s risk management.
Employees are required to be familiar with
risk management policies which are relevant
to their responsibilities, know how to escalate
actual or potential risk issues, and have a
role-appropriate level of awareness of the risk
management process as defined by the ERMF.
Our Code of Conduct – the Barclays Way
Globally, all colleagues must attest to the
‘Barclays Way’, our Code of Conduct, and
comply with all frameworks, policies and
standards applicable to their roles. The Code
of Conduct outlines the purpose and values
which govern our ‘Barclays Way’ of working
across our business globally. It constitutes
a reference point covering the aspects of
colleagues’ working relationships, with other
Barclays employees, customers and clients,
governments and regulators, business
partners, suppliers, competitors and the
broader community.
The Code of Conduct
outlines the purpose
and values which
govern our ‘Barclays
Way’ of working across
our business globally. It
constitutes a reference
point covering the
aspects of colleagues’
working relationships,
with other Barclays
employees, customers
and clients,
governments and
regulators, business
partners, suppliers,
competitors and the
broader community.
128 Barclays PLC Annual Report 2019
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Material existing and emerging risks
Material existing and emerging
risks to the Group’s future
performance
The Group has identified a broad range of
risks to which its businesses are exposed.
Material risks are those to which senior
management pay particular attention and
which could cause the delivery of the Group’s
strategy, results of operations, financial
condition and/or prospects to differ materially
from expectations. Emerging risks are those
which have unknown components, the impact
of which could crystallise over a longer time
period. In addition, certain other factors
beyond the Group’s control, including
escalation of terrorism or global conflicts,
natural disasters, epidemic outbreaks and
similar events, although not detailed below,
could have a similar impact on the Group.
Material existing and emerging
risks potentially impacting more
than one principal risk
i) Business conditions, general
economy and geopolitical issues
The Group’s operations are subject to
potentially unfavourable global and local
economic and market conditions, as well as
geopolitical developments, which may have
a material effect on the Group’s business,
results of operations, financial condition
and prospects.
A deterioration in global or local economic
and market conditions may lead to (among
other things): (i) deteriorating business,
consumer or investor confidence and lower
levels of fixed asset investment and
productivity growth, which in turn may
lead to lower client activity, including lower
demand for borrowing from creditworthy
customers; (ii) higher default rates,
delinquencies, write-offs and impairment
charges as borrowers struggle with the
burden of additional debt; (iii) subdued asset
prices and payment patterns, including the
value of any collateral held by the Group;
(iv) mark-to-market losses in trading
portfolios resulting from changes in factors
such as credit ratings, share prices and
solvency of counterparties; and (v) revisions
to calculated expected credit losses (ECLs)
leading to increases in impairment allowances.
In addition, the Group’s ability to borrow from
other financial institutions or raise funding
from external investors may be affected by
deteriorating economic conditions and
market disruption.
Geopolitical events may lead to further
financial instability and affect economic
growth. In particular:
■■ in the UK, the decision to leave the
European Union (EU) may give rise
to further economic and political
consequences including for investment
and market confidence in the UK and
the remainder of the EU. See ‘(ii) Process
of UK withdrawal from the EU’ below for
further details
■■ 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. The possibility of significant
continued changes in US policy in certain
sectors (including trade, healthcare and
commodities), may have an impact on the
Group’s associated portfolios. Stress in
the US economy, weakening GDP and the
associated exchange rate fluctuations,
heightened trade tensions (such as the
current dispute between the US and
China), an unexpected rise in
unemployment and/or an increase in
interest rates could lead to increased levels
of impairment, resulting in a negative
impact on the Group’s profitability
■■ global GDP growth weakened in 2019,
as elevated policy uncertainty weighed
on manufacturing activity and investment.
As a result, a number of central banks,
most notably the Federal Reserve and
European Central Bank (ECB), pursued
monetary easing. Growth is expected to
stabilise in 2020, but macroeconomic risks
remain skewed to the downside, while
concerns around the efficacy of existing
policy tools to counter these risks persist.
An escalation in geopolitical tensions,
increased use of protectionist measures or
a disorderly withdrawal from the EU may
negatively impact the Group’s business in
the affected regions
■■ in China the pace of credit growth remains
a concern, given the high level of leverage
and despite government and regulatory
action. A stronger than expected
slowdown could result if authorities fail to
appropriately manage growth during the
transition from manufacturing towards
services and the end of the investment and
credit-led boom. Deterioration in emerging
markets could affect the Group if it results
in higher impairment charges via sovereign
or counterparty defaults.
ii) Process of UK withdrawal from
the EU
The manner in which the UK withdraws from
the EU will likely have a marked impact on
general economic conditions in the UK and
the EU. The UK’s future relationship with the
EU and its trading relationships with the rest
of the world could take a number of years to
resolve. This may lead to a prolonged period
of uncertainty, unstable economic conditions
and market volatility, including fluctuations
in interest rates and foreign exchange rates.
Whilst the exact impact of the UK’s withdrawal
from the EU is unknown, the Group continues
to monitor the risks that may have a more
immediate impact for its business, including,
but not limited to:
■■ market volatility, including in currencies
and interest rates, might increase which
could have an impact on the value of the
Group’s trading book positions
■■ credit spreads could widen leading to
reduced investor appetite for the Group’s
debt securities. This could negatively
impact the Group’s cost of and/or access
to funding. In addition, market and interest
rate volatility could affect the underlying
value of assets in the banking book and
securities held by the Group for liquidity
purposes
■■ a credit rating agency downgrade applied
directly to the Group, or indirectly as a
result of a credit rating agency downgrade
to the UK Government, could significantly
increase the Group’s cost of and/or reduce
its access to funding, widen credit spreads
and materially adversely affect the Group’s
interest margins and liquidity position
■■ a UK recession with lower growth, higher
unemployment and falling UK property
prices could lead to increased impairments
in relation to a number of the Group’s
portfolios, including, but not limited to,
its UK mortgage portfolio, UK unsecured
lending portfolio (including credit cards)
and its commercial real estate exposures
■■ the ability to attract, or prevent the
departure of, qualified and skilled
employees may be impacted by the UK’s
and the EU’s future approach to the EU
freedom of movement and immigration
from the EU countries and this may impact
the Group’s access to the EU talent pool
■■ a disorderly exit from the EU may put a
strain on the capabilities of the Group’s
systems, increasing the risk of failure of
those systems and potentially resulting
in losses and reputational damage for
the Group
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Barclays PLC Annual Report 2019 129
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review RISK REVIEW
Material existing and emerging risks
■■ changes to current EU ‘Passporting’ rights
may require further adjustment to the
current model for the Group’s cross-border
banking operation which could increase
operational complexity and/or costs for
the Group
In addition, changes in interest rates could
have an adverse impact on the value of the
securities held in the Group’s liquid asset
portfolio. Consequently, this could create
more volatility than expected through the
Group’s FVOCI reserves.
■■ the legal framework within which the
Group operates could change and become
more uncertain if the UK takes steps to
replace or repeal certain laws currently in
force, which are based on EU legislation
and regulation (including EU regulation
of the banking sector) following its
withdrawal from the EU. Certainty around
the ability to maintain existing contracts,
enforceability of certain legal obligations
and uncertainty around the jurisdiction
of the UK courts may be affected until
the impacts of the loss of the current legal
and regulatory arrangements between the
UK and EU and the enforceability of UK
judgements across the EU are fully known
■■ should the UK see reduced access to
financial markets infrastructures (including
exchanges, central counterparties and
payments services, or other support
services provided by third party suppliers)
service provision for clients could be
impacted, likely resulting in reduced
market share and revenue and increased
operating costs for the Group.
iii) The impact of interest rate changes
on the Group’s profitability
Any changes to interest rates are significant
for the Group, especially given the uncertainty
as to the direction of interest rates and the
pace at which interest rates may change,
particularly in the Group’s main markets
of the UK and the US.
A continued period of low interest rates and
flat yield curves, including any further cuts,
may affect and continue to put pressure on
the Group’s net interest margins (the
difference between its lending income and
borrowing costs) and could adversely affect
the profitability and prospects of the Group.
However, whilst interest rate rises could
positively impact the Group’s profitability
as retail and corporate business income
increases due to margin de-compression,
further increases in interest rates, if larger
or more frequent than expected, could lead
to generally weaker than expected growth,
reduced business confidence and higher
unemployment, which in turn could cause
stress in the lending portfolio and
underwriting activity of the Group. Resultant
higher credit losses driving an increased
impairment charge would most notably
impact retail unsecured portfolios and
wholesale non-investment grade lending and
could have a material effect on the Group’s
business, results of operations, financial
condition and prospects.
iv) The competitive environments of the
banking and financial services industry
The Group’s businesses are conducted in
competitive environments (in particular, in the
UK and US), with increased competition
scrutiny, and the Group’s financial
performance depends upon the Group’s ability
to respond effectively to competitive pressures
whether due to competitor behaviour, new
entrants to the market, consumer demand,
technological changes or otherwise.
This competitive environment, and the
Group’s response to it, may have a material
adverse effect on the Group’s ability to
maintain existing or capture additional market
share, business, results of operations, financial
condition and prospects.
v) Regulatory change agenda and
impact on 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. Furthermore,
a more intensive regulatory approach and
enhanced requirements together with the
potential lack of international regulatory
co-ordination as enhanced supervisory
standards are developed and implemented
may adversely affect the Group’s business,
capital and risk management strategies and/
or may result in the Group deciding to modify
its legal entity, capital and funding structures
and business mix, or to exit certain business
activities altogether or not to expand in areas
despite otherwise attractive potential.
There are several significant pieces of
legislation and areas of focus which will
require significant management attention,
cost and resource, including:
■■ changes in prudential requirements may
impact minimum requirements for own
funds and eligible liabilities (MREL)
(including requirements for internal MREL),
leverage, liquidity or funding requirements,
applicable buffers and/or add-ons to such
minimum requirements and risk weighted
assets calculation methodologies all as
may be set by international, EU or national
authorities. Such or similar changes to
prudential requirements or additional
supervisory and prudential expectations,
either individually or in aggregate, may
result in, among other things, a need for
further management actions to meet the
changed requirements, such as:
– increasing capital, MREL or liquidity
resources, reducing leverage and
risk weighted assets
– restricting distributions on capital
instruments
– modifying the terms of outstanding
capital instruments
– modifying legal entity structure
(including with regard to issuance
and deployment of capital, MREL
and funding)
– changing the Group’s business mix
or exiting other businesses
– and/or undertaking other actions
to strengthen the Group’s position.
■■ the derivatives market has been the subject
of particular focus for regulators in recent
years across the G20 countries and
beyond, with regulations introduced which
require the reporting and clearing
of standardised over the counter (OTC)
derivatives and the mandatory margining
of non-cleared OTC derivatives. These
regulations may increase costs for market
participants, as well as reduce liquidity
in the derivatives markets. More broadly,
changes to the regulatory framework
(in particular, the review of the second
Markets in Financial Instruments Directive
and the implementation of the Benchmarks
Regulation) could entail significant costs
for market participants and may have a
significant impact on certain markets in
which the Group operate.
■■ 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 European
Banking Authority (EBA), the Federal
Deposit Insurance Corporation (FDIC) and
the Federal Reserve Board (FRB). Failure to
meet the requirements of regulatory stress
tests, or the failure by regulators to
approve the stress test results and capital
plans of the Group, could result in the
Group or certain of its members being
required to enhance their capital position,
limit capital distributions or position
additional capital in specific subsidiaries.
For further details on the regulatory
supervision of, and regulations
applicable to, the Group,
see Supervision and regulation
on pages 204 to 210.
130 Barclays PLC Annual Report 2019
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As the economy transitions to a low-carbon
economy, financial institutions such as the
Group may face significant and rapid
developments in stakeholder expectations,
policy, law and regulation which could impact
the lending activities the Group undertakes, as
well as the risks associated with its lending
portfolios, and the value of the Group’s
financial assets. As sentiment towards climate
change shifts and societal preferences
change, the Group may face greater scrutiny
of the type of business it conducts, adverse
media coverage and reputational damage,
which may in turn impact customer demand
for the Group’s products, returns on certain
business activities and the value of certain
assets and trading positions resulting in
impairment charges.
In addition, the impacts of physical and
transition climate risks can lead to second
order connected risks, which have the
potential to affect the Group’s retail and
wholesale portfolios. The impacts of climate
change may increase losses for those sectors
sensitive to the effects of physical and
transition risks. Any subsequent increase in
defaults and rising unemployment could
create recessionary pressures, which may lead
to wider deterioration in the creditworthiness
of the Group’s clients, higher ECLs, and
increased charge-offs and defaults among
retail customers.
If the Group does not adequately embed risks
associated with climate change into its risk
framework to appropriately measure, manage
and disclose the various financial and
operational risks it faces as a result of climate
change, or fails to adapt its strategy and
business model to the changing regulatory
requirements and market expectations on a
timely basis, it may have a material and
adverse impact on the Group’s level of
business growth, competitiveness, profitability,
capital requirements, cost of funding, and
financial condition.
For further details on the Group’s
approach to climate change, see page
138 of climate change risk
management.
vii) Impact of benchmark interest rate
reforms on the Group
For several years, global regulators and central
banks have been driving international efforts
to reform key benchmark interest rates and
indices, such as the London Interbank Offered
Rate (LIBOR), which are used to determine the
amounts payable under a wide range of
transactions and make them more reliable and
robust. This has resulted in significant
changes to the methodology and operation of
certain benchmarks and indices, the adoption
of alternative ‘risk-free’ reference rates and the
proposed discontinuation of certain reference
rates (including LIBOR), with further changes
anticipated.
Uncertainty as to the nature of such potential
changes, the availability and/or suitability
of alternative ‘risk-free’ reference rates and
other reforms may adversely affect a broad
range of transactions (including any securities,
loans and derivatives which use LIBOR to
determine the amount of interest payable that
are included in the Group’s financial assets
and liabilities) that use these reference rates
and indices and introduce a number of risks
for the Group, including, but not limited to:
■■ Conduct risk: in undertaking actions to
transition away from using certain
reference rates (including LIBOR), the
Group faces conduct risks, which may
lead to customer complaints, regulatory
sanctions or reputational impact if the
Group is (i) considered to be undertaking
market activities that are manipulative or
create a false or misleading impression,
(ii) misusing sensitive information or not
identifying or appropriately managing
or mitigating conflicts of interest,
(iii) providing customers with inadequate
advice, misleading information, unsuitable
products or unacceptable service, (iv) not
taking an appropriate or consistent
response to remediation activity or
customer complaints, (v) providing
regulators with inaccurate regulatory
reporting or (vi) colluding or
inappropriately sharing information
with competitors
vi) The impact of climate change
on the Group’s business
The risks associated with climate change are
subject to rapidly increasing societal,
regulatory and political focus, both in the UK
and internationally. Embedding climate risk
into the Group’s risk framework in line with
regulatory expectations, and adapting the
Group’s operations and business strategy to
address both the financial risks resulting from:
(i) the physical risk of climate change; and
(ii) the risk from the transition to a low-carbon
economy, could have a significant impact on
the Group’s business.
Physical risks from climate change arise from
a number of factors and relate to specific
weather events and longer-term shifts in the
climate. The nature and timing of extreme
weather events are uncertain but they are
increasing in frequency and their impact on
the economy is predicted to be more acute
in the future. The potential impact on the
economy includes, but is not limited to,
lower GDP growth, higher unemployment
and significant changes in asset prices and
profitability of industries. Damage to the
properties and operations of borrowers could
impair asset values and the creditworthiness
of customers leading to increased default
rates, delinquencies, write-offs and
impairment charges in the Group’s portfolios.
In addition, the Group’s premises and
resilience may also suffer physical damage
due to weather events leading to increased
costs for the Group.
As the economy
transitions to a low-
carbon economy,
financial institutions
such as the Group may
face significant and
rapid developments in
policy, law and
regulation which could
impact the lending
activities the Group
undertakes.
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Material existing and emerging risks
■■ Financial risks: the valuation of certain of
the Group’s financial assets and liabilities
may change. Moreover, transitioning to
alternative ‘risk-free’ reference rates may
impact the ability of members of the Group
to calculate and model amounts receivable
by them on certain financial assets and
determine the amounts payable on certain
financial liabilities (such as debt securities
issued by them) because currently
alternative ‘risk-free’ reference rates
(such as the Sterling Overnight Index
Average (SONIA) and the Secured
Overnight Financing Rate (SOFR)) are
look-back rates whereas term rates (such
as LIBOR) allow borrowers to calculate at
the start of any interest period exactly how
much is payable at the end of such interest
period. This may have a material adverse
effect on the Group’s cash flows
■■ Pricing risk: changes to existing reference
rates and indices, discontinuation of any
reference rate or indices and transition to
alternative ‘risk-free’ reference rates may
impact the pricing mechanisms used by
the Group on certain transactions
■■ Operational risk: changes to existing
reference rates and indices,
discontinuation of any reference rate
or index and transition to alternative
‘risk-free’ reference rates may require
changes to the Group’s IT systems, trade
reporting infrastructure, operational
processes, and controls. In addition, if any
reference rate or index (such as LIBOR) is
no longer available to calculate amounts
payable, the Group may incur additional
expenses in amending documentation
for new and existing transactions and/or
effecting the transition from the original
reference rate or index to a new reference
rate or index
■■ Accounting risk: an inability to apply
hedge accounting in accordance with IFRS
could lead to increased volatility in the
Group’s financial results and performance.
Any of these factors may have a material
adverse effect on the Group’s business,
results of operations, financial condition
and prospects.
For further details on the impacts of
benchmark interest rate reforms on
the Group, see Note 14 on pages
270 to 277.
viii) Holding company structure of
Barclays PLC and its dependency
on distributions from its subsidiaries
Barclays PLC is a holding company and its
principal sources of income are, and are
expected to continue to be, distributions
(in the form of dividends and interest
payments) from operating subsidiaries which
also hold the principal assets of the Group.
As a separate legal entity, Barclays PLC relies
on such distributions in order to be able to
meet its obligations as they fall due (including
its payment obligations with respect to its
debt securities) and to create distributable
reserves for payment of dividends to
ordinary shareholders.
The ability of Barclays PLC’s subsidiaries to
pay dividends and interest and Barclays PLC’s
ability to receive such distributions from its
investments in its subsidiaries and other
entities will be subject not only to such
subsidiaries’ and other entities’ financial
performance but also to applicable local
laws and other restrictions. These laws and
restrictions could limit the payment of
dividends and distributions to Barclays PLC
by its subsidiaries and any other entities in
which it holds an investment from time to
time, which could restrict Barclays PLC’s
ability to meet its obligations and/or to pay
dividends to ordinary shareholders.
ix) Application of resolution measures
and stabilisation powers under the
Banking Act
Under the Banking Act 2009, as amended,
(the ‘Banking Act’) substantial powers are
granted to the Bank of England (or, in certain
circumstances, HM Treasury), in consultation
with the PRA, the FCA and HM Treasury, as
appropriate, as part of a special resolution
regime (the ‘SRR’). These powers enable the
relevant UK resolution authority to implement
resolution measures and stabilisation options
with respect to a UK bank or investment firm
and certain of its affiliates (currently including
Barclays PLC) (each a ‘relevant entity’) in
circumstances in which the relevant UK
resolution authority is satisfied that the
resolution conditions are met.
The SRR consists of five stabilisation options:
(i) private sector transfer of all or part of the
business or shares of the relevant entity, (ii)
transfer of all or part of the business of the
relevant entity to a ‘bridge bank’ established
by the Bank of England, (iii) transfer to an
asset management vehicle wholly or partly
owned by HM Treasury or the Bank of
England, (iv) the cancellation or transfer of the
relevant entities’ equity and write-down or
conversion of the relevant entity’s capital
instruments and liabilities (the bail-in tool)
and (v) temporary public ownership (i.e.
nationalisation).
In addition, the relevant UK resolution
authority may, in certain circumstances,
in accordance with the Banking Act require
the permanent write-down or conversion
into equity of any outstanding tier 1 capital
instruments and tier 2 capital instruments
prior to the exercise of any stabilisation option
(including the bail-in tool), which may lead
to the cancellation, transfer or dilution of
Barclays PLC’s ordinary share capital.
Shareholders should assume that, in a
resolution situation, public financial support
will only be available to a relevant entity as
a last resort after the relevant UK resolution
authorities have assessed and used, to the
maximum extent practicable, the resolution
tools, including the bail-in tool (the Bank of
England’s preferred approach for the
resolution of the Group is a bail-in strategy
with a single point of entry at Barclays PLC).
The exercise of any of such powers under the
Banking Act or any suggestion of any such
exercise could materially adversely affect the
value of Barclays PLC ordinary shares and
could lead to shareholders losing some or all
of their investment.
In addition, any safeguards within the Banking
Act (such as the ‘no creditor worse off ’
principle) may not result in compensation
to shareholders that is equivalent to the full
losses incurred by them in the resolution and
there can be no assurance that shareholders
would recover such compensation promptly.
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Material existing and emerging
risks impacting individual
principal risks
i) Credit risk
Credit risk is the risk of loss to the Group
from the failure of clients, customers or
counterparties, including sovereigns, to fully
honour their obligations to members of
the Group, including the whole and timely
payment of principal, interest, collateral and
other receivables.
a) Impairment
The introduction of the impairment
requirements of IFRS 9 Financial Instruments,
resulted in impairment loss allowances that
are recognised earlier, on a more forward-
looking basis and on a broader scope of
financial instruments, and may continue
to have a material impact on the Group’s
business, results of operations, financial
condition and prospects.
Measurement involves complex judgement
and impairment charges could be volatile,
particularly under stressed conditions.
Unsecured products with longer expected
lives, such as credit cards, are the most
impacted. Taking into account the transitional
regime, the capital treatment on the increased
reserves has the potential to adversely impact
the Group’s regulatory capital ratios.
In addition, the move from incurred losses to
ECLs has the potential to impact the Group’s
performance under stressed economic
conditions or regulatory stress tests.
For more information, refer to Note 1
on pages 248 to 252.
b) Specific sectors and concentrations
The Group is subject to risks arising from
changes in credit quality and recovery rates
of loans and advances due from borrowers
and counterparties in any specific portfolio.
Any deterioration in credit quality could lead
to lower recoverability and higher impairment
in a specific sector. The following are areas
of uncertainties to the Group’s portfolio which
could have a material impact on performance:
■■ UK retail, hospitality & leisure. Softening
demand, rising costs and a structural shift
to online shopping is fuelling pressure
on the UK High Street and other sectors
heavily reliant on consumer discretionary
spending. As these sectors continue to
reposition themselves, the trend represents
a potential risk in the Group’s UK corporate
portfolio from the perspective of its
interactions with both retailers and
their landlords
■■ consumer affordability has remained a
key area of focus, particularly in unsecured
lending. Macroeconomic factors, such
as rising unemployment, that impact a
customer’s ability to service unsecured
debt payments could lead to increased
arrears in unsecured products
■■ UK real estate market. UK property
represents a significant portion of the
overall Group retail and corporate credit
exposure. In 2019, property price growth
across the UK has slowed, particularly
in London and the South East where the
Group’s exposure has high concentration.
The Group is at risk of increased
impairment from a material fall in
property prices
■■ 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, or an increased capital
requirement should there be a need to
hold the exposure for an extended period
■■ Italian mortgage portfolio. The Group is
exposed to a decline in the Italian
economic environment through a
mortgage portfolio in run-off and positions
to wholesale customers. Growth in the
Italian economy remained weak in 2019
and should the economy deteriorate
further, there could be a material adverse
effect on the Group’s results including, but
not limited to, increased credit losses and
higher impairment charges.
The Group also has large individual exposures
to single name counterparties, both in its
lending activities and in its financial services
and trading activities, including transactions
in derivatives and transactions with brokers,
central clearing houses, dealers, other banks,
mutual and hedge funds and other
institutional clients. The default of such
counterparties could have a significant
impact on the carrying value of these assets.
In addition, where such counterparty risk has
been mitigated by taking collateral, credit risk
may remain high if the collateral held cannot
be realised, or has to be liquidated at prices
which are insufficient to recover the full
amount of the loan or derivative exposure.
Any such defaults could have a material
adverse effect on the Group’s results due to,
for example, increased credit losses and
higher impairment charges.
For further details on the Group’s
approach to credit risk, see credit risk
management on pages 139 to 140
and credit risk performance on pages
148 to 175.
ii) Market risk
Market risk is the risk of loss arising from
potential adverse change in the value of the
Group’s assets and liabilities from fluctuation
in market variables including, but not limited
to, interest rates, foreign exchange, equity
prices, commodity prices, credit spreads,
implied volatilities and asset correlations.
A broadening in trade tensions between the
US and its major trading partners, slowing
global growth and political concerns in the US
and Europe (including Brexit) are some of the
factors that could heighten market risks for
the Group’s portfolios. 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.
It is difficult to predict changes in market
conditions, and such changes could have a
material adverse effect on the Group’s
business, results of operations, financial
condition and prospects.
For further details on the Group’s
approach to market risk, see market
risk management on page 141 and
market risk performance on pages 176
to 177.
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Material existing and emerging risks
c) Interest rate risk in the banking book
Interest rate risk in the banking book is the
risk that the Group is exposed to capital or
income volatility because of a mismatch
between the interest rate exposures of its
(non-traded) assets and liabilities. The Group’s
hedge programmes for interest rate risk in the
banking book rely on behavioural assumptions
and, as a result, the success of the hedging
strategy cannot be guaranteed. A potential
mismatch in the balance or duration of the
hedge assumptions could lead to earnings
deterioration. A decline in interest rates in
G3 currencies may also compress net interest
margin on retail portfolios. In addition, the
Group’s liquidity pool is exposed to potential
capital and/or income volatility due to
movements in market rates and prices.
For further details on the Group’s
approach to treasury and capital risk,
see treasury and capital risk
management on pages 142 to 143 and
treasury and capital risk performance
on pages 178 to 199.
iv) Operational risk
Operational risk is the risk of loss to the
Group from inadequate or failed processes
or systems, human factors or due to external
events where the root cause is not due to
credit or market risks. Examples include:
a) Operational resilience
The loss of or disruption to business
processing is a material inherent risk within
the Group and across the financial services
industry, whether arising through impacts
on the Group’s technology systems, real estate
services including its retail branch network,
or availability of personnel or services supplied
by third parties. Failure to build resilience and
recovery capabilities into business processes
or into the services of technology, real estate
or suppliers on which the Group’s business
processes depend, may result in significant
customer detriment, costs to reimburse losses
incurred by the Group’s customers, and
reputational damage.
b) Capital risk
Capital risk is the risk that the Group has an
insufficient level or composition of capital to
support its normal business activities and to
meet its regulatory capital requirements under
normal operating environments or stressed
conditions (both actual and as defined for
internal planning or regulatory stress testing
purposes). This includes the risk from the
Group’s pension plans. Key capital risks that
the Group faces include:
■■ failure to meet prudential capital
requirements: this could lead to the Group
being unable to support some or all of its
business activities, a failure to pass
regulatory stress tests, increased cost of
funding due to deterioration in investor
appetite or credit ratings, restrictions on
distributions including the ability to meet
dividend targets, and/or the need to take
additional measures to strengthen the
Group’s capital or leverage position
■■ 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. Failure to appropriately
manage the Group’s balance sheet to take
account of foreign currency movements
could result in an adverse impact on
the Group’s regulatory capital and
leverage ratios
■■ adverse movements in the pension fund:
adverse movements in pension assets
and liabilities for defined benefit pension
schemes could result in deficits on a
funding and/or accounting basis. This
could lead to the Group making substantial
additional contributions to its pension
plans and/or a deterioration in its capital
position. Under IAS 19, the liabilities
discount rate is derived from the yields of
high quality corporate bonds. Therefore,
the valuation of the Group’s defined
benefits schemes would be adversely
affected by a prolonged fall in the discount
rate due to a persistent low interest rate
and/or credit spread environment. Inflation
is another significant risk driver to the
pension fund as the liabilities are adversely
impacted by an increase in long-term
inflation expectations.
iii) Treasury and capital risk
There are three primary types of treasury
and capital risk faced by the Group:
a) Liquidity risk
Liquidity risk is the risk that the Group is
unable to meet its contractual or contingent
obligations or that it does not have the
appropriate amount, tenor and composition
of funding and liquidity to support its assets.
This could cause the Group to fail to meet
regulatory liquidity standards or be unable
to support day-to-day banking activities.
Key liquidity risks that the Group faces include:
■■ the stability of the Group’s current
funding profile: in particular, that part
which is based on accounts and deposits
payable on demand or at short notice,
could be affected by the Group failing
to preserve the current level of customer
and investor confidence. The Group
also regularly accesses the money and
capital markets to provide short-term
and long-term funding to support its
operations. Several factors, including
adverse macroeconomic conditions,
adverse outcomes in conduct and legal,
competition and regulatory matters
and loss of confidence by investors,
counterparties and/or customers in the
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
■■ credit rating changes and the impact on
funding costs: rating agencies regularly
review credit ratings given to Barclays PLC
and certain members of the Group. Credit
ratings are based on a number of factors,
including some which are not within the
Group’s control (such as political and
regulatory developments, changes in
rating methodologies, macro-economic
conditions and the sovereign credit ratings
of the countries in which the Group
operates)
Whilst the impact of a credit rating
change will depend on a number of
factors (including the type of issuance
and prevailing market conditions), any
reductions in a credit rating (in particular,
any downgrade below investment grade)
may affect the Group’s access to the
money or capital markets and/or terms
on which the Group is able to obtain
market funding, increase costs of funding
and credit spreads, reduce the size of the
Group’s deposit base, trigger additional
collateral or other requirements in
derivative contracts and other secured
funding arrangements or limit the range
of counterparties who are willing to enter
into transactions with the Group. Any of
these factors could have a material
adverse effect on the Group’s business,
results of operations, financial condition
and prospects.
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f ) Algorithmic trading
In some areas of the investment banking
business, trading algorithms are used to
price and risk manage client and principal
transactions. An algorithmic error could result
in erroneous or duplicated transactions, a
system outage, or impact the Group’s pricing
abilities, which could have a material adverse
effect on the Group’s business, results of
operations, financial condition and prospects
and reputation.
g) Processing error
As a large, complex financial institution,
the Group faces the risk of material errors
in existing operational processes, or from
new processes as a result of ongoing
change activity, including payments and client
transactions. Material operational or payment
errors could disadvantage the Group’s
customers, clients or counterparties and
could have a material adverse effect on the
Group’s business, results of operations,
financial condition and prospects.
h) Supplier exposure
The Group depends on suppliers for the
provision of many of its services and the
development of technology. Whilst the
Group depends on suppliers, it remains fully
accountable for any risk arising from the
actions of suppliers. The dependency on
suppliers and sub-contracting of outsourced
services introduces concentration risk where
the failure of specific suppliers could have
an impact on the Group’s ability to continue
to provide material services to its customers.
Failure to adequately manage supplier risk
could have a material adverse effect on
the Group’s business, results of operations,
financial condition and prospects.
b) Cyberthreats
The frequency of cyberattacks continues
to grow and is a global threat that is inherent
across all industries. The financial sector
remains a primary target for cyber criminals,
hostile nation states, opportunists and
hacktivists and there is an increasing level
of sophistication in criminal hacking for
the purpose of stealing money, stealing,
destroying or manipulating data (including
customer data) and/or disrupting operations,
where multiple threats exist including threats
arising from malicious emails, distributed
denial of service (DDoS) attacks, payment
system compromises, insider attackers,
supply chain and vulnerability exploitation.
Cyber events have a compounding impact
on services and customers, e.g. data breaches
in social networking sites, retail companies
and payments networks.
Any failure in the Group’s cybersecurity
policies, procedures or controls and/or its IT
systems, may result in significant financial
losses, major business disruption, inability
to deliver customer services, or loss of data
or other sensitive information (including as a
result of an outage) and may cause associated
reputational damage. Any of these factors
could increase costs (including, but not
limited to, costs relating to notification of,
or compensation for customers) or may
affect the Group’s ability to retain and attract
customers. Regulators in the UK, US and Europe
continue to recognise cybersecurity as an
increasing systemic risk to the financial sector
and have highlighted the need for financial
institutions to improve their monitoring and
control of, and resilience (particularly of critical
services) to cyberattacks, and to provide
timely notification of them, as appropriate.
Given the Group’s reliance on technology, a
cyberattack could have a material adverse
effect on its business, results of operations,
financial condition and prospects.
For further details on the Group’s
approach to cyberthreats, see
operational risk performance on
pages 200 to 202.
c) 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,
however, also has the potential to increase
inherent risk. Failure to evaluate, actively
manage and closely monitor risk exposure
during all phases of business development
could introduce new vulnerabilities and
security flaws and have a material adverse
effect on the Group’s business, results of
operations, financial condition and prospects.
d) External fraud
The level and nature of fraud threats continue
to evolve, particularly with the increasing use
of digital products and the greater
functionality available online. Criminals
continue to adapt their techniques and are
increasingly focused on targeting customers
and clients through ever more sophisticated
methods of social engineering. External data
breaches also provide criminals with the
opportunity to exploit the growing levels of
compromised data. These fraud threats could
lead to customer detriment, loss of business,
missed business opportunity and reputational
damage, all of which could have a material
adverse effect on the Group’s business, results
of operations, financial condition and
prospects. Furthermore, recent changes in the
regulatory landscape has seen increased levels
of liability being taken by the Group as part of
a voluntary code in the UK to provide
additional protection to customers and clients
who are victims of Authorised Push Payment
scams.
e) Data management and information
protection
The Group holds and processes large volumes
of data, including personally identifiable
information, intellectual property, and financial
data. The General Data Protection Regulation
(GDPR) has strengthened the data protection
rights of customers and increased the
accountability of the Group in its management
of such data. Failure to accurately collect and
maintain this data, protect it from breaches
of confidentiality and interference with its
availability exposes the Group to the risk of
loss or unavailability of data (including
customer data discussed under ‘vi) Conduct
risk, c) Data protection and privacy’ below)
or data integrity issues. Any of these failures
could have a material adverse effect on
the Group’s business, results of operations,
financial condition and prospects.
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Material existing and emerging risks
i) Critical accounting estimates
and judgements
The preparation of financial statements
in accordance with IFRS requires the use
of estimates. It also requires management
to exercise judgement in applying relevant
accounting policies. The key areas involving
a higher degree of judgement or complexity,
or areas where assumptions are significant
to the consolidated and individual financial
statements, include credit impairment charges
for amortised cost assets, taxes, fair value of
financial instruments, pensions and post-
retirement benefits, and provisions including
conduct and legal, competition and regulatory
matters. There is a risk that if the judgement
exercised, or the estimates or assumptions
used, subsequently turn out to be incorrect,
this could result in material losses to the
Group, beyond what was anticipated or
provided for. Further development of
standards and interpretations under IFRS
could also materially impact the financial
results, condition and prospects of the Group.
For further details on the accounting
estimates and policies, see the Notes
to the audited financial statements
on pages 248 to 337.
j) 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.
In addition, increasing reporting and
disclosure requirements around the world
and the digitisation of the administration of
tax has potential to increase the Group’s tax
compliance obligations further.
k) Ability to hire and retain appropriately
qualified employees
As a regulated financial institution, the Group
requires diversified and specialist skilled
colleagues. The Group’s ability to attract,
develop and retain a diverse mix of talent is
key to the delivery of its core business activity
and strategy.
This is impacted by a range of external and
internal factors, such as the UK’s decision to
leave the EU and the enhanced individual
accountability applicable to the banking
industry. Failure to attract or prevent the
departure of appropriately qualified and skilled
employees could have a material adverse
effect on the Group’s business, results of
operations, financial condition and prospects.
Additionally, this may result in disruption to
service which could in turn lead to
disenfranchising certain customer groups,
customer detriment and reputational damage.
For further details on the Group’s
approach to operational risk, see
operational risk management on
pages 143 to 144 and operational risk
performance on pages 200 to 202.
v) Model risk
Model risk is the risk of potential adverse
consequences from financial assessments or
decisions based on incorrect or misused model
outputs and reports. The Group relies on
models to support a broad range of business
and risk management activities, including
informing business decisions and strategies,
measuring and limiting risk, valuing exposures
(including the calculation of impairment),
conducting stress testing, assessing capital
adequacy, supporting new business
acceptance and risk and reward evaluation,
managing client assets, and meeting reporting
requirements. Models are, by their nature,
imperfect and incomplete representations of
reality because they rely on assumptions and
inputs, and so they may be subject to errors
affecting the accuracy of their outputs. For
instance, the quality of the data used in models
across the Group has a material impact on
the accuracy and completeness of its risk and
financial metrics. Models may also be misused.
Model errors or misuse may result in (among
other things) the Group making inappropriate
business decisions and/or inaccuracies or
errors being identified in the Group’s risk
management and regulatory reporting
processes. This could result in significant
financial loss, imposition of additional
capital requirements, enhanced regulatory
supervision and reputational damage, all of
which could have a material adverse effect
on the Group’s business, results of operations,
financial condition and prospects.
For further details on the Group’s
approach to model risk, see model risk
management on page 144 and model
risk performance on page 203.
vi) Conduct risk
Conduct risk is the risk of detriment to
customers, clients, market integrity, effective
competition or the Group from the
inappropriate supply of financial services,
including instances of wilful or negligent
misconduct. This risk could manifest itself
in a variety of ways:
a) Employee misconduct
The Group’s businesses are exposed to risk
from potential non-compliance with its
policies and instances of wilful and negligent
misconduct by employees, all of which could
result in enforcement action or reputational
harm. It is not always possible to deter
employee misconduct, and the precautions
we take to prevent and detect this activity may
not always be effective. Employee misconduct
could have a material adverse effect on the
Group’s customers, clients, market integrity
as well as reputation, financial condition
and prospects.
b) Product governance and life cycle
The ongoing review, management and
governance of new and amended products
has come under increasing regulatory focus
(for example, the recast of the Markets in
Financial Instruments Directive and guidance
in relation to the adoption of the EU
Benchmarks Regulation) and the Group
expects this to continue. The following could
lead to poor customer outcomes:
(i) ineffective product governance, including
design, approval and review of products,
and (ii) inappropriate controls over internal
and third party sales channels and post sales
services, such as complaints handling,
collections and recoveries. The Group is at
risk of financial loss and reputational damage
as a result.
c) Financial crime
The Group may be adversely affected if it fails
to effectively mitigate the risk that third parties
or its employees facilitate, or that its products
and services are used to facilitate, financial
crime (money laundering, terrorist financing
and proliferation financing, breaches of
economic and financial sanctions, bribery and
corruption, and the facilitation of tax evasion).
UK and US regulations covering financial
institutions continue to focus on combating
financial crime. Failure to comply may lead to
enforcement action by the Group’s regulators,
including severe penalties, which may have
a material adverse effect on the Group’s
business, financial condition and prospects.
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d) Data protection and privacy
Proper handling of personal data is critical
to sustaining long-term relationships with our
customers and clients and complying with
privacy laws and regulations. Failure to protect
personal data can lead to potential detriment
to our customers and clients, reputational
damage, enforcement action and financial
loss, which may be substantial (see ‘iv)
Operational risk, (e) Data management and
information protection’ above).
e) Regulatory focus on culture
and accountability
Regulators around the world continue to
emphasise the importance of culture and
personal accountability and enforce the
adoption of adequate internal reporting
and whistleblowing procedures to help to
promote appropriate conduct and drive
positive outcomes for customers, colleagues,
clients and markets. The requirements and
expectations of the UK Senior Managers
Regime, Certification Regime and Conduct
Rules have driven additional accountabilities
for individuals across the Group with an
increased focus on governance and rigour.
Failure to meet these requirements and
expectations may lead to regulatory sanctions,
both for the individuals and the Group.
For further details on the Group’s
approach to conduct risk, see conduct
risk management on page 145
and conduct risk performance on
page 203.
vii) Reputation risk
Reputation risk is the risk that an action,
transaction, investment, event, decision or
business relationship will reduce trust in the
Group’s integrity and/or competence.
Any material lapse in standards of integrity,
compliance, customer service or operating
efficiency may represent a potential reputation
risk. Stakeholder expectations constantly
evolve, and so reputation risk is dynamic and
varies between geographical regions, groups
and individuals. A risk arising in one business
area can have an adverse effect upon the
Group’s overall reputation and any one
transaction, investment or event (in the
perception of key stakeholders) can reduce
trust in the Group’s integrity and competence.
The Group’s association with sensitive topics
and sectors has been, and in some instances
continues to be, an area of concern for
stakeholders, including (i) the financing of,
and investments in, businesses which
operate in sectors that are sensitive because
of their relative carbon intensity or local
environmental impact; (ii) potential
association with human rights violations
(including combating modern slavery) in the
Group’s operations or supply chain and by
clients and customers; and (iii) the financing
of businesses which manufacture and export
military and riot control goods and services.
Reputation risk could also arise from negative
public opinion about the actual, or perceived,
manner in which the Group conducts its
business activities, or the Group’s financial
performance, as well as actual or perceived
practices in banking and the financial services
industry generally. Modern technologies,
in particular online social media channels
and other broadcast tools that facilitate
communication with large audiences in short
time frames and with minimal costs, may
significantly enhance and accelerate the
distribution and effect of damaging
information and allegations. Negative public
opinion may adversely affect the Group’s
ability to retain and attract customers, in
particular, corporate and retail depositors,
and to retain and motivate staff, and could
have a material adverse effect on the Group’s
business, results of operations, financial
condition and prospects.
In addition to the above, reputation risk has
the potential to arise from operational issues
or conduct matters which cause detriment to
customers, clients, market integrity, effective
competition or the Group (see ‘iv) Operational
risk’ above).
For further details on the Group’s
approach to reputation risk, see
reputation risk management on page
145 and reputation risk performance
on page 203.
viii) Legal risk and legal, competition
and regulatory matters
The Group conducts activities in a highly
regulated global market which exposes it and
its employees to legal risk arising from (i) the
multitude of laws and regulations that apply
to the businesses it operates, which are highly
dynamic, may vary between jurisdictions, and
are often unclear in their application to
particular circumstances especially in new and
emerging areas; and (ii) the diversified and
evolving nature of the Group’s businesses and
business practices. In each case, this exposes
the Group and its employees to the risk of loss
or the imposition of penalties, damages or
fines from the failure of members of the
Group to meet their respective legal
obligations, including legal or contractual
requirements. Legal risk may arise in relation
to a number of the risk factors identified
above, including (without limitation) as a
result of (i) the UK’s withdrawal from the EU,
(ii) benchmark reform, (iii) the regulatory
change agenda, and (iv) rapidly evolving rules
and regulations in relation to data protection,
privacy and cybersecurity.
A breach of applicable legislation and/or
regulations by the Group or its employees
could result in criminal prosecution, regulatory
censure, potentially significant fines and other
sanctions in the jurisdictions in which the
Group operates. Where clients, customers or
other third parties are harmed by the Group’s
conduct, this may also give rise to civil legal
proceedings, including class actions. Other
legal disputes may also arise between the
Group and third parties relating to matters
such as breaches or enforcement of legal
rights or obligations arising under contracts,
statutes or common law. Adverse findings
in any such matters may result in the Group
being liable to third parties 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 26. In addition
to matters specifically described in Note 26,
the Group is engaged in various other legal
proceedings 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 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. 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; 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 or changes to laws
or regulations; 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 have a material
adverse effect on the Group’s business,
results of operations, financial condition
and prospects.
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Climate change risk management
Overview
The Group has a long-standing commitment to Environmental Risk Management (ERM) and its approach, aided by regulatory initiatives, has
continued to evolve, incorporating climate change in recent years as the understanding of associated risks has grown. In 2018, a dedicated
Sustainability team was created to consider how the Group approaches wider sustainability and ESG matters, working closely with the ERM function.
In 2019, the Group published an Energy & Climate Change Statement (home.barclays/statements/barclays-energy-and-climate-change-
statement) which articulates our focus on three areas: financing growth of renewables and businesses addressing environmental challenges;
taking a responsible approach to financing energy sources with a greater carbon intensity; and reducing our own carbon footprint.
It is supported by an internal standard containing guidelines for restricting or supporting financing activities in carbon-intensive energy sectors,
as well as enhanced due diligence requirements for environmentally or socially sensitive sectors.
For more detail on how climate change risks arise and their impact on the Group, refer to material existing and emerging risks on page 131.
Organisation and structure
On behalf of the Board, the BRC reviews and approves the Group’s approach to managing the financial and operational risks associated with
climate change.
Broadly, climate change matters are co-ordinated by the Sustainability team, including reputation risks linked to the Group’s financial and societal
impact. In 2019, reputation risk became the responsibility of the Board, where the most material issues facing the Group are escalated to and
directly handled by the Board.
Governance
Enterprise Risk Management Framework (ERMF)
Board Risk Committee
Board
Credit, market, treasury & capital
and operational risks
Sustainability matters and reputation risk
associated with climate change
Ownership
Group Chief Risk Officer
Global Head of Sustainability
Risk management – policy
In 2019, the Group published a ‘Climate Change Financial Risk and Operational Risk Policy’. This introduced climate change as an overarching risk
impacting certain principal risks: credit risk, market risk, treasury & capital risk and operational risk. The policy is jointly owned by the relevant
Principal Risk Leads with oversight by the BRC.
Each relevant Principal Risk Lead has developed a methodology and implementation plan for quantifying climate change risk.
Risk
Credit risk
Market risk
Measurement approach
A Credit Risk Materiality Matrix (Climate Lens) assesses the climate change risk of a counterparty to which
the Group is exposed. The Climate Lens considers transition factors such as a counterparty’s reliance on
fossil fuels, sensitivity to policy changes and ability to diversify, as well as exposure to physical risks. Where
an obligor is rated as Medium or High, the details are referred to the Environmental Risk Management team,
who conduct enhanced due diligence.
Stress tests are used to assess and aggregate exposures arising from climate related risks. Stress test
scenarios are applied to a range of assets, reflecting the impact of climate change across sectors, countries
and regions.
Treasury and capital risk
Stress tests are used to assess and aggregate exposures arising from climate related risks. They are
measured as part of existing stress testing, ICAAP and capital planning.
Operational risk
The risks associated with Climate Change are relevant to the following Operational Risk Categories/Themes,
which are managed through the Operational Risk Framework: Premises Risk, Supplier Risk and Resilience.
Climate Change has been included in the Strategic Risk Assessment to understand exposure on a forward
looking basis across the five-year business planning cycle.
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Principal risk management
Credit risk management (audited)
The risk of loss to the Group from the failure of clients, customers or counterparties, including sovereigns, to fully honour their obligations to the
Group, including the whole and timely payment of principal, interest, collateral and other receivables.
Overview
The credit risk that the Group faces arises from wholesale and retail loans and advances together with the counterparty credit risk arising from
derivative contracts with clients; trading activities, including: debt securities, settlement balances with market counterparties, FVOCI assets and
reverse repurchase loans.
Credit risk management objectives are to:
■■ maintain a framework of controls to oversee credit risk
■■ identify, assess and measure credit risk clearly and accurately across the 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.
Organisation, roles and responsibilities
The first line of defence has primary responsibility for managing credit risk within the risk appetite and limits set by the Risk function, supported by
a defined set of policies, standards and controls. In the entities, business risk committees (attended by the first line) monitor and review the credit
risk profile of each business unit where the most material issues are escalated to the Retail Credit Risk Management Committee, Wholesale Credit
Risk Management Committee and Group Risk Committee.
Wholesale and retail portfolios are managed separately to reflect the differing nature of the assets; wholesale balances tend to be larger and are
managed on an individual basis, while retail balances are greater in number but lesser in value and are, therefore, managed in aggregated segments.
The responsibilities of the credit risk management teams in the businesses, the sanctioning team and other shared services include: sanctioning
new credit agreements (principally wholesale); setting strategies for approval of transactions (principally retail); setting risk appetite; monitoring
risk against limits and other parameters; maintaining robust processes, data gathering, quality, storage and reporting methods for effective credit
risk management; performing effective turnaround and workout scenarios for wholesale portfolios via dedicated restructuring and recoveries
teams; maintaining robust collections and recovery processes/units for retail portfolios; and review and validation of credit risk measurement
models. The credit risk management teams in each legal entity are accountable to the relevant Legal Entity CRO, who reports to the Group CRO.
For wholesale portfolios, credit risk managers are organised in sanctioning teams by geography, industry and/or product. In wholesale portfolios,
credit risk approval is undertaken by experienced credit risk professionals operating within a clearly defined delegated authority framework, with
only the most senior credit officers assigned the higher levels of delegated authority. The largest credit exposures, which are outside the Risk
Sanctioning Unit or Risk Distribution Committee authority, require the support of a legal entity Senior Credit Officer. For exposures in excess of the
legal entity Senior Credit Officer’s authority, approval by Group Senior Credit Officer/Board Risk Committee is also required. The Group Credit Risk
Committee, attended by legal entity Senior Credit Officers, provides a formal mechanism for the Group Senior Credit Officer to exercise the highest
level of credit authority over the most material Group single name exposures.
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
Credit risk exposures can be reduced by applying netting and set-off. For derivative transactions, the Group’s normal practice is, on a legal entity
basis, 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.
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Principal risk management
Collateral
The Group has the ability to call on collateral in the event of default of the counterparty, comprising:
■■ home loans: a fixed charge over residential property in the form of houses, flats and other dwellings
■■ wholesale lending: a fixed charge over commercial property and other physical assets, in various forms
■■ other retail lending: includes charges over motor vehicles and other physical assets; second lien charges over residential property; and finance
lease receivables
■■ derivatives: the Group also often seeks to enter into a margin agreement (e.g. Credit Support Annex) 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
■■ 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. For more information, refer to pages 175 to 177 of
the Barclays PLC Pillar 3 Report 2019 (unaudited).
Governance and oversight of ECLs under IFRS 9
The Group’s organisational structure and internal governance processes oversee the estimation of ECL across several areas, including: i) setting
requirements in policy, including key assumptions and the application of key judgements; ii) the design and execution of models; and iii) review of
ECL results.
i) Impairment policy requirements are set and reviewed regularly, at a minimum annually, to maintain adherence to accounting standards. Key
judgements inherent in policy, including the estimated life of revolving credit facilities and the quantitative criteria for assessing the significant
increase in credit risk (SICR), are separately supported by analytical study. In particular, the quantitative thresholds used for assessing SICR are
subject to a number of internal validation criteria, particularly in retail portfolios where thresholds decrease as the origination PD of each facility
increases. Key policy requirements are also typically aligned to the Group’s credit risk management strategy and practices, for example, wholesale
customers that are risk managed on an individual basis are assessed for ECL on an individual basis upon entering Stage 3; furthermore, key
internal risk management indicators of high risk are used to set SICR policy, for example, retail customers identified as High Risk Management
Accounts are automatically deemed to have met the SICR criteria.
ii) ECL is estimated in line with internal policy requirements using models which are validated by a qualified independent party to the model
development area, the Independent Validation Unit (IVU), before first use and at a minimum annually thereafter. Each model is designated an
owner who is responsible for:
■■ model maintenance: monitoring of model performance including backtesting by comparing predicted ECL versus flow into Stage 3 and
coverage ratios; proposing material changes for independent IVU approval; and recalibrating model parameters on more timely data; and
■■ proposing post-model adjustments (PMA) to address model weaknesses or to account for situations where known or expected risk factors
and information have not been considered in the modelling process. Each PMA above an absolute and relative threshold is approved by the IVU
for a set time period (usually a maximum of six months) together with a plan for remediation where related to a model deficiency. The most
material PMAs are also approved by the CRO.
Models must also assess ECL across a range of future economic conditions. These economic scenarios are generated via an independent model
and ultimately set by the Senior Scenario Review Committee. Economic scenarios are regenerated at a minimum annually, to align with the
Group’s medium-term planning exercise, but also if the external consensus of the UK or US economy materially worsen. Each model used in the
estimation of ECL, including key inputs, are governed by a series of internal controls, which include the validation of completeness and accuracy of
data in golden source systems, documented data transformations and documented lineage of data transfers between systems.
iii) The Group Impairment Committee, formed of members from both Finance and Risk and attended by both the Group Finance Director and the
Group CRO, is responsible for overseeing impairment policy and practice across the Group and will approve impairment results. Reported results
and key messages are communicated to the BAC, which has an oversight role and provides challenge of key assumptions, including the basis of
the scenarios adopted. Impairment results are then factored into management decision-making, including but not limited to, business planning,
risk appetite setting and portfolio management.
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Market risk management (audited)
The risk of loss arising from potential adverse changes in the value of the Group’s assets and liabilities from fluctuation in market variables
including, but not limited to, interest rates, foreign exchange, equity prices, commodity prices, credit spreads, implied volatilities and
asset correlations.
Overview
Market risk arises primarily as a result of client facilitation in wholesale markets, involving market-making activities, risk management solutions
and execution of syndications. Upon execution of a trade with a client, the Group will look to hedge against the risk of the trade moving in an
adverse direction. Mismatches between client transactions and hedges result in market risk due to changes in asset prices, volatility or correlations.
Organisation, roles and responsibilities
Market risk in the businesses resides primarily in Barclays International and Treasury. These businesses have the mandate to assume market risk.
The front office and Treasury trading desks are responsible for managing market risk on a day-to-day basis, where they are required to understand
and adhere to all limits applicable to their businesses. The Market Risk team support the trading desks with the day-to-day limit management of
market risk exposures through governance processes which are outlined in supporting market risk policies and standards.
Market risk oversight and challenge is provided by business committees and Group committees, including the Market Risk Committee.
The objectives of market risk management are to:
■■ identify, understand and control market risk by robust measurement, limit setting, reporting and oversight
■■ facilitate business growth within a controlled and transparent risk management framework
■■ control market risk in the businesses according to the allocated appetite.
To meet the above objectives, a governance structure is in place to manage these risks consistent with the ERMF.
The 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 market or regulatory issues and limits and utilisation.
The committee is chaired by the PR Lead and attendees include the business heads of market risk and business aligned market risk managers.
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.
For more information on market risk management, refer to the Barclays PLC Pillar 3 Report 2019 (unaudited).
Management value at risk (VaR)
VaR is an estimate of the potential loss arising from unfavourable market movements if the current positions were to be held unchanged for one
business day. For internal market risk management purposes, a historical simulation methodology with a two-year equally weighted historical
period, at the 95% confidence level is used for all trading books and some banking books.
In some instances, historical data is not available for particular market risk factors for the entire look-back period, for example, complete historical
data would not be available for an equity security following an initial public offering. In these cases, market risk managers will proxy the
unavailable market risk factor data with available data for a related market risk factor.
Limits are applied at the total level as well as by risk factor type, which are then cascaded down to particular trading desks and businesses by the
market risk management function.
See page 177 for a review of management VaR in 2019.
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Principal risk management
Treasury and capital risk management
This comprises:
Liquidity risk: the risk that the Group is unable to meet its contractual or contingent obligations or that it does not have the appropriate amount,
tenor and composition of funding and liquidity to support its assets.
Capital risk: the risk that the Group has an insufficient level or composition of capital to support its normal business activities and to meet its
regulatory capital requirements under normal operating environments or stressed conditions (both actual and as defined for internal planning or
regulatory testing purposes). This also includes the risk from the Group’s pension plans.
Interest rate risk in the banking book: the risk that the Group is exposed to capital or income volatility because of a mismatch between
the interest rate exposures of its (non traded) assets and liabilities.
The Treasury function manages treasury and capital risk exposure on a day-to-day basis with the Group Treasury Committee acting as the
principal management body. The Treasury and Capital Risk function is responsible for oversight and provides insight into key capital, liquidity,
interest rate risk in the banking book (IRRBB) and pension risk management activities.
Liquidity risk management (audited)
Overview
The efficient management of liquidity is essential to the Group in order to retain the confidence of the financial markets and maintain the
sustainability of the business. The liquidity risk control framework is used to manage all liquidity risk exposures under both BAU and stressed
conditions. The framework is designed to maintain liquidity resources that are sufficient in amount, quality and funding tenor profile to support
the liquidity risk appetite as expressed by the Barclays PLC Board. The liquidity risk appetite is monitored against both internal and regulatory
liquidity metrics.
Organisation, roles and responsibilities
Treasury has the primary responsibility for managing liquidity risk within the set risk appetite. Both Risk and Treasury contribute to the production
of the Internal Liquidity Adequacy Assessment Process (ILAAP). The Treasury and Capital Risk function is responsible for the management and
governance of the liquidity risk mandate, as defined by the Board.
The liquidity risk control framework is designed to deliver the appropriate term and structure of funding, consistent with the liquidity risk appetite
set by the Board. The control framework incorporates a range of ongoing business management tools to monitor, limit and stress test the Group’s
balance sheet, contingent liabilities and 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 Board approves the Group funding plan, internal stress tests, regulatory stress test results, and recovery plan. The Group Treasury Committee
is responsible for monitoring and managing liquidity risk in line with the Group’s funding management objectives, funding plan and risk
framework. The Treasury and Capital Risk Committee monitors and reviews the liquidity risk profile and control environment, providing second
line oversight of the management of liquidity risk. The BRC reviews the risk profile, and annually reviews risk appetite and the impact of stress
scenarios on the Group funding plan/forecast in order to agree the Group’s projected funding abilities.
Capital risk management (audited)
Overview
Capital risk is managed through ongoing monitoring and management of the capital position, regular stress testing and a robust capital
governance framework. The objectives of the framework are to maintain adequate capital for the Group and legal entities to withstand the impact
of the risks that may arise under normal and stressed conditions, and maintain adequate capital to cover current and forecast business needs and
associated risks to provide a viable and sustainable business offering.
Organisation, roles and responsibilities
Treasury has the primary responsibility for managing and monitoring capital. The Treasury and Capital Risk function provides oversight of capital
risk and is an independent risk function that reports to the Group CRO. Production of the Barclays PLC Internal Capital Adequacy Assessment
Process (ICAAP) is the responsibility of the Treasury.
Capital risk management is underpinned by a control framework and policy. The capital management strategy, outlined in the Group and legal
entity capital plans, is developed in alignment with the control framework and policy for capital risk, and is implemented consistently in order to
deliver on the Group’s objectives.
The Board approves the Group capital plan, internal stress tests and results of regulatory stress tests, and the Group recovery plan. The Group
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 (ALCOs) with oversight by the Group Treasury Committee, as required. In 2019, Barclays complied with all regulatory minimum
capital requirements.
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Pension risk
The Group maintains a number of defined benefit pension schemes for past and current employees. The ability of schemes to meet pension
payments is achieved with investments and contributions.
Pension risk arises because the market value of pension fund assets might decline; investment returns might reduce; or the estimated value of
pension liabilities might increase. The 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 (IRRBB)
Overview
Interest rate risk in the banking book is driven by customer deposit taking and lending activities, investments in the liquid asset portfolio and
funding activities. As per the Group’s policy to remain within the defined risk appetite, businesses and Treasury execute hedging strategies to
mitigate the risks. However, the Group remains susceptible to interest rate risk and other non-traded market risks from key sources:
■■ interest rate and repricing risk: the risk that net interest income could be adversely impacted by a change in interest rates, differences in the
timing of interest rate changes between assets and liabilities, and other constraints on interest rate changes as per product terms and
conditions
■■ customer behavioural risk: the risk that net interest income could be adversely impacted by the discretion that customers and counterparties
may have in respect of being able to vary their contractual obligations with Barclays. This risk is often referred to by industry regulators as
‘embedded option risk’
■■ investment risks in the liquid asset portfolio: the risk that the fair value of assets held in the liquid asset portfolio and associated risk
management portfolios could be adversely impacted by market volatility, creating volatility in capital directly.
Organisation, roles and responsibilities
The entity ALCOs, together with the Group Treasury Committee, are responsible for monitoring and managing IRRBB risk in line with the Group’s
management objectives and risk frameworks. The GRC and Treasury and Capital Risk Committee monitors and reviews the IRRBB risk profile and
control environment, providing second line oversight of the management of IRRBB. The BRC reviews the interest rate risk profile, including annual
review of the risk appetite and the impact of stress scenarios on the interest rate risk of the Group’s banking books.
In addition, the Group’s IRRBB policy sets out the processes and key controls required to identify all IRRBB risks arising from banking book
operations, to monitor the risk exposures via a set of metrics with a frequency in line with the risk management horizon, and to manage these
risks within agreed risk appetite and limits.
Operational risk management
The risk of loss to the Group from inadequate or failed processes or systems, human factors or due to external events (for example, fraud) where
the root cause is not due to credit or market risks.
Overview
The management of operational risk has three key objectives:
■■ deliver an operational risk capability owned and used by business leaders to enable sound risk decisions over the long term
■■ provide the frameworks, policies and standards to enable management to meet their risk management responsibilities while the second line
of defence provides robust, independent, and effective oversight and challenge
■■ 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 and
stakeholder needs.
The Group operates within a system of internal controls that enables business to be transacted and risk taken without exposing it to unacceptable
potential losses or reputational damages.
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Principal risk management
Organisation, roles and responsibilities
The prime responsibility for the management of operational risk and the compliance with control requirements rests within the business and
functional units where the risk arises. The operational risk profile and control environment is reviewed by management through business risk
committees and control committees. Legal entities, businesses and functions are required to report their operational risks on both a regular and an
event-driven basis. The reports include a profile of the material risks that may threaten the achievement of their objectives and the effectiveness of
key controls, operational risk events and a review of scenarios.
The 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 the Group’s operational risk profile. ORM alerts management when risk levels exceed acceptable tolerance in
order to drive timely decision-making and actions by the first line of defence. Operational risk issues escalated from these meetings are considered
through the second line of defence review meetings. Depending on their nature, the outputs of these meetings are presented to the operational
risk profile forum, the BRC or the BAC. In addition, specific reports are prepared by Operational Risk on a regular basis for the GRC and the BRC.
Operational risk categories
Operational risks are grouped into risk categories to support effective risk management, measurement and reporting. These comprise: Data
Management & Information Risk; Financial Reporting Risk; Fraud Risk; Payments Process Risk; People Risk; Premises Risk; Physical Security Risk;
Supplier Risk; Tax Risk; Technology Risk; Transaction Operations Risk and Execution Risk.
In addition to the above, operational risk encompasses risks associated with prudential regulation. This includes the risk of failing to: adhere to
prudential regulatory requirements, provide regulatory submissions, or monitor and manage adherence to new prudential regulatory requirements.
Enterprise risk themes
Barclays also recognises that there are certain threats/risk drivers that are more thematic and have the potential to impact the Group’s strategic
objectives. These are enterprise risk themes which require an overarching and integrated risk management approach. The Group’s enterprise risk
themes include Cyber, Data, and Resilience.
For definitions of the Group’s operational risk categories and enterprise risk themes, refer to pages 198 to 201 of the Barclays PLC Pillar 3 Report 2019.
Model risk management
The risk of the potential adverse consequences from financial assessments or decisions based on incorrect or misused model outputs and reports.
Overview
The Group uses models to support a broad range of activities, including informing business decisions and strategies, measuring and limiting risk,
valuing exposures, conducting stress testing, assessing capital adequacy, managing client assets, and meeting reporting requirements.
Since models are imperfect and incomplete representations of reality, they may be subject to errors affecting the accuracy of their output. Model
errors and misuse are the primary sources of model risk.
Organisation, roles and responsibilities
The Group has a dedicated Model Risk Management (MRM) function that consists of two main units: the Independent Validation Unit (IVU),
responsible for model validation and approval, and Model Governance and Controls (MGC), covering model risk governance, controls and reporting,
including ownership of model risk policy and the model inventory.
The model risk management framework consists of the model risk policy and standards. The policy prescribes Group-wide, end-to-end
requirements for the identification, measurement and management of model risk, covering model documentation, development, implementation,
monitoring, annual review, independent validation and approval, change and reporting processes. The policy is supported by global standards
covering model inventory, documentation, validation, complexity and materiality, testing and monitoring, overlays, risk appetite, as well as vendor
models and stress testing challenger models.
The function reports to the Group CRO and operates a global framework. Implementation of best practice standards is a central objective of
the Group.
The key model risk management activities include:
■■ correctly identifying models across all relevant areas of the Group, and recording models in the Group Models Database (GMD), the Group-
wide model inventory
■■ enforcing that every model has a model owner who is accountable for the model. The model owner must sign off models prior to submission
to IVU for validation and maintain that the model presented to IVU is and remains fit for purpose
■■ overseeing that every model is subject to validation and approval by IVU, prior to being implemented and on a continual basis
■■ defining model risk appetite in terms of risk tolerance, and qualitative metrics which are used to track and report model risk.
144 Barclays PLC Annual Report 2019
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Conduct risk management
The risk of detriment to customers, clients, market integrity, effective competition or Barclays from the inappropriate supply of financial services,
including instances of wilful or negligent misconduct.
Overview
The Group defines, manages and mitigates conduct risk with the objective of providing good customer and client outcomes, protecting market
integrity and promoting effective competition.
Product Life cycle, Culture and Strategy and Financial Crime are the risk categories under the Group definition of conduct risk.
Organisation, roles and responsibilities
The governance of conduct risk within the Group is fulfilled through management committees and forums operated by the first and second lines
of defence with clear escalation and reporting lines to the Board.
The Group Risk Committee is the most senior executive body responsible for reviewing and monitoring the effectiveness of the Group’s
management of conduct risk.
The Conduct Risk Management Framework (CRMF) outlines how the Group manages and measures its conduct risk profile.
Senior managers have accountability for managing conduct risk in their areas of responsibility. This is expressed in their Statements of
Responsibilities. The primary responsibility for managing conduct risk 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. This includes defining and
owning the relevant conduct risk policies and oversight of the implementation of controls to manage and escalate the risk.
The Group and the Barclays UK Risk Committees are the primary second line governance committees for oversight of conduct risk profile and
implementation of the CRMF. The responsibilities of these risk committees in relation to the trading entities includes the identification and
discussion of any emerging conduct risks exposures which have been identified.
Reputation risk management
The risk that an action, transaction, investment, event, decision, or business relationship will reduce trust in the Group’s integrity
and/or competence.
Overview
A reduction of trust in the Group’s integrity and competence may reduce the attractiveness of the Group 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, roles and responsibilities
The GRC is the most senior executive body responsible for reviewing and monitoring the effectiveness of the Group’s management of reputation risk.
The Group Chief Compliance Officer is accountable for developing a Reputation Risk Management Framework (RRMF), and the Head of Corporate
Relations is responsible for developing a reputation risk policy and associated standards, including tolerances against which data is monitored,
reported on and escalated, as required. The RRMF sets out what is required to manage reputation risk across the Group.
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 Bank Group and Barclays Bank UK Group are required to operate within established reputation risk appetite, and their component
businesses prepare reports for their respective Risk and Board Risk Committees 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 the Board.
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Barclays PLC Annual Report 2019 145
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review RISK REVIEW
Principal risk management
Legal risk management
The risk of loss or imposition of penalties, damages or fines from the failure of the Group to meet its legal obligations including regulatory or
contractual requirements.
Overview
The Group has no tolerance for wilful breaches of laws, regulations or other legal obligations. However, the multitude of laws and regulations
across the globe are highly dynamic and their application to particular circumstances is often unclear; this results in a level of inherent legal risk,
for which the Group has limited tolerance.
Organisation, roles and responsibilities
The Group’s businesses and functions have primary responsibility for identifying, managing and escalating legal risk in their area as well as
responsibility for adherence to minimum control requirements.
The Legal Function organisation and coverage model aligns expertise to businesses, functions, products, activities and geographic locations so
that the Group receives legal support from appropriate legal professionals. The senior management of the Legal Function oversees, monitors and
challenges legal risk across the Group. The Legal Function does not sit in any of the three lines of defence but supports them all.
The Group General Counsel is responsible for maintaining an appropriate Group-wide legal risk management framework. This includes defining
the relevant legal risk policies and oversight of the implementation of controls to manage and escalate legal risk.
The legal risk profile and control environment is reviewed by management through business risk committees and control committees. The Group
Risk Committee is the most senior executive body responsible for reviewing and monitoring the effectiveness of risk management across the
Group. Escalation paths from this committee exist to the Barclays PLC Board Risk Committee.
146 Barclays PLC Annual Report 2019
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RISK REVIEW: CREDIT RISK
Risk performance
Credit risk: summary of contents
Credit risk represents a significant risk 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 outlines the expected credit loss allowances,
the movements in allowances during the period,
material management adjustments to model output
and measurement uncertainty and sensitivity analysis.
The Group reviews and monitors risk concentrations in a
variety of ways. This section outlines performance against
key concentration risks.
Credit risk monitors exposure performance across a range
of significant portfolios.
The Group monitors exposures to assets where there is
a heightened likelihood of default and assets where an
actual default has occurred. From time to time, suspension
of certain aspects of client credit agreements are agreed,
generally during temporary periods of financial difficulties
where the Group is confident that the client will be able to
remedy the suspension. This section outlines the current
exposure to assets with this treatment.
■■ Credit risk overview and summary of performance
■■ Maximum exposure and effects of netting, collateral and risk transfer
■■ Expected Credit Losses
– Loans and advances at amortised cost by stage
– Loans and advances at amortised cost by product
– Movement in gross exposure and impairment allowance
for loans and advances at amortised cost
– Stage 2 decomposition
– Stage 3 decomposition
■■ Management adjustments to models for impairment
■■ Measurement uncertainty and sensitivity analysis
■■ Analysis of the concentration of credit risk
– Geographic concentrations
– Industry concentrations
■■ Approach to management and representation of credit quality
– Asset credit quality
– Debt securities
– Balance sheet credit quality
– Credit exposures by internal PD grade
■■ Analysis of specific portfolios and asset types
– Secured home loans
– Credit cards, unsecured loans and other retail lending
– Exposure to UK commercial real estate
■■ Forbearance
– Retail forbearance programmes
– Wholesale forbearance programmes
This section provides an analysis of credit risk on debt
securities and derivatives.
■■ Analysis of debt securities
■■ Analysis of derivatives
Page
148
148
151
151
153
154
157
157
157
158
163
163
163
165
165
165
165
167
169
169
170
171
172
173
174
174
175
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Barclays PLC Annual Report 2019 147
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review Credit risk
All disclosures in this section (pages
148 to 175) are unaudited unless
otherwise stated.
Overview
Credit risk represents a significant risk
to the Group and mainly arises from
exposure to wholesale and retail loans
and advances together with the
counterparty credit risk arising from
derivative contracts entered into with
clients.
Credit risk disclosures include many
of the recommendations of the
Taskforce on Disclosures about
Expected Credit Losses (DECL) and it
is expected that relevant disclosures
will continue to be developed in future
periods.
Further detail can be found in the
Financial statements section in
Note 7 Credit impairment charges.
Descriptions of terminology can
be found in the glossary, available
at home.barclays/annualreport
Key metrics
Reduction in impairment
allowances of
£411m
Impairment allowances on loans
and advances at amortised cost,
including off-balance sheet elements
of the allowance, decreased by £411m
to £6,630m (2018: £7,041m). The
decrease is driven by Barclays UK
£300m, Barclays International £92m
and Head Office £19m. Refer to the
Expected Credit Losses section on
page 151 for further details.
Summary of performance
in the period
Credit impairment charges increased to
£1,912m (2018: £1,468m). The 2019 charge
includes the impact of macroeconomic
scenario updates and an overall reduction in
unsecured gross exposures. Prior year
comparatives included the impact of
favourable macroeconomic scenario updates
and a £150m charge regarding the anticipated
economic uncertainty in the UK. The Group
loan loss rate was 55bps (2018: 44bps).
Refer to the credit risk management section
on pages 139 to 140 for details of governance,
policies and procedures.
Maximum exposure and
effects of netting, collateral
and risk transfer
Basis of preparation
The following tables present a reconciliation
between the maximum exposure and its net
exposure to credit risk, reflecting the financial
effects of risk mitigation reducing
the 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.
This and subsequent analyses of credit risk
exclude other financial assets not subject
to credit risk, mainly equity securities.
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
175 to 177 of the Barclays PLC Pillar 3
Report 2019 (unaudited).
Overview
As at 31 December 2019, the Group’s net
exposure to credit risk, after taking into
account credit risk mitigation, decreased
0.9% to £800.3bn. Overall, the extent to
which the Group holds mitigation against
its total exposure remained unchanged at
43% (2018: 43%).
Of the unmitigated on-balance sheet
exposure, a significant portion relates to
cash held at central banks, cash collateral
and settlement balances, and debt securities
issued by governments all of which are
considered to be lower risk. The decrease in
the Group’s net exposure to credit risk is due
to decreases in cash held at central banks and
trading portfolio assets, offset by increases in
cash collateral and settlement balances,
financial assets at fair value through other
comprehensive income and off-balance sheet
loan commitments. 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
165 to 168.
Collateral obtained
Where collateral has been obtained in
the event of default, the Group does not,
ordinarily, use such assets for its own
operations and they are usually sold on
a timely basis. The carrying value of assets
held by the Group as at 31 December 2019,
as a result of the enforcement of collateral,
was £6m (2018: £6m).
148 Barclays PLC Annual Report 2019
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RISK REVIEW: CREDIT RISK Risk performance Maximum exposure and effects of netting, collateral and risk transfer (audited)
As at 31 December 2019
On-balance sheet:
Cash and balances at central banks
Cash collateral and settlement balances
Loans and advances at amortised cost:
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Total loans and advances at amortised cost
Of which credit-impaired (Stage 3):
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Total credit-impaired loans and advances at amortised cost
Reverse repurchase agreements and other similar secured lending
Trading portfolio assets:
Debt securities
Traded loans
Total trading portfolio assets
Financial assets at fair value through the income statement:
Loans and advances
Debt securities
Reverse repurchase agreements
Other financial assets
Total financial assets at fair value through the income statement
Derivative financial instruments
Financial assets at fair value through other comprehensive income
Other assets
Total on-balance sheet
Off-balance sheet:
Contingent liabilities
Loan commitments
Total off-balance sheet
Total
Maximum
exposure
£m
Netting and
set-off
£m
Cash
collateral
£m
Non-cash
collateral
£m
Risk
transfer
£m
Net
exposure
£m
–
–
–
–
–
–
–
–
150,258
83,256
–
–
(7,636)
(7,636)
(294)
(778)
(148)
(1,220)
(153,939)
(5,283)
(39,981)
(199,203)
(70)
(258)
(12,071)
(12,399)
176
48,977
69,504
118,657
–
–
–
–
–
–
–
–
(2)
(12)
(9)
(23)
–
–
–
–
(1,785)
(250)
(909)
(2,944)
(3,379)
(423)
(134)
(557)
(14)
(2)
(20)
(36)
–
–
–
–
150,258
83,256
154,479
55,296
129,340
339,115
1,809
1,074
1,812
4,695
3,379
52,739
5,378
58,117
22,692
5,249
96,887
763
125,591
229,236
64,727
1,375
1,055,054
–
–
–
–
–
(175,998)
–
–
(183,634)
(14)
–
(1,132)
–
(1,146)
(33,411)
–
–
(35,777)
(16,580)
–
(95,736)
–
(112,316)
(5,511)
(305)
–
(321,271)
(57)
–
–
–
(57)
(5,564)
(1,051)
–
(19,071)
24,527
334,455
358,982
–
–
–
(400)
(84)
(484)
(4,412)
(47,008)
(51,420)
(159)
(1,950)
(2,109)
19,556
285,413
304,969
1,414,036
(183,634)
(36,261)
(372,691)
(21,180)
800,270
8
810
874
1,692
–
52,316
5,244
57,560
6,041
5,249
19
763
12,072
8,752
63,371
1,375
495,301
Off-balance sheet exposures are shown gross of provisions of £322m (2018: £271m). See Note 25 for further details.
In addition to the above, the Group holds forward starting reverse repos with notional contract amounts of £31.1bn (2018: £35.5bn). The balances
are fully collateralised.
For further information on credit risk mitigation techniques, refer to page 139 within the Credit risk management section.
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Barclays PLC Annual Report 2019 149
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review Maximum exposure and effects of netting, collateral and risk transfer (audited)
As at 31 December 2018
On-balance sheet:
Cash and balances at central banks
Cash collateral and settlement balances
Loans and advances at amortised cost:
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Total loans and advances at amortised cost
Of which credit-impaired (Stage 3):
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Total credit-impaired loans and advances at amortised cost
Reverse repurchase agreements and other similar secured lending
Trading portfolio assets:
Debt securities
Traded loans
Total trading portfolio assets
Financial assets at fair value through the income statement:
Loans and advances
Debt securities
Reverse repurchase agreements
Other financial assets
Total financial assets at fair value through the income statement
Derivative financial instruments
Financial assets at fair value through other comprehensive income
Other assets
Total on-balance sheet
Off-balance sheet:
Contingent liabilities
Loan commitments
Total off-balance sheet
Total
Maximum
exposure
£m
Netting and
set-off
£m
Cash
collateral
£m
Non-cash
collateral
£m
Risk
transfer
£m
Net
exposure
£m
177,069
77,222
150,284
56,431
119,691
326,406
2,125
1,249
1,762
5,136
2,308
57,283
7,234
64,517
19,524
4,522
119,041
542
143,629
222,538
51,694
1,006
1,066,389
20,303
324,223
344,526
–
–
–
–
–
–
–
–
177,069
77,222
–
–
(7,550)
(7,550)
(295)
(725)
(65)
(1,085)
(149,679)
(5,608)
(41,042)
(196,329)
(132)
(451)
(4,454)
(5,037)
178
49,647
66,580
116,405
–
–
–
–
–
–
–
–
(3)
(6)
–
(9)
(17)
–
–
–
(2,083)
(232)
(895)
(3,210)
(2,261)
(451)
(154)
(605)
(31)
(38)
(17)
(86)
–
–
–
–
–
–
–
–
–
(172,001)
–
–
(179,551)
(11)
–
(2,996)
–
(3,007)
(31,402)
–
–
(35,511)
(11,782)
(445)
(115,601)
–
(127,828)
(5,502)
–
–
(332,525)
(89)
–
–
–
(89)
(4,712)
(399)
–
(10,237)
8
973
850
1,831
30
56,832
7,080
63,912
7,642
4,077
444
542
12,705
8,921
51,295
1,006
508,565
–
–
–
(399)
(124)
(523)
(1,418)
(42,117)
(43,535)
(190)
(1,395)
(1,585)
18,296
280,587
298,883
1,410,915
(179,551)
(36,034)
(376,060)
(11,822)
807,448
150 Barclays PLC Annual Report 2019
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RISK REVIEW: CREDIT RISK Risk performance Expected Credit Losses
Loans and advances at amortised cost by stage
The table below presents an analysis of loans and advances at amortised cost by gross exposure, impairment allowance, coverage ratio and
impairment charge by stage allocation and business segment as at 31 December 2019. Also included are off-balance sheet loan commitments
and financial guarantee contracts by gross exposure and impairment allowance and coverage ratio by stage allocation as at 31 December 2019.
Impairment allowance under IFRS 9 considers both the drawn and the undrawn counterparty exposure. For retail portfolios, the total impairment
allowance is allocated to the drawn exposure to the extent that the allowance does not exceed the exposure as ECL is not reported separately.
Any excess is reported on the liability side of the balance sheet as a provision. For wholesale portfolios, the impairment allowance on the undrawn
exposure is reported on the liability side of the balance sheet as a provision.
Loans and advances at amortised cost by stage (audited)
As at 31 December 2019
Barclays UK
Barclays International
Head Office
Total Barclays Group retail
Barclays UK
Barclays Internationala
Head Office
Total Barclays Group wholesale
Total loans and advances
at amortised cost
Off-balance sheet loan
commitments and financial
guarantee contractsb
Totalc
Gross exposure
Impairment allowance
Stage 1
£m
143,097
27,886
4,803
175,786
27,891
92,615
2,974
123,480
Stage 2
£m
23,198
4,026
500
27,724
2,397
8,113
–
10,510
Stage 3
£m
2,446
1,875
826
5,147
1,124
1,615
37
2,776
Total
£m
168,741
33,787
6,129
208,657
31,412
102,343
3,011
136,766
Stage 1
£m
198
352
5
555
16
136
–
152
Stage 2
£m
1,277
774
36
2,087
38
248
–
286
Stage 3
£m
974
1,359
305
2,638
108
447
35
590
Total
£m
2,449
2,485
346
5,280
162
831
35
1,028
Net
exposure
£m
166,292
31,302
5,783
203,377
31,250
101,512
2,976
135,738
299,266
38,234
7,923
345,423
707
2,373
3,228
6,308
339,115
321,140
620,406
19,185
57,419
935
8,858
341,260
686,683
97
804
170
2,543
55
3,283
322
6,630
340,938
680,053
As at 31 December 2019
Barclays UK
Barclays International
Head Office
Total Barclays Group retail
Barclays UK
Barclays Internationala
Head Office
Total Barclays Group wholesale
Total loans and advances
at amortised cost
Off-balance sheet loan
commitments and financial
guarantee contractsb
Other financial assets subject
to impairmentc
Totald
Stage 1
%
0.1
1.3
0.1
0.3
0.1
0.1
–
0.1
0.2
Coverage ratio
Stage 2
%
5.5
19.2
7.2
7.5
1.6
3.1
–
2.7
6.2
Stage 3
%
39.8
72.5
36.9
51.3
9.6
27.7
94.6
21.3
40.7
–
0.9
5.9
0.1
4.4
37.1
Loan impairment charge
and loan loss rate
Loan
impairment
charge
£m
661
999
27
1,687
33
113
–
146
Loan
loss rate
bps
39
296
44
81
11
11
–
11
1,833
53
71
8
1,912
Total
%
1.5
7.4
5.6
2.5
0.5
0.8
1.2
0.8
1.8
0.1
1.0
Notes
a Includes Wealth and Private Banking exposures measured on an individual customer exposure basis.
b Excludes loan commitments and financial guarantees of £17.7bn carried at fair value.
c Other financial assets subject to impairment not included in the table above include cash collateral and settlement balances, financial assets at fair value through other
comprehensive income and other assets. These have a total gross exposure of £149.3bn and impairment allowance of £24m. This comprises £12m ECL on £148.5bn Stage 1 assets,
£2m on £0.8bn Stage 2 fair value through other comprehensive income assets, cash collateral and settlement assets and £10m on £10m Stage 3 other assets.
d The loan loss rate is 55bps after applying the total impairment charge of £1,912m.
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Barclays PLC Annual Report 2019 151
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review Loans and advances at amortised cost by stage (audited)
As at 31 December 2018
Barclays UK
Barclays International
Head Office
Total Barclays Group retail
Barclays UK
Barclays Internationala
Head Office
Total Barclays Group wholesale
Total loans and advances
at amortised cost
Off-balance sheet loan
commitments and financial
guarantee contractsb
Totalc
Gross exposure
Impairment allowance
Stage 1
£m
134,911
26,714
6,510
168,135
22,824
87,344
2,923
113,091
Stage 2
£m
25,279
4,634
636
30,549
4,144
8,754
–
12,898
Stage 3
£m
3,040
1,830
938
5,808
1,272
1,382
41
2,695
Total
£m
163,230
33,178
8,084
204,492
28,240
97,480
2,964
128,684
Stage 1
£m
183
352
9
544
16
128
–
144
Stage 2
£m
1,389
965
47
2,401
70
244
–
314
Stage 3
£m
1,152
1,315
306
2,773
117
439
38
594
Total
£m
2,724
2,632
362
5,718
203
811
38
1,052
Net
exposure
£m
160,506
30,546
7,722
198,774
28,037
96,669
2,926
127,632
281,226
43,447
8,503
333,176
688
2,715
3,367
6,770
326,406
309,989
591,215
22,126
65,573
684
9,187
332,799
665,975
99
787
150
2,865
22
3,389
271
7,041
332,528
658,934
As at 31 December 2018
Barclays UK
Barclays International
Head Office
Total Barclays Group retail
Barclays UK
Barclays Internationala
Head Office
Total Barclays Group wholesale
Total loans and advances
at amortised cost
Off-balance sheet loan
commitments and financial
guarantee contractsb
Other financial assets subject
to impairmentc
Totald
Stage 1
%
0.1
1.3
0.1
0.3
0.1
0.1
–
0.1
Coverage ratio
Stage 2
%
5.5
20.8
7.4
7.9
1.7
2.8
–
2.4
Stage 3
%
37.9
71.9
32.6
47.7
9.2
31.8
92.7
22.0
0.2
6.2
39.6
–
0.7
3.2
0.1
4.4
36.9
Loan impairment charge
and loan loss rate
Loan
impairment
charge
£m
830
844
15
1,689
74
(142)
(31)
(99)
Loan
loss rate
bps
51
254
19
83
26
–
–
–
1,590
48
(125)
3
1,468
Total
%
1.7
7.9
4.5
2.8
0.7
0.8
1.3
0.8
2.0
0.1
1.1
Notes
a Included in the above analysis are Wealth and Private Banking exposures measured on an individual customer exposure basis.
b Excludes loan commitments and financial guarantees of £11.7bn carried at fair value.
c Other financial assets subject to impairment not included in the table above include cash collateral and settlement balances, financial assets at fair value through other
comprehensive income and other assets. These have a total gross exposure of £129.9bn and impairment allowance of £12m. This comprises £10m ECL on £129.3bn Stage 1 assets
and £2m on £0.6bn Stage 2 fair value through other comprehensive income assets.
d The loan loss rate is 44bps after applying the total impairment charge of £1,468m.
152 Barclays PLC Annual Report 2019
home.barclays/annualreport
RISK REVIEW: CREDIT RISK Risk performance Loans and advances at amortised cost by product (audited)
The table below presents a breakdown of loans and advances at amortised cost and the impairment allowance with stage allocation
by asset classification.
Loans and advances at amortised cost by product (audited)
As at 31 December 2019
Gross exposure
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Total
Stage 1
£m
135,713
46,012
117,541
299,266
Not past due
£m
14,733
9,759
9,374
33,866
Stage 2
<=30 days
past due
£m
1,585
496
374
2,455
>30 days
past due
£m
725
504
684
1,913
Impairment allowance
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Total
Net exposure
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Total
Coverage ratio
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Total
As at 31 December 2018
Gross exposure
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Total
Impairment allowance
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Total
Net exposure
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Total
Coverage ratio
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Total
22
542
143
707
37
1,597
284
1,918
135,691
45,470
117,398
298,559
14,696
8,162
9,090
31,948
%
–
1.2
0.1
0.2
£m
130,066
45,785
105,375
281,226
31
528
129
688
130,035
45,257
105,246
280,538
%
–
1.2
0.1
0.2
%
0.3
16.4
3.0
5.7
£m
15,672
11,262
12,177
39,111
56
1,895
300
2,251
15,616
9,367
11,877
36,860
%
0.4
16.8
2.5
5.8
14
159
9
182
1,571
337
365
2,273
%
0.9
32.1
2.4
7.4
£m
1,672
530
360
2,562
13
169
16
198
1,659
361
344
2,364
%
0.8
31.9
4.4
7.7
13
251
9
273
712
253
675
1,640
%
1.8
49.8
1.3
14.3
£m
862
437
475
1,774
13
240
13
266
849
197
462
1,508
%
1.5
54.9
2.7
15.0
Total
£m
17,043
10,759
10,432
38,234
64
2,007
302
2,373
16,979
8,752
10,130
35,861
%
0.4
18.7
2.9
6.2
£m
18,206
12,229
13,012
43,447
82
2,304
329
2,715
18,124
9,925
12,683
40,732
%
0.5
18.8
2.5
6.2
Stage 3
£m
2,155
3,409
2,359
7,923
Total
£m
154,911
60,180
130,332
345,423
346
2,335
547
3,228
1,809
1,074
1,812
4,695
%
16.1
68.5
23.2
40.7
£m
2,476
3,760
2,267
8,503
351
2,511
505
3,367
2,125
1,249
1,762
5,136
%
14.2
66.8
22.3
39.6
432
4,884
992
6,308
154,479
55,296
129,340
339,115
%
0.3
8.1
0.8
1.8
£m
150,748
61,774
120,654
333,176
464
5,343
963
6,770
150,284
56,431
119,691
326,406
%
0.3
8.6
0.8
2.0
home.barclays/annualreport
Barclays PLC Annual Report 2019 153
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review Movement in gross exposures and impairment allowance including provisions
for loan commitments and financial guarantees
The following tables present a reconciliation of the opening to the closing balance of the exposure and impairment allowance. An explanation
of the terms: 12-month ECL, lifetime ECL and credit-impaired is included on page 259. The disclosure has been enhanced in 2019 to provide
further granularity by product. Transfers between stages in the tables have been reflected as if they had taken place at the beginning of the year.
The movements are measured over a 12-month period.
Loans and advances at amortised cost (audited)
Stage 1
Stage 2
Stage 3
Home loans
As at 1 January 2019
Transfers from Stage 1 to Stage 2
Transfers from Stage 2 to Stage 1
Transfers to Stage 3
Transfers from Stage 3
Business activity in the year
Changes to models used for calculationa
Net drawdowns, repayments, net
remeasurement and movements due to
exposure and risk parameter changes
Final repayments
Disposalsb
Write-offsc
As at 31 December 2019d
Credit cards, unsecured loans
and other retail lending
As at 1 January 2019
Transfers from Stage 1 to Stage 2
Transfers from Stage 2 to Stage 1
Transfers to Stage 3
Transfers from Stage 3
Business activity in the year
Changes to models used for calculationa
Net drawdowns, repayments, net
remeasurement and movements due to
exposure and risk parameter changes
Final repayments
Disposalsb
Write-offsc
As at 31 December 2019d
Wholesale loans
As at 1 January 2019
Transfers from Stage 1 to Stage 2
Transfers from Stage 2 to Stage 1
Transfers to Stage 3
Transfers from Stage 3
Business activity in the year
Changes to models used for calculationa
Net drawdowns, repayments, net
remeasurement and movements due to
exposure and risk parameter changes
Final repayments
Disposalsb
Write-offsc
As at 31 December 2019d
Gross
exposure
£m
130,066
(9,051)
8,000
(199)
43
24,935
–
(6,931)
(10,427)
(723)
–
135,713
45,785
(3,604)
4,522
(857)
144
9,664
–
(5,975)
(3,667)
–
–
46,012
105,375
(3,419)
5,213
(501)
473
40,837
–
5,929
(34,081)
(2,285)
–
117,541
ECL
£m
31
(1)
28
–
2
3
–
(38)
(2)
(1)
–
22
528
(72)
701
(21)
103
120
16
(779)
(54)
–
–
542
129
(11)
84
(2)
35
51
(9)
(104)
(30)
–
–
143
Gross
exposure
£m
18,206
9,051
(8,000)
(510)
294
734
–
(843)
(1,827)
(62)
–
17,043
12,229
3,604
(4,522)
(1,264)
28
704
–
351
(371)
–
–
10,759
13,012
3,419
(5,213)
(650)
205
1,757
–
321
(2,419)
–
–
10,432
ECL
£m
82
1
(28)
(15)
3
2
–
27
(4)
(4)
–
64
2,304
72
(701)
(448)
14
123
(110)
806
(53)
–
–
2,007
329
11
(84)
(19)
25
27
(19)
85
(53)
–
–
302
Gross
exposure
£m
2,476
–
–
709
(337)
3
–
(214)
(454)
(2)
(26)
2,155
3,760
–
–
2,121
(172)
89
–
373
(290)
(777)
(1,695)
3,409
2,267
–
–
1,151
(678)
31
–
122
(372)
–
(162)
2,359
Total
Gross
exposure
£m
150,748
–
–
–
–
25,672
–
(7,988)
(12,708)
(787)
(26)
154,911
ECL
£m
351
–
–
15
(5)
–
–
24
(13)
–
(26)
346
2,511
–
–
469
(117)
39
(7)
61,774
–
–
–
–
10,457
–
1,836
(74)
(627)
(1,695)
2,335
(5,251)
(4,328)
(777)
(1,695)
60,180
505
–
–
21
(60)
–
–
120,654
–
–
–
–
42,625
–
334
(91)
–
(162)
547
6,372
(36,872)
(2,285)
(162)
130,332
ECL
£m
464
–
–
–
–
5
–
13
(19)
(5)
(26)
432
5,343
–
–
–
–
282
(101)
1,863
(181)
(627)
(1,695)
4,884
963
–
–
–
–
78
(28)
315
(174)
–
(162)
992
Notes
a Changes to models used for calculation include a £101m movement in Credit cards, unsecured loans and other retail lending and a £28m movement in Wholesale loans. These
reflect methodology changes made during the year. Barclays continually review the output of models to determine accuracy of the ECL calculation including review of model
monitoring, external benchmarking and experience of model operation over an extended period of time. This ensures that the models used continue to reflect the risks inherent
across the businesses.
b The £787m movement of gross loans and advances disposed of across Home loans relates to the sale of a portfolio of mortgages from the Italian loan book. The £777m disposal
reported within Credit cards, unsecured loans and other retail lending portfolio relates to debt sales undertaken during the year. Finally, disposals of £2,285m within Wholesale loans
relate to the sale of debt securities as part of the Group’s Treasury operations.
c In 2019, gross write-offs amounted to £1,883m (2018: £1,891m) and post write-off recoveries amounted to £124m (2018: £195m). Net write-offs represent gross write-offs less post
write-off recoveries and amounted to £1,759m (2018: £1,696m).
d Other financial assets subject to impairment not included in the table above include cash collateral and settlement balances, financial assets at fair value through other comprehensive
income and other assets. These have a total gross exposure of £149.3bn (December 2018: £129.9bn) and impairment allowance of £24m (December 2018: £12m). This comprises
£12m ECL (December 2018: £10m) on £148.5bn Stage 1 assets (December 2018: £129.3bn), £2m (December 2018: £2m) on £0.8bn Stage 2 fair value through other comprehensive
income assets, cash collateral and settlement assets (December 2018: £0.6bn) and £10m (December 2018: £nil) on £10m Stage 3 other assets (December 2018: £nil).
154 Barclays PLC Annual Report 2019
home.barclays/annualreport
RISK REVIEW: CREDIT RISK Risk performance Reconciliation of ECL movement to impairment charge/(release) for the period
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
ECL movement excluding assets derecognised due to disposals and write-offs
Post write-off recoveries
Exchange and other adjustmentsa
Impairment charge on loan commitments and financial guarantees
Impairment charge on other financial assetsb
Income statement charge for the period
£m
(1)
1,863
191
2,053
(124)
(96)
71
8
1,912
Notes
a Includes foreign exchange and interest and fees in suspense.
b Other financial assets subject to impairment not included in the table above include cash collateral and settlement balances, financial assets at fair value through other comprehensive
income and other assets. These have a total gross exposure of £149.3bn (December 2018: £129.9bn) and impairment allowance of £24m (December 2018: £12m). This comprises
£12m ECL (December 2018: £10m) on £148.5bn Stage 1 assets (December 2018: £129.3bn), £2m (December 2018: £2m) on £0.8bn Stage 2 fair value through other comprehensive
income assets, cash collateral and settlement assets (December 2018: £0.6bn) and £10m (December 2018: £nil) on £10m Stage 3 other assets (December 2018: £nil).
Loan commitments and financial guarantees (audited)
Stage 1
Stage 2
Stage 3
Total
Gross
exposure
£m
ECL
£m
Gross
exposure
£m
ECL
£m
Gross
exposure
£m
ECL
£m
Gross
exposure
£m
Home loans
As at 1 January 2019
Net transfers between stages
Business activity in the year
Net drawdowns, repayments, net
re-measurement and movement due to
exposure and risk parameter changes
Final repayments
As at 31 December 2019
Credit cards, unsecured loans
and other retail lending
As at 1 January 2019
Net transfers between stages
Business activity in the year
Net drawdowns, repayments, net
re-measurement and movement due to
exposure and risk parameter changes
Final repayments
As at 31 December 2019
Wholesale loans
As at 1 January 2019
Net transfers between stages
Business activity in the year
Net drawdowns, repayments, net
re-measurement and movement due to
exposure and risk parameter changes
Final repayments
As at 31 December 2019
6,948
(39)
2,848
1
(216)
9,542
124,611
117
14,619
(1,151)
(12,437)
125,759
178,430
(875)
53,685
(487)
(44,914)
185,839
–
–
–
–
–
–
546
47
–
(40)
(53)
500
41
44
2
9,016
(1,082)
218
(48)
(4)
35
(1,172)
(742)
6,238
58
7
22
12,564
580
2,779
(1)
(24)
62
1,190
(4,666)
12,447
–
–
–
–
–
–
65
(43)
1
54
(6)
71
85
(8)
22
36
(36)
99
13
(8)
–
–
(1)
4
267
965
6
(874)
(114)
250
404
295
16
232
(266)
681
–
–
–
–
–
–
7,507
–
2,848
(39)
(270)
10,046
20
(1)
6
(9)
(2)
14
133,894
–
14,843
(3,197)
(13,293)
132,247
2
1
–
191,398
–
56,480
41
(3)
41
935
(49,846)
198,967
ECL
£m
–
–
–
–
–
–
126
–
9
(3)
(12)
120
145
–
44
76
(63)
202
home.barclays/annualreport
Barclays PLC Annual Report 2019 155
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review Gross exposure for loans and advances at amortised cost (audited)
As at 1 January 2018
Net transfers between stages
Business activity in the year
– of which: Barclays UK
– of which: Barclays International
Net drawdowns and repayments
– of which: Barclays UK
– of which: Barclays International
Final repayments
– of which: Barclays UK
– of which: Barclays International
Disposals
Write-offs
As at 31 December 2018a
Impairment allowance on loans and advances at amortised cost (audited)
As at 1 January 2018
Net transfers between stages
Business activity in the year
Net remeasurement and movement due to exposure and risk parameter changes
UK economic uncertainty adjustment
Final repayments
Disposals
Write-offs
As at 31 December 2018a
Reconciliation of ECL movement to impairment charge/(release) for the period
ECL movement excluding assets derecognised due to disposals and write-offs
Post write-off recoveries
Exchange and other adjustments
Impairment release on loan commitments and financial guaranteesb
Impairment charge on other financial assets
Income statement charge/(release) for the period
Stage 1
£m
265,617
1,385
74,419
29,467
42,346
(13,140)
(10,269)
(1,305)
(41,946)
(11,728)
(29,421)
(5,109)
–
281,226
Stage 1
£m
608
798
223
(865)
–
(76)
–
–
688
Stage 2
£m
49,592
(3,602)
2,680
1,493
1,164
136
(980)
1,348
(5,359)
(1,753)
(3,520)
–
–
43,447
Stage 2
£m
3,112
(1,182)
173
638
150
(176)
–
–
2,715
Stage 3
£m
9,081
2,217
374
326
44
162
(322)
561
(1,071)
(478)
(549)
(369)
(1,891)
8,503
Stage 3
£m
3,382
384
95
1,918
–
(152)
(369)
(1,891)
3,367
Total
£m
324,290
–
77,473
31,286
43,554
(12,842)
(11,571)
604
(48,376)
(13,959)
(33,490)
(5,478)
(1,891)
333,176
Total
£m
7,102
–
491
1,691
150
(404)
(369)
(1,891)
6,770
1,928
(195)
(143)
(125)
3
1,468
Notes
a Other financial assets subject to impairment not included in the table above include cash collateral and settlement balances, financial assets at fair value through other
comprehensive income and other assets. These have a total gross exposure of £129.9bn (1 January 2018: £128.1bn) and impairment allowance of £12m (1 January 2018: £9m).
This comprises £10m ECL on £129.3bn Stage 1 assets and £2m on £0.6bn Stage 2 fair value through other comprehensive income assets.
b Impairment release of £125m on loan commitments and financial guarantees represents reduction in impairment allowance of £149m partially offset by exchange and other
adjustments of £24m.
Gross exposure for loan commitments and financial guarantees (audited)
As at 1 January 2018
Net transfers between stages
Business activity in the year
Net drawdowns and repayments
Final repayments
As at 31 December 2018
Provision on loan commitments and financial guarantees (audited)
As at 1 January 2018
Net transfers between stages
Business activity in the year
Net remeasurement and movement due to exposure and risk parameter changes
Final repayments
As at 31 December 2018
Stage 1
£m
275,364
13,521
65,404
(14,491)
(29,809)
309,989
Stage 1
£m
133
42
18
(79)
(15)
99
Stage 2
£m
38,867
(13,552)
811
4,298
(8,298)
22,126
Stage 2
£m
259
(43)
–
(22)
(44)
150
Stage 3
£m
1,442
31
–
(473)
(316)
684
Stage 3
£m
28
1
–
44
(51)
22
Total
£m
315,673
–
66,215
(10,666)
(38,423)
332,799
Total
£m
420
–
18
(57)
(110)
271
156 Barclays PLC Annual Report 2019
home.barclays/annualreport
RISK REVIEW: CREDIT RISK Risk performance Stage 2 decomposition
Loans and advances at amortised costa
As at 31 December
Quantitative test
Qualitative test
30 days past due backstop
Total Stage 2
2019
2018
Gross
exposure
£m
24,034
12,733
1,467
38,234
Impairment
allowance
£m
2,059
278
36
2,373
Gross
exposure
£m
30,665
12,206
576
43,447
Impairment
allowance
£m
2,506
183
26
2,715
Note
a Where balances satisfy more than one of the above three criteria for determining a significant increase in credit risk, the corresponding gross exposure and ECL has been assigned
in order of categories presented.
Stage 2 exposures are predominantly identified using quantitative tests where the lifetime PD has deteriorated more than a predetermined
amount since origination. This is augmented by inclusion of accounts meeting the designated high risk criteria (including watchlist) for the
portfolio under the qualitative test. Qualitative tests predominantly include £9.3bn in Barclays UK of which £7.4bn relates to UK Home Finance,
£1.1bn relates to Business Banking and £0.4bn relates to Barclaycard UK. A further £3.4bn relates to Barclays International of which £1.7bn relates
to Corporate and Investment Bank, £0.9bn relates to Barclaycard International and £0.7bn relates to Private Bank.
A small number of other accounts (2% of impairment allowances and 4% of gross exposure) are included in Stage 2. These accounts are not
otherwise identified by the quantitative or qualitative tests but are more than 30 days past due. The percentage triggered by these backstop
criteria is a measure of the effectiveness of the Stage 2 criteria in identifying deterioration prior to delinquency. These balances include items in the
Corporate and Investment Bank for reasons such as outstanding interest and fees rather than principal balances.
For further detail on the three criteria for determining a significant increase in credit risk required for Stage 2 classification, refer to Note 7
on page 259.
Stage 3 decomposition
Loans and advances at amortised cost
As at 31 December
Exposures not charged-off including within cure perioda
Exposures individually assessed or in recovery bookb
Total Stage 3
2019
2018
Gross
exposure
£m
3,540
4,383
7,923
Impairment
allowance
£m
857
2,371
3,228
Gross
exposure
£m
4,589
3,914
8,503
Impairment
allowance
£m
916
2,451
3,367
Notes
a Includes £2.5bn of gross exposure in a cure period that must remain in Stage 3 for a minimum of 12 months before moving to Stage 2.
b Exposures individually assessed or in recovery book cannot cure out of Stage 3.
Management adjustments to models for impairment (audited)
Management adjustments to impairment models are applied in order to factor in certain conditions or changes in policy that are not fully
incorporated into the impairment models, or to reflect additional facts and circumstances at the period end. Management adjustments are
reviewed and incorporated into future model development where applicable.
Total management adjustments to impairment allowance are presented by product below.
Management adjustments to models for impairment (audited)a
As at 31 December
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Total
Note
a Positive values relate to an increase in impairment allowance.
2019
2018
Management
adjustments to
impairment
allowances
£m
57
308
(25)
340
Proportion
of total
impairment
allowances
%
13.2
6.3
(2.5)
5.4
Management
adjustments to
impairment
allowances
£m
59
385
(6)
438
Proportion
of total
impairment
allowances
%
12.7
7.2
(0.6)
6.5
home.barclays/annualreport
Barclays PLC Annual Report 2019 157
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review Home loans: the low average LTV nature of the UK Home Loans portfolio means that modelled ECL estimates are low in all but the most severe
economic scenarios. An adjustment is held to maintain an appropriate level of ECL.
Credit cards, unsecured loans and other retail lending: management adjustments primarily relate to UK Cards where model adjustments have
been made to maintain adequacy of Loss Given Default and Probability of Default estimates.
Following recent portfolio analysis and industry benchmarking, releases were applied to the UK cards and US cards portfolios to account for
changes in the modelled lifetime of credit cards in Stage 2. These adjustments will be removed once updates to the model have been
incorporated.
A £100m ECL adjustment is held in UK Cards for the anticipated impact of economic uncertainty in the UK, first taken in December 2018
and retained as at 2019 year end.
Wholesale loans: Adjustments include a release in Investment Bank to reduce inappropriate ECL sensitivity to a macroeconomic variable
and model adjustments in Corporate and Investment Bank related to Probability of Default at origination and Loss Given Default floors.
A £50m ECL adjustment is held in Corporate and Investment Bank for the anticipated impact of economic uncertainty in the UK, first taken in
December 2018 and retained as at 2019 year end.
Measurement uncertainty and sensitivity analysis
The measurement of ECL involves complexity and judgement, including estimation of probabilities of default (PD), loss given default (LGD),
a range of unbiased future economic scenarios, estimation of expected lives, estimation of exposures at default (EAD) and assessing significant
increases in credit risk.
The Group uses a five-scenario model to calculate ECL. An external consensus forecast is assembled from key sources, including HM Treasury
(short- and medium-term forecasts), Bloomberg (based on median of economic forecasts) and the Urban Land Institute (for US House Prices),
which forms the Baseline scenario. In addition, two adverse scenarios (Downside 1 and Downside 2) and two favourable scenarios (Upside 1
and Upside 2) are derived, with associated probability weightings. The adverse scenarios are calibrated to a similar severity to internal stress tests,
whilst also considering IFRS 9 specific sensitivities and non-linearity. Downside 2 is benchmarked to the Bank of England’s annual cyclical
scenarios and to the most severe scenario from Moody’s inventory, but is not designed to be the same. The favourable scenarios are calibrated
to be symmetric to the adverse scenarios, subject to a ceiling calibrated to relevant recent favourable benchmark scenarios. All scenarios are
regenerated at a minimum annually. The scenarios include eight economic variables (GDP, unemployment, House Price Index (HPI) and base rates
in both the UK and US markets), and expanded variables using statistical models based on historical correlations. The upside and downside shocks
are designed to evolve over a five-year stress horizon, with all five scenarios converging to a steady state after approximately eight years.
Scenario weights (audited)
The methodology for estimating probability weights for each of the scenarios involves a comparison of the distribution of key historical UK and US
macroeconomic variables against the forecast paths of the five scenarios. The methodology works such that the Baseline (reflecting current
consensus outlook) has the highest weight and the weights of adverse and favourable scenarios depend on the deviation from the Baseline;
the further from the Baseline, the smaller the weight. This is reflected in the table below where the probability weights of the scenarios as of
31 December 2019 are shown. A single set of five scenarios is used across all portfolios and all five weights are normalised to equate to 100%.
The same scenarios and weights that are used in the estimation of expected credit losses are also used for Barclays internal planning purposes.
The impacts across the portfolios are different because of the sensitivities of each of the portfolios to specific macroeconomic variables, for
example, mortgages are highly sensitive to house prices and base rates, credit cards and unsecured consumer loans are highly sensitive
to unemployment.
The tables below show the macroeconomic variables for each scenario and their respective scenario weights. Macroeconomic variables are
presented using the most relevant basis for each variable. five-year average tables and movement over time graphs provide additional transparency.
Scenario probability weighting (audited)
As at 31 December 2019
Scenario probability weighting
As at 31 December 2018
Scenario probability weighting
Upside 2
%
Upside 1
%
Baseline
%
Downside 1
%
Downside 2
%
10.1
9.0
23.1
24.0
40.8
41.0
22.7
23.0
3.3
3.0
The weights of Upside 2 and Downside 2 have increased slightly reflecting the small decrease in dispersion in the scenarios. The impact on ECL
is immaterial.
158 Barclays PLC Annual Report 2019
home.barclays/annualreport
RISK REVIEW: CREDIT RISK Risk performance Macroeconomic variables used in the calculation of ECL (specific bases)a (audited)
As at 31 December 2019
UK GDPb
UK unemploymentc
UK HPId
UK bank ratec
US GDPb
US unemploymentc
US HPId
US federal funds ratec
As at 31 December 2018
UK GDPb
UK unemploymentc
UK HPId
UK bank ratec
US GDPb
US unemploymentc
US HPId
US federal funds ratec
Upside 2
%
Upside 1
%
Baseline
%
Downside 1
%
Downside 2
%
4.2
3.4
46.0
0.5
4.2
3.0
37.1
1.5
4.5
3.4
46.4
0.8
4.8
3.0
36.9
2.3
2.9
3.8
32.0
0.5
3.3
3.5
23.3
1.5
3.1
3.9
32.6
0.8
3.7
3.4
30.2
2.3
1.6
4.2
3.1
0.7
1.9
3.9
3.0
1.7
1.7
4.3
3.2
1.0
2.1
3.7
4.1
2.7
0.2
5.7
(8.2)
2.8
0.4
5.3
0.5
3.0
0.3
5.7
(0.5)
2.5
0.4
5.2
–
3.0
(4.7)
8.7
(32.4)
4.0
(3.4)
8.5
(19.8)
3.5
(4.1)
8.8
(32.1)
4.0
(3.3)
8.4
(17.4)
3.5
Macroeconomic variables used in the calculation of ECL (five-year averages)a (audited)
As at 31 December 2019
UK GDP
UK unemployment
UK HPI
UK bank rate
US GDP
US unemployment
US HPI
US federal funds rate
As at 31 December 2018
UK GDP
UK unemployment
UK HPI
UK bank rate
US GDP
US unemployment
US HPI
US federal funds rate
Upside 2
%
Upside 1
%
Baseline
%
Downside 1
%
Downside 2
%
3.2
3.5
7.9
0.5
3.5
3.1
6.5
1.6
3.4
3.7
7.9
0.8
3.7
3.1
6.5
2.3
2.4
3.9
5.7
0.5
2.8
3.6
4.3
1.7
2.6
4.0
5.8
0.8
3.0
3.5
5.4
2.3
1.6
4.2
3.1
0.7
1.9
3.9
3.0
1.7
1.7
4.3
3.2
1.0
2.1
3.7
4.1
2.7
0.8
5.4
(1.1)
2.5
1.0
5.0
1.3
2.9
0.9
5.1
0.9
2.3
1.1
4.7
2.4
3.0
(0.7)
7.7
(6.5)
3.7
(0.5)
7.5
(3.7)
3.4
(0.6)
7.9
(6.4)
3.7
(0.5)
7.4
(2.6)
3.4
Notes
a UK GDP = Real GDP growth seasonally adjusted; UK unemployment = UK unemployment rate 16-year+; UK HPI = Halifax All Houses, All Buyers Index; US GDP = Real GDP growth
seasonally adjusted; US unemployment = US civilian unemployment rate 16-year+; US HPI = FHFA house price index.
b Highest annual growth in Upside scenarios; five-year average in Baseline; lowest annual growth in Downside scenarios.
c Lowest yearly average in Upside scenarios; five-year average in Baseline; highest yearly average in Downside scenarios.
d Cumulative growth (trough-to-peak) in Upside scenarios; five-year average in Baseline; cumulative fall (peak-to-trough) in Downside scenarios.
Over the year, the macroeconomic baseline variables have worsened in the US, in part due to the trade dispute with China. Baseline expectations
for the US federal funds rate have also moved lower from 2.7% to 1.7% averaged over the first five years. Macroeconomic baseline variables in the
UK have remained fairly flat with a small decrease in bank rates driven by market expectations of lower interest rates in the next few years. The
other scenarios are generally unchanged from 2018, with the exception of UK HPI in the Downside 1 scenario where the cumulative fall in house
prices now represents a more severe fall of 8.2% versus 0.5% in 2018.
home.barclays/annualreport
Barclays PLC Annual Report 2019 159
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review The graphs below plot the historical data for GDP growth rate and unemployment rate in the UK and US as well as the forecasted data under each
of the five scenarios.
UK GDP
%
5
4
3
2
1
0
-1
-2
-3
-4
-5
-6
UK unemployment rate
%
10
9
8
7
6
5
4
3
2
1
0
2016
2018
2020
2022
2024
2026
2028
2016
2018
2020
2022
2024
2026
2028
Downside 2
Downside 1
Baseline
Upside 1
Upside 2
Downside 2
Downside 1
Baseline
Upside 1
Upside 2
US GDP
%
5
4
3
2
1
0
-1
-2
-3
-4
-5
US unemployment rate
%
9
8
7
6
5
4
3
2
1
0
2016
2018
2020
2022
2024
2026
2028
2016
2018
2020
2022
2024
2026
2028
Downside 2
Downside 1
Baseline
Upside 1
Upside 2
Downside 2
Downside 1
Baseline
Upside 1
Upside 2
ECL under 100% weighted scenarios for modelled portfolios (audited)
The table below shows the ECL assuming scenarios have been 100% weighted. Model exposures are allocated to a stage based on the individual
scenario rather than through a probability-weighted approach as required for Barclays reported impairment allowances. As a result, it is not
possible to back solve to the final reported weighted ECL from the individual scenarios as a balance may be assigned to a different stage
dependent on the scenario. Model exposure uses Exposure at Default (EAD) values and is not directly comparable to gross exposure used in prior
disclosures. For Credit cards, unsecured loans and other retail lending, an average EAD measure is used (12 month or lifetime depending on stage
allocation in each scenario). Therefore, the model exposure movement into Stage 2 is higher than the corresponding Stage 1 reduction.
All ECL using a model is included, with the exception of Treasury assets (£9m of ECL), providing additional coverage as compared to the 2018
year-end disclosure. Non-modelled exposures and management adjustments are excluded. Management adjustments can be found on page 157.
The prior year comparative includes key principal portfolios amounting to circa 80% of total impairment allowance.
Model exposures allocated to Stage 3 do not change in any of the scenarios as the transition criteria relies only on observable evidence of default
as at 31 December 2019 and not on macroeconomic scenarios.
The Downside 2 scenario represents a severe global recession with substantial falls in both UK and US GDP. Unemployment in both markets rises
towards 9% and there are substantial falls in asset prices including housing.
Under the Downside 2 scenario, model exposure moves between stages as the economic environment weakens. This can be seen in the
movement of £29bn of model exposure into Stage 2 between the Weighted and Downside 2 scenario. ECL increases in Stage 2 predominantly
due to unsecured portfolios as economic conditions deteriorate.
160 Barclays PLC Annual Report 2019
home.barclays/annualreport
RISK REVIEW: CREDIT RISK Risk performance As at 31 December 2019
Stage 1 Model Exposure (£m)
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Stage 1 Model ECL (£m)
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Stage 1 Coverage (%)
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Stage 2 Model Exposure (£m)
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Stage 2 Model ECL (£m)
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Stage 2 Coverage (%)
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Stage 3 Model Exposure (£m)
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loansa
Stage 3 Model ECL (£m)
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loansa
Stage 3 Coverage (%)
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loansa
Total Model ECL (£m)
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loansa
Weighted
Upside 2
Upside 1
Baseline Downside 1 Downside 2
Scenarios
137,929
68,619
160,544
139,574
69,190
162,717
138,992
69,012
162,058
138,249
68,388
161,111
136,454
68,309
157,720
132,505
67,015
143,323
6
505
209
–
0.7
0.1
4
490
162
–
0.7
0.1
5
495
174
–
0.7
0.1
5
495
188
–
0.7
0.1
7
511
271
–
0.7
0.2
19
528
297
–
0.8
0.2
16,889
13,406
15,947
15,245
11,449
13,773
15,826
12,108
14,433
16,570
13,075
15,380
18,364
15,663
18,770
22,314
19,615
33,168
41
1,844
414
0.2
13.8
2.6
1,670
3,008
1,489
268
2,198
118
16.0
73.1
7.9
315
4,547
741
33
1,412
285
0.2
12.3
2.1
1,670
3,008
1,489
262
2,154
111
15.7
71.6
7.4
299
4,056
558
34
1,562
323
0.2
12.9
2.2
1,670
3,008
1,489
264
2,174
114
15.8
72.3
7.6
303
4,231
611
36
1,771
374
0.2
13.5
2.4
1,670
3,008
1,489
266
2,195
117
15.9
73.0
7.9
307
4,461
679
47
2,384
579
0.3
15.2
3.1
1,670
3,008
1,489
272
2,235
127
16.3
74.3
8.5
326
5,130
977
170
4,285
1,427
0.8
21.8
4.3
1,670
3,008
1,489
316
2,292
128
18.9
76.2
8.6
505
7,105
1,852
£m
5,603
687
340
6,630
Note
a Material wholesale loan defaults are individually assessed across different recovery strategies. As a result, ECL of £419m is reported as non-modelled in the table below.
Reconciliation to total ECL
Total model ECL
ECL from non-modelled, individually assessed, and other adjustments
ECL from management adjustments
Total ECL
The total weighted ECL represents a 3% uplift from the Baseline ECL, largely driven by credit card losses which have more linear loss profiles than
UK home loans and wholesale loan positions.
Home loans: total weighted ECL of £315m represents a 2% increase over the Baseline ECL (£307m), and coverage ratios remain steady across the
Upside scenarios, Baseline and Downside 1 scenario. However, total ECL increases in the Downside 2 scenario to £506m, driven by a significant fall
in UK HPI (32.4%), reflecting the non-linearity of the UK portfolio.
Credit cards, unsecured loans and other retail lending: total weighted ECL of £4,547m represents a 2% increase over the Baseline ECL (£4,461m)
reflecting the range of economic scenarios used, mainly impacted by unemployment. Total ECL increases to £7,105m under the Downside 2
scenario, mainly driven by Stage 2, where coverage rates increase to 21.8% from a weighted scenario approach of 13.8% and circa £6bn increase
in model exposure that meets the Significant Increase in Credit Risk criteria and transitions from Stage 1 to Stage 2.
Wholesale loans: total weighted ECL of £741m represents a 9% increase over the Baseline ECL (£679m) reflecting the range of economic
scenarios used, with exposures in the Investment Bank particularly sensitive to the Downside 2 scenario.
home.barclays/annualreport
Barclays PLC Annual Report 2019 161
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review As at 31 December 2018
Stage 1 Gross Exposure (£m)
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Stage 1 ECL (£m)
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Stage 1 Coverage (%)
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Stage 2 Gross Exposure (£m)
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Stage 2 ECL (£m)
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Stage 2 Coverage (%)
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loans
Stage 3 Gross Exposure (£m)
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loansa
Stage 3 ECL (£m)
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loansa
Stage 3 Coverage (%)
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loansa
Total ECL (£m)
Home loans
Credit cards, unsecured loans and other retail lending
Wholesale loansa
Weighted
Upside 2
Upside 1
Baseline
Downside 1
Downside 2
Scenarios
115,573
30,494
80,835
116,814
32,104
81,346
116,402
31,082
81,180
115,924
30,536
80,941
114,858
29,846
80,517
109,305
24,884
73,715
1
355
175
–
1.2
0.2
–
304
161
–
0.9
0.2
–
343
163
–
1.1
0.2
–
351
162
–
1.1
0.2
1
365
203
–
1.2
0.3
9
388
242
–
1.6
0.3
17,455
10,943
11,377
16,214
9,334
10,866
16,627
10,355
11,031
17,105
10,902
11,271
18,170
11,591
11,694
23,724
16,553
18,496
7
2,013
323
–
18.4
2.8
1,104
2,999
1,165
6
2,200
333
0.5
73.4
28.6
14
4,568
831
1
1,569
277
–
16.8
2.5
1,104
2,999
n/a
3
2,154
n/a
0.3
71.8
n/a
4
4,027
n/a
1
1,779
290
–
17.2
2.6
1,104
2,999
n/a
4
2,174
n/a
0.4
72.5
n/a
5
4,296
n/a
3
1,969
302
–
18.1
2.7
1,104
2,999
1,165
5
2,199
323
0.5
73.3
27.7
8
4,519
787
7
2,331
397
–
20.1
3.4
1,104
2,999
n/a
7
2,234
n/a
0.7
74.5
n/a
15
4,930
n/a
172
4,366
813
0.7
26.4
4.4
1,104
2,999
n/a
27
2,297
n/a
2.4
76.6
n/a
208
7,051
n/a
Note
a Material corporate loan defaults are individually assessed across different recovery strategies which are impacted by the macroeconomic variables. As a result, only the Baseline
scenario is shown together with the weighted estimate which reflects alternative recovery paths.
Staging sensitivity (audited)
An increase of 1% (£3,454m) of total gross exposure into Stage 2 (from Stage 1), would result in an increase in ECL impairment allowance
of £207m based on applying the difference in Stage 2 and Stage 1 average impairment coverage ratios to the movement in gross exposure
(refer to Loans and advances at amortised cost by product on page 153).
162 Barclays PLC Annual Report 2019
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RISK REVIEW: CREDIT RISK Risk performance Analysis of the concentration of credit risk
A concentration of credit risk exists when a number of counterparties are located in a common geographical region or are engaged in similar
activities and have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by
changes in economic or other conditions. 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 policies with regard to managing concentration risk is presented on page 159 of Barclays PLC Pillar 3 Report 2019 (unaudited).
Geographic concentrations
As at 31 December 2019, the geographic concentration of the Group’s assets remained broadly consistent with 2018. Exposure is concentrated
in the UK 40% (2018: 41%), in the Americas 34% (2018: 34%) and Europe 20% (2018: 21%).
Americas
£m
Europe
£m
Africa and
Middle East
£m
Asia
£m
Total
£m
Credit risk concentrations by geography (audited)
As at 31 December 2019
On-balance sheet:
Cash and balances at central banks
Cash collateral and settlement balances
Loans and advances at amortised cost
Reverse repurchase agreements and other similar secured lending
Trading portfolio assets
Financial assets at fair value through the income statement
Derivative financial instruments
Financial assets at fair value through other comprehensive income
Other assets
Total on-balance sheet
United
Kingdom
£m
51,477
27,431
257,459
1,005
11,550
29,001
69,844
9,444
1,170
458,595
28,273
23,595
46,569
15
27,621
70,849
63,344
23,052
126
283,267
54,632
26,008
25,599
1,056
13,397
11,286
83,165
24,443
79
239,628
Off-balance sheet:
Contingent liabilities
Loan commitments
Total off-balance sheet
Total
As at 31 December 2018
On-balance sheet:
Cash and balances at central banks
Cash collateral and settlement balances
Loans and advances at amortised cost
Reverse repurchase agreements and other similar secured lending
Trading portfolio assets
Financial assets at fair value through the income statement
Derivative financial instruments
Financial assets at fair value through other comprehensive income
Other assets
Total on-balance sheet
7,539
105,350
112,889
571,484
10,838
188,109
198,947
482,214
3,862
36,033
39,895
279,523
64,343
27,418
240,116
724
12,444
33,842
69,798
11,494
780
460,959
36,045
22,184
49,592
68
34,369
73,489
58,699
13,953
100
288,499
66,887
22,316
27,913
113
13,375
20,984
80,003
23,298
125
255,014
15,130
5,385
6,275
470
4,786
12,534
11,189
7,665
–
63,434
1,562
3,166
4,728
68,162
9,076
4,928
5,371
83
3,616
13,556
12,172
2,786
–
51,588
746
837
3,213
833
763
1,921
1,694
123
–
150,258
83,256
339,115
3,379
58,117
125,591
229,236
64,727
1,375
10,130 1,055,054
726
1,797
2,523
24,527
334,455
358,982
12,653 1,414,036
718
376
3,414
1,320
713
1,758
1,866
163
1
177,069
77,222
326,406
2,308
64,517
143,629
222,538
51,694
1,006
10,329 1,066,389
Off-balance sheet:
Contingent liabilities
Loan commitments
Total off-balance sheet
Total
5,910
108,506
114,416
575,375
8,996
175,995
184,991
473,490
3,572
34,524
38,096
293,110
1,289
3,346
4,635
56,223
536
1,852
2,388
12,717
20,303
324,223
344,526
1,410,915
Industry concentrations
The concentration of the Group’s assets by industry remained broadly consistent year on year. As at 31 December 2019, total assets concentrated
in banks and other financial institutions was 36% (2018: 36%), predominantly within derivative financial instruments. The proportion of the overall
balance concentrated in governments and central banks was 19% (2018: 20%), cards, unsecured loans and other personal lending was 13%
(2018: 13%) and in home loans remained stable at 12% (2018: 11%).
home.barclays/annualreport
Barclays PLC Annual Report 2019 163
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review Credit risk concentrations by industry (audited)
Other
financial
insti-
tutions
£m
Manu-
facturing
£m
Con-
struction
and
property
£m
Govern-
ment and
central
bank
£m
Energy
and
water
£m
Banks
£m
Wholesale
and retail
distri-
bution
and
leisure
£m
Cards,
unsecured
loans and
other
personal
lending
£m
Business
and other
services
£m
Home
loans
£m
Other
£m
Total
£m
7
73
8,788
20,473
16,599 55,262
As at 31 December 2019
On-balance sheet:
Cash and balances
at central banks
Cash collateral and
settlement balances
Loans and advances
at amortised cost
Reverse repurchase
agreements and other
similar secured lending
Trading portfolio assets
Financial assets at fair
value through the
income statement
Derivative financial
instruments
Financial assets at fair
value through other
4,370
comprehensive income
Other assets
322
Total on-balance sheet 185,001 272,817
125,323 83,285
18,596
897
1,172
2,872
2,134
9,049
97,849
10,747
–
– 150,178
–
–
–
516
64
9,251
536
51
642
–
–
–
–
– 150,258
335
83,256
8,323 24,403
23,847
5,346
10,031
17,125 154,479 55,232
11,068
339,115
–
2,787
–
73
1,053 33,092
–
–
–
2,996
842
3,158
–
–
–
–
–
2,268
3,379
58,117
634
6,909
5,353
45
–
3,569
358
–
127
125,591
2,049
2,273
7,811
3,077
562
1,520
–
2
3,334
229,236
–
1
286 40,763
2
14,310 34,993 270,370
5
–
7
12,007
–
2
–
18
11,488 26,553 154,837 55,252
430
109
–
–
Off-balance sheet:
Contingent liabilities
Loan commitments
Total off-balance sheet
Total
8,043
47,815
703
1,250
1,909
14,358
3,159 55,858 45,697 15,061
3,549
42,148
1,981
3,318
1,704 29,877
3,685
1,072
2,831
14,711 22,932
33,195 15,783 25,763
109
10,060 124,841
10,060 124,950
27,271 52,316 164,897 180,202
–
188,160 328,675
60,007 50,054 274,055 45,202
–
–
9,478
17,341
18,653
48,398
As at 31 December 2018
On-balance sheet:
Cash and balances
at central banks
Cash collateral and
settlement balances
Loans and advances
at amortised cost
Reverse repurchase
agreements and other
similar secured lending
Trading portfolio assets
Financial assets at fair
value through the
income statement
Derivative financial
instruments
Financial assets at fair
value through other
2,250
comprehensive income
Other assets
426
Total on-balance sheet 198,545 256,896
12,135
580
1,368
3,500
865
9,550
123,769
96,378
80,376
30,374
–
– 177,069
–
–
–
498
75
9,235
386
223
717
–
–
–
–
–
177,069
349
77,222
8,775
23,565
12,764
5,515
11,609
19,716 150,284
55,298
10,749
326,406
–
3,825
37
897
38
34,968
–
–
4,202
1,202
–
3,481
–
–
–
8,914
5,331
32
13
2,178
405
2,390
1,993
5,987
2,791
486
2,004
–
–
–
–
2,892
2,308
64,517
4
143,629
–
2,742
222,538
–
–
15,488
200
36,973
–
35,681 282,365
–
–
–
–
–
136
–
12,926
13,533
28,232 150,689
55,298
–
–
–
–
51,694
1,006
16,736 1,066,389
–
–
–
Off-balance sheet:
Contingent liabilities
Loan commitments
Total off-balance sheet
Total
939
1,267
2,206
3,840
42,890
46,730
200,751 303,626
3,470
39,978
43,448
58,936
1,890
626
1,629
14,362
14,988
3,519
50,669 285,884
3,491
26,519
30,010
42,936
952
14,566
15,518
29,051
–
116
3,455
8,900 126,640
22,142
25,597
8,900 126,756
53,829 159,589 182,054
1,524
25,330
26,854
43,590
20,303
324,223
344,526
1,410,915
164 Barclays PLC Annual Report 2019
home.barclays/annualreport
282
12
64,727
1,375
17,426 1,055,054
24,527
1,671
334,455
24,100
25,771
358,982
43,197 1,414,036
RISK REVIEW: CREDIT RISK Risk performance The approach to management and representation of credit quality
Asset credit quality
The credit quality distribution is based on the IFRS 9 12-month probability of default (PD) at the reporting date to ensure comparability with other
ECL disclosures on pages 151 to 157.
The following internal measures are used to determine credit quality for loans:
Default Grade
1-3
4-5
6-8
9-11
12-14
15-19
19
20-21
22
Retail and Wholesale lending
Probability of default
0.0 to <0.05%
0.05 to <0.15%
0.15 to <0.30%
0.30 to <0.60%
0.60 to <2.15%
2.15 to <10%
10 to <11.35%
11.35 to <100%
100%
Credit Quality
Description
Strong
Satisfactory
Higher Risk
Credit Impaired
For retail clients, a range of analytical tools is used to derive the probability of default of clients at inception and on an ongoing basis.
For loans that are not past due, 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.
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 the Group’s assets exposed to credit risk.
Overview
As at 31 December 2019, the ratio of the Group’s on-balance sheet assets classified as strong (0.0 to <0.60%) remained stable at 86% (2018: 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 174 and 175 respectively.
home.barclays/annualreport
Barclays PLC Annual Report 2019 165
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review Balance sheet credit quality (audited)
As at 31 December 2019
Cash and balances at central banks
Cash collateral and settlement balances
Loans and advances at amortised cost:
Home loans
Credit cards, unsecured and other retail lending
Wholesale loans
Total loans and advances at amortised cost
Reverse repurchase agreements and other
similar secured lending
Trading portfolio assets:
Debt securities
Traded loans
Total trading portfolio assets
Financial assets at fair value through the
income statement:
Loans and advances
Debt securities
Reverse repurchase agreements
Other financial assets
Total financial assets at fair value through
the income statement
Derivative financial instruments
Financial assets at fair value through other
comprehensive income
Other assets
Total on-balance sheet
As at 31 December 2018
Cash and balances at central banks
Cash collateral and settlement balances
Loans and advances at amortised cost:
Home loans
Credit cards, unsecured and other retail lending
Wholesale loans
Total loans and advances at amortised cost
Reverse repurchase agreements and other
similar secured lending
Trading portfolio assets:
Debt securities
Traded loans
Total trading portfolio assets
Financial assets at fair value through the
income statement:
Loans and advances
Debt securities
Reverse repurchase agreements
Other financial assets
Total financial assets at fair value through
the income statement
Derivative financial instruments
Financial assets at fair value through other
comprehensive income
Other assets
Total on-balance sheet
0.0 to
<0.60%
£m
PD range
0.60 to
<11.35%
£m
150,258
73,122
146,269
20,750
97,854
264,873
–
10,134
5,775
31,425
28,150
65,350
11.35 to
100%
£m
Total
£m
–
–
150,258
83,256
2,435
3,121
3,336
8,892
154,479
55,296
129,340
339,115
3,290
89
–
3,379
49,117
864
49,981
3,479
3,219
6,698
143
1,295
1,438
52,739
5,378
58,117
14,467
4,806
62,475
757
82,505
216,103
64,727
1,242
906,101
177,069
70,455
137,449
21,786
86,271
245,506
7,993
413
34,232
6
42,644
13,012
232
30
180
–
442
121
22,692
5,249
96,887
763
125,591
229,236
–
133
138,060
–
–
64,727
1,375
10,893 1,055,054
–
6,763
9,701
31,664
30,108
71,473
–
4
177,069
77,222
3,134
2,981
3,312
9,427
150,284
56,431
119,691
326,406
1,820
444
44
2,308
389
963
1,352
52
61
1,341
–
1,454
52
57,283
7,234
64,517
19,524
4,522
119,041
542
143,629
222,538
51,896
1,903
53,799
4,998
4,368
9,366
13,177
4,380
85,887
524
103,968
211,695
51,546
723
916,581
6,295
81
31,813
18
38,207
10,791
148
283
137,475
0.0 to
<0.60%
%
100
88
94
38
75
78
97
93
16
86
64
91
65
99
66
94
100
90
86
100
91
92
39
72
75
79
90
27
83
68
97
72
97
72
95
PD range
0.60 to
<11.35%
%
11.35 to
100%
%
Total
%
–
12
4
56
22
19
3
7
60
12
35
8
35
1
34
6
–
10
13
–
9
6
56
25
22
19
9
60
15
32
2
27
3
27
5
–
28
13
–
–
2
6
3
3
–
–
24
2
1
1
–
–
–
–
–
–
1
–
–
2
5
3
3
2
1
13
2
–
1
1
–
1
–
–
–
1
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
–
51,694
1,006
12,333 1,066,389
100
72
86
166 Barclays PLC Annual Report 2019
home.barclays/annualreport
RISK REVIEW: CREDIT RISK Risk performance Credit exposures by internal PD grade
The below tables represent credit risk profile by PD grade for loans and advances at amortised cost, contingent liabilities and loan commitments.
Stage 1 higher risk assets, presented gross of associated collateral held, are of weaker credit quality but have not significantly deteriorated
since origination. Examples would include leveraged corporate loans or non-prime credit cards.
IFRS 9 Stage 1 and Stage 2 classification is not dependent solely on the absolute probability of default but on elements that determine a
Significant Increase in Credit Risk (see Note 7 on page 259), including relative movement in probability of default since initial recognition.
There is therefore no direct relationship between credit quality and IFRS 9 stage classification.
Credit risk profile by internal PD grade for loans and advances at amortised cost (audited)
Gross carrying amount
Allowance for ECL
Credit
quality
description
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
Net
exposure
£m
Coverage
ratio
%
Total
£m
PD range
%
Grading
As at 31 December 2019
1-3
4-5
6-8
9-11
12-14
15-19
19
20-21
22
Total
0.0 to <0.05%
0.05 to <0.15%
0.15 to <0.30%
0.30 to <0.60%
0.60 to <2.15%
2.15 to <10%
10 to <11.35%
11.35 to <100%
Strong
91,993
Strong 92,668
Strong
29,187
Strong 34,515
Satisfactory 35,690
9,041
Satisfactory
5,235
Satisfactory
937
Higher Risk
–
100% Credit Impaired
1,615
7,704
4,444
2,932
4,341
9,190
3,629
4,379
–
299,266 38,234
As at 31 December 2018
1-3
4-5
6-8
9-11
12-14
15-19
19
20-21
22
Total
0.0 to <0.05%
0.05 to <0.15%
0.15 to <0.30%
0.30 to <0.60%
0.60 to <2.15%
2.15 to <10%
10 to <11.35%
11.35 to <100%
Strong
Strong
Strong
Strong
Satisfactory
Satisfactory
Satisfactory
Higher Risk
100% Credit Impaired
69,216
72,460
47,172
43,315
38,831
6,920
2,979
333
–
281,226
1,413
3,142
4,728
4,273
9,561
8,806
6,401
5,123
–
43,447
– 93,608
– 100,372
– 33,631
–
37,447
– 40,031
– 18,231
8,864
–
5,316
–
7,923
7,923
7,923 345,423
70,629
–
75,602
–
51,900
–
47,588
–
48,392
–
15,726
–
9,380
–
5,456
–
8,503
8,503
8,503 333,176
13
12
23
91
210
232
62
64
–
707
26
6
37
77
255
202
51
34
–
688
13
12
5
16
187
981
104
1,055
–
2,373
21
13
13
20
339
992
186
1,131
–
2,715
–
–
–
–
–
–
–
–
3,228
3,228
–
–
–
–
–
–
–
–
3,367
3,367
26 93,582
24 100,348
28 33,603
107
37,340
397 39,634
17,018
1,213
8,698
166
4,197
1,119
3,228
4,695
6,308 339,115
70,582
47
75,583
19
51,850
50
47,491
97
47,798
594
14,532
1,194
9,143
237
4,291
1,165
3,367
5,136
6,770 326,406
–
–
0.1
0.3
1.0
6.7
1.9
21.0
40.7
1.8
0.1
–
0.1
0.2
1.2
7.6
2.5
21.4
39.6
2.0
home.barclays/annualreport
Barclays PLC Annual Report 2019 167
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review Credit risk profile by internal PD grade for contingent liabilities (audited)a
PD range
%
Credit quality
description
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Stage 1
£m
Gross carrying amount
Allowance for ECL
Stage 3
Stage 2
£m
£m
Net
exposure
£m
Coverage
ratio
%
Total
£m
Grading
As at 31 December 2019
1-3
4-5
6-8
9-11
12-14
15-19
19
20-21
22
Total
0.0 to <0.05%
0.05 to <0.15%
0.15 to <0.30%
0.30 to <0.60%
0.60 to <2.15%
2.15 to <10%
10 to <11.35%
11.35 to <100%
Strong
Strong
Strong
Strong
Satisfactory
Satisfactory
Satisfactory
Higher Risk
100% Credit Impaired
As at 31 December 2018
1-3
4-5
6-8
9-11
12-14
15-19
19
20-21
22
Total
0.0 to <0.05%
0.05 to <0.15%
0.15 to <0.30%
0.30 to <0.60%
0.60 to <2.15%
2.15 to <10%
10 to <11.35%
11.35 to <100%
Strong
Strong
Strong
Strong
Satisfactory
Satisfactory
Satisfactory
Higher Risk
100% Credit Impaired
6,947
4,199
2,953
4,551
2,529
663
421
117
–
22,380
6,674
3,687
1,433
3,206
2,543
464
534
49
–
18,590
118
40
103
136
654
244
172
282
–
1,749
37
129
55
222
509
252
203
228
–
1,635
7,065
–
4,239
–
3,056
–
4,687
–
3,183
–
907
–
593
–
399
–
355
355
355 24,484
–
–
–
–
–
–
–
–
74
74
6,711
3,816
1,488
3,428
3,052
716
737
277
74
20,299
3
1
1
2
7
4
9
–
–
27
3
1
1
1
3
1
6
–
–
16
–
–
–
2
8
8
9
30
–
57
–
–
–
3
6
3
5
10
–
27
–
–
–
–
–
–
–
–
5
5
–
–
–
–
–
–
–
–
2
2
3
1
1
4
15
12
18
30
5
7,062
4,238
3,055
4,683
3,168
895
575
369
350
89 24,395
3
1
1
4
9
4
11
10
2
45
6,708
3,815
1,487
3,424
3,043
712
726
267
72
20,254
–
–
–
0.1
0.5
1.3
3.0
7.5
1.4
0.4
–
–
0.1
0.1
0.3
0.6
1.5
3.6
2.7
0.2
Credit risk profile by internal PD grade for loan commitments (audited)a
Credit quality
description
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Stage 1
£m
Gross carrying amount
Allowance for ECL
Stage 3
Stage 2
£m
£m
Net
exposure
£m
Coverage
ratio
%
Total
£m
PD range
%
Grading
As at 31 December 2019
1-3
4-5
6-8
9-11
12-14
15-19
19
20-21
22
Total
0.0 to <0.05%
0.05 to <0.15%
0.15 to <0.30%
0.30 to <0.60%
0.60 to <2.15%
2.15 to <10%
10 to <11.35%
11.35 to <100%
Strong 85,908
Strong
70,112
Strong 53,340
Strong 44,097
36,112
4,913
3,662
616
–
298,760
Satisfactory
Satisfactory
Satisfactory
Higher Risk
100% Credit Impaired
As at 31 December 2018
1-3
4-5
6-8
9-11
12-14
15-19
19
20-21
22
Total
0.0 to <0.05%
0.05 to <0.15%
0.15 to <0.30%
0.30 to <0.60%
0.60 to <2.15%
2.15 to <10%
10 to <11.35%
11.35 to <100%
Strong
Strong
Strong
Strong
Satisfactory
Satisfactory
Satisfactory
Higher Risk
100% Credit Impaired
80,971
54,239
36,714
34,587
62,217
20,824
1,100
747
–
291,399
1,025
1,889
1,019
1,592
3,955
3,857
2,106
1,993
–
17,436
1,636
1,498
823
1,483
4,142
6,645
1,019
3,245
–
20,491
– 86,933
–
72,001
– 54,359
– 45,689
– 40,067
8,770
–
5,768
–
2,609
–
580
580
580 316,776
82,607
–
55,737
–
37,537
–
36,070
–
66,359
–
27,469
–
2,119
–
3,992
–
610
610
610 312,500
2
5
8
13
30
8
4
–
–
70
3
3
4
11
32
26
1
3
–
83
1
1
1
1
26
55
7
21
–
113
2
1
1
1
12
44
24
38
–
123
–
–
–
–
–
–
–
–
50
50
–
–
–
–
–
–
–
–
20
20
3 86,930
6
71,995
9 54,350
14 45,675
40,011
56
8,707
63
5,757
11
2,588
21
530
50
233 316,543
5
4
5
12
44
70
25
41
20
82,602
55,733
37,532
36,058
66,315
27,399
2,094
3,951
590
226 312,274
–
–
–
–
0.1
0.7
0.2
0.8
8.6
0.1
–
–
–
–
0.1
0.3
1.2
1.0
3.3
0.1
Note
a Excludes loan commitments and financial guarantees of £17.7bn (2018: £11.7bn) carried at fair value.
168 Barclays PLC Annual Report 2019
home.barclays/annualreport
RISK REVIEW: CREDIT RISK Risk performance Analysis of specific portfolios and asset types
This section provides an analysis of principal portfolios and businesses, in particular, home loans, credit cards, unsecured loans and other
retail lending.
Secured home loans
The UK home loans portfolio comprises first lien home loans and accounts for 92% (2018: 91%) 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 (%)
Annualised gross charge-off rates – 180 days past due (%)
Recovery book proportion of outstanding balances (%)
Recovery book impairment coverage ratio (%)
Barclays UK
2019
143,259
0.2
0.6
0.5
5.3
2018
136,517
0.2
0.7
0.6
2.9
Note
a 2018 metrics have been restated to align with the current methodology for the classification of delinquent balances and the inclusion of past maturity balances.
Within the UK home loans portfolio:
■■ gross loans and advances increased by £6.7bn (4.9%) following increases across both Residential (3.0%) and Buy to Let (BTL) (17.6%)
■■ owner-occupied interest-only home loans comprised 23.4% (2018: 26.3%) of total balances
■■ the average balance weighted LTV on owner-occupied loans increased to 50.2% (2018: 47.9%) with average completion LTVs remaining higher
than for the existing portfolio
■■ BTL home loans comprised 13.6% (2018: 12.1%) of total balances. The average balance weighted LTV increased to 56.5% (2018: 55.4%) driven
by average completion LTVs remaining higher than for the existing book.
Home loans principal portfolios – distribution of balances by LTVa
Barclays UK
As at 31 December 2019
<=75%
>75% and <=90%
>90% and <=100%
>100%
As at 31 December 2018
<=75%
>75% and <=90%
>90% and <=100%
>100%
Distribution of balances
Distribution of impairment allowance
Coverage ratio
Stage 1
%
Stage 2
%
Stage 3
%
Total
%
Stage 1
%
Stage 2
%
Stage 3
%
Total
%
Stage 1
%
Stage 2
%
Stage 3
%
76.0
10.4
1.3
0.1
77.9
8.0
0.6
–
10.7
0.7
0.1
–
11.9
0.6
0.1
0.1
0.7
–
–
–
0.8
–
–
–
87.4
11.1
1.4
0.1
90.6
8.6
0.7
0.1
4.2
2.7
0.8
0.2
3.3
1.6
0.3
–
15.4
11.5
2.5
4.1
26.7
11.8
3.0
10.0
28.5
12.6
4.9
12.6
20.9
8.7
4.4
9.3
48.1
26.8
8.2
16.9
50.9
22.1
7.7
19.3
–
–
–
0.2
–
–
–
–
0.1
0.9
1.8
8.7
0.1
1.0
1.7
5.9
2.2
19.7
54.4
107.4
1.3
12.7
44.5
88.5
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 2019.
Home loans principal portfolios – average LTVa
As at 31 December
Overall portfolio LTV(%):
Balance weighted
Valuation weighted
For >100% LTVs:
Balances (£m)
Marked to market collateral (£m)
Average LTV: balance weighted (%)
Average LTV: valuation weighted (%)
Balances in recovery book (%)
Barclays UK
2019
51.1
37.3
160
140
133.5
119.7
10.0
Note
a 2018 metrics have been restated to align with the current methodology for the classification of delinquent balances and the inclusion of past maturity balances.
Total
%
–
0.1
0.3
9.0
–
0.1
0.5
10.8
2018
48.8
35.8
150
132
136.3
119.5
7.7
home.barclays/annualreport
Barclays PLC Annual Report 2019 169
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review Home loans principal portfolios – new lending
As at 31 December
New bookings (£m)
New home loan proportion above >90% LTV (%)
Average LTV on new home loans: balance weighted (%)
Average LTV on new home loans: valuation weighted (%)
Barclays UK
2019
25,530
4.2
67.9
60.0
2018
23,473
1.8
65.4
57.4
The value of new bookings increased across both the owner-occupied and BTL portfolios, 9.2% and 6.5% respectively. High LTV lending booked
in 2019 increased, driven by market conditions.
Head Office: Italian home loans and advances at amortised cost reduced to £6.0bn (2018: £7.9bn) and continue to run-off since new bookings
ceased in 2016. The portfolio is secured on residential property with an average balance weighted mark to market LTV of 64.4% (2018: 61.8%).
90-day arrears increased to 1.8% (2018: 1.4%), a function of the balance reduction associated with the sale of £787m assets in Q3 2019, gross
charge-off rates remained stable at 0.8% (2018: 0.8%).
Credit cards, unsecured loans and other retail lending
The principal portfolios listed below accounted for 87% (2018: 86%) 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 2019
Barclays UK
UK cards
UK personal loans
Barclays International
US cards
Barclays Partner Finance
Germany consumer lending
As at 31 December 2018
Barclays UK
UK cards
UK personal loans
Barclays International
US cards
Barclays Partner Finance
Germany consumer lending
30-day
arrears,
excluding
recovery
book
%
90-day
arrears,
excluding
recovery
book
%
Annualised
gross
write-off
rate
%
Annualised
net
write-off
rate
%
Gross
loans and
advances
£m
16,457
6,139
22,041
4,134
3,558
17,285
6,335
22,178
4,216
3,400
1.7
2.1
2.7
0.9
1.7
1.8
2.3
2.7
1.1
1.9
0.8
1.0
1.4
0.3
0.7
0.9
1.1
1.4
0.4
0.8
1.6
3.2
4.5
1.7
2.1
1.9
1.9
3.6
1.7
2.7
1.6
2.9
4.4
1.7
1.3
1.5
1.5
3.4
1.7
2.0
UK cards: following the introduction of payment reminders both 30- and 90-day arrears rates reduced by 0.1%. The annualised gross write-off
rate reduced to 1.6% (2018: 1.9%), reflecting lower levels of delinquency and contractual charge-offs through 2019, albeit with increased debt
sales from the recovery book.
UK personal loans: 30- and 90-day arrears rates reduced by 0.2% and 0.1% respectively, reflecting a continued improvement in lending quality
over the past two years, coupled with improvements in collections effectiveness. Write-off rates increased significantly reflecting higher
charge-offs in 2018.
US cards: 30- and 90-day arrears rates remained stable. The annualised gross and net write-off rates increased to 4.5% (2018: 3.6%) and 4.4%
(2018: 3.4%) respectively primarily driven by an increase in charge-offs in 2018. The percentage of write-offs to charge-offs was stable year on
year.
Barclays Partner Finance: improvement in 30- and 90-day arrears was driven by better arrears management and improved customer selection.
Annualised write-off rates remained flat.
Germany consumer lending: improvement in 30- and 90-day arrears was driven by better collections performance across all products.
The annualised write-off rates improved in line with expectations.
170 Barclays PLC Annual Report 2019
home.barclays/annualreport
RISK REVIEW: CREDIT RISK Risk performance Exposure to UK commercial real estate (CRE)
The UK CRE portfolio includes property investment, development, trading and house builders but excludes social housing and contractors.
UK CRE summary
As at 31 December
UK CRE loans and advances (£m)
Stage 3 balances (£m)
Stage 3 balances as % of UK CRE balances (%)
Impairment allowances (£m)
Stage 3 coverage ratio (%)
Total collateral (£m)a
12 months ended 31 December
Impairment charge (£m)
Note
a Based on the most recent valuation assessment.
Maturity analysis of exposure to UK CRE
As at 31 December
2019
2018
Stage 3
balances
£m
254
267
2019
2018
9,051
254
2.8
52
7.5
26,876
8,576
267
3.1
49
8.8
26,508
6
(15)
Over
10 years
£m
1,388
1,236
Total
loans and
advances
£m
9,051
8,576
Contractual maturity of UK CRE loans and advances at amortised cost
Over
five years
but not
more than
10 years
£m
3,687
2,778
Over
six months
but not
more than
one year
£m
111
134
Over
one year
but not
more than
two years
£m
377
492
Over
two years
but not
more than
five years
£m
3,088
3,569
Not
more than
six months
£m
146
100
home.barclays/annualreport
Barclays PLC Annual Report 2019 171
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review
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 2019
Barclays UK
Barclays International
Head Office
Total retail
Barclays UK
Barclays International
Head Office
Total wholesale
Group total
As at 31 December 2018
Barclays UKa
Barclays International
Head Office
Total retail
Barclays UK
Barclays International
Head Office
Total wholesale
Group total
Gross balances
Impairment allowances
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
147
2
–
149
47
918
–
965
1,114
173
2
–
175
56
1,088
–
1,144
1,319
298
225
130
653
449
1,016
–
1,465
2,118
349
231
165
745
615
1,196
–
1,811
2,556
445
227
130
802
496
1,934
–
2,430
3,232
522
233
165
920
671
2,284
–
2,955
3,875
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
35
1
–
36
4
37
–
41
77
33
1
–
34
9
40
–
49
83
92
158
8
258
31
226
–
257
515
139
165
10
314
36
201
–
237
551
Total
£m
127
159
8
294
35
263
–
298
592
172
166
10
348
45
241
–
286
634
Note
a 2018 metrics have been restated to exclude up to date, paying customers classified as Stage 1.
Balances on forbearance programmes decreased 17%, driven by better portfolio performance.
Retail balances on forbearance reduced 13% to £0.8bn, reflecting a decrease in Barclays UK and Head Office.
Wholesale balances on forbearance fell to £2.4bn (2018: £3.0bn) with lower exposure in Corporate Bank and SME of £211m and £171m
respectively. Impairment allowances rose to £298m (2018: £286m) following a small number of material single name charges in the year. Barclays
International accounted for 80% of wholesale forbearance with corporate cases representing 72% of all forborne balances.
172 Barclays PLC Annual Report 2019
home.barclays/annualreport
RISK REVIEW: CREDIT RISK Risk performance Retail forbearance programmes
Forbearance on the Group’s principal retail portfolios is presented below.
Analysis of key portfolios in forbearance programmes
Gross balances on
forbearance programmes
As at 31 December 2019
Barclays UK
UK home loans
UK cards
UK personal loans
Barclays International
US cards
Barclays Partner Finance
Germany consumer lending
Head Office
Italian home loans
As at 31 December 2018
Barclays UK
UK home loansa
UK cardsa
UK personal loans
Barclays International
US cards
Barclays Partner Finance
Germany consumer lending
Head Office
Italian home loans
% of gross
retail loans
and advances
%
0.1
1.5
0.9
0.8
0.1
1.0
2.2
0.1
1.6
1.0
0.8
0.1
1.3
2.1
Total
£m
137
254
54
183
3
37
130
182
279
62
177
6
46
165
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
%
42.7
n/a
n/a
n/a
n/a
n/a
60.6
41.3
n/a
n/a
n/a
n/a
n/a
59.5
31.0
n/a
n/a
n/a
n/a
n/a
44.9
29.9
n/a
n/a
n/a
n/a
n/a
46.6
–
97
30
131
2
23
8
–
121
51
131
4
28
10
–
38.2
55.3
71.6
66.7
60.9
5.9
–
43.4
82.3
74.0
66.7
60.9
6.1
Note
a 2018 metrics have been restated to exclude up to date, paying customers classified as Stage 1.
UK home loans: Forbearance balances reduced to £137m (2018: £182m) due to a reduction in volumes of entries into collections and new
forbearance plans.
UK cards: Forbearance balances decreased in line with the reduction in delinquent balances.
UK personal loans: Forbearance balances decreased in line with the reduction in delinquent balances.
US cards: Forbearance balances increased to £183m (2018: £177m) in line with book size but as a percentage of total balance remained low
(<1%). Lower coverage was driven by favourable macroeconomic conditions.
Barclays Partner Finance: The reduction in forbearance balances was mainly driven by the rundown of the motor business over the course of
2019.
Germany consumer lending: Improved performance and higher quality bookings led to fewer accounts moving into forbearance.
Italian home loans: Forbearance balances reduced to £130m (2018: £165m), due to an asset sale in Q3 2019.
home.barclays/annualreport
Barclays PLC Annual Report 2019 173
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review Wholesale forbearance programmes
The tables below detail balance information for wholesale forbearance cases.
Analysis of wholesale balances in forbearance programmes
As at 31 December 2019
Barclays UK
Barclays International
Total
As at 31 December 2018
Barclays UK
Barclays International
Total
Gross balances on
forbearance programmes
Total balances
£m
% of gross
wholesale loans
and advances
%
Impairment
allowances
marked against
balances
on forbearance
programmes
£m
Total balances
on forbearance
programmes
coverage ratio
%
496
1,934
2,430
671
2,284
2,955
1.6
1.9
1.8
2.4
2.3
2.3
35
263
298
45
241
286
7.1
13.6
12.3
6.7
10.6
9.7
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 165 to 166.
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
Total
Government securities
As at 31 December
United States
United Kingdom
Japan
2019
£m
91,058
39,231
4,480
5,084
139,853
%
65.1
28.1
3.2
3.6
100.0
2018
£m
76,646
30,767
7,014
4,143
118,570
2019
Fair value
£m
32,145
28,010
6,679
%
64.6
26.0
5.9
3.5
100.0
2018
Fair value
£m
31,199
19,555
1,249
174 Barclays PLC Annual Report 2019
home.barclays/annualreport
RISK REVIEW: CREDIT RISK Risk performance 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
Balance
sheet
assets
£m
56,606
142,468
8,215
20,806
1,141
229,236
2019
Counterparty
netting
£m
44,284
106,589
6,589
17,517
1,019
175,998
Balance
sheet
assets
£m
64,188
125,272
10,755
20,882
1,441
222,538
2018
Counterparty
netting
£m
50,189
95,572
8,450
16,653
1,137
172,001
Net
exposure
£m
12,322
35,879
1,626
3,289
122
53,238
33,411
19,827
Net
exposure
£m
13,999
29,700
2,305
4,229
304
50,537
31,402
19,135
Derivative asset exposures would be £209bn (2018: £203bn) 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 £212bn (2018: £202bn) lower
reflecting counterparty netting and collateral placed. In addition, non-cash collateral of £6bn (2018: £6bn) 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.
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
Total unilateral in favour of Barclays
Unilateral in favour of counterparty
Foreign exchange
Interest rate
Credit derivatives
Equity and stock index
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)
2019
2018
Notional
contract
amount
£m
32,441
5,202
338
158
38,139
11,230
44,360
116
494
56,200
Fair value
Assets
£m
Liabilities
£m
398
859
3
5
1,265
424
3,094
–
298
3,816
(422)
(13)
(1)
(27)
(463)
(1,206)
(4,210)
(1)
(40)
(5,457)
Notional
contract
amount
£m
22,639
4,762
54
107
27,562
14,221
64,504
78
714
79,517
4,484,380
12,303,652
390,790
210,267
7,269
17,396,358
379,741
284,168
8,142
21,131
58
693,240
18,183,937
51,571
131,700
5,034
8,925
294
197,524
4,117
4,697
216
1,400
9
10,439
213,044
(51,001) 4,788,711
(128,096) 9,699,149
380,546
177,496
9,635
(195,408) 15,055,537
(4,923)
(11,178)
(210)
(4,216)
(1,668)
(474)
(4,540)
(46)
(10,944)
371,158
205,050
5,830
12,179
121
594,338
(212,272) 15,756,954
Fair value
Assets
£m
Liabilities
£m
473
769
1
17
1,260
530
2,925
1
242
3,698
58,772
116,712
6,339
7,984
492
190,299
4,243
3,454
234
1,468
29
9,428
204,685
(369)
(25)
–
–
(394)
(1,641)
(4,090)
(3)
(31)
(5,765)
(56,392)
(114,091)
(5,002)
(8,494)
(330)
(184,309)
(5,495)
(1,138)
(234)
(3,305)
(78)
(10,250)
(200,718)
home.barclays/annualreport
Barclays PLC Annual Report 2019 175
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review RISK REVIEW: MARKET RISK
Risk performance
Summary of contents
Outlines key measures used to summarise the market risk profile
of the bank such as value at risk (VaR).
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.
■■ Market risk overview and summary of performance
■■ Traded market risk
■■ Review of management measures
– The daily average, maximum and minimum values
of management VaR
– Business scenario stresses
Page
176
176
176
177
177
All disclosures in this section (pages
176 to 177) are unaudited unless
otherwise stated.
Overview
This section contains key statistics
describing the market risk profile
of the Group. The market risk
management section on page 177
provides a description of management
VaR.
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.
Summary of performance
in the period
Overall, the Group has maintained a steady
market risk profile. Average management VaR
increased by 10% to £23m in 2019 (2018:
£21m) and remained relatively stable during
the period. The increase in average
management VaR in 2019 was driven by a
small increase in equity risk and credit risk,
partially offset by a slight decrease in interest
rate risk compared to 2018.
Traded market risk review
Review of management measures
The following disclosures provide details on
management measures of market risk. Refer
to the market risk management section on
pages 179 to 186 of the Barclays PLC Pillar 3
Report 2019 (unaudited) 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 Treasury and it is
calculated with a one-day holding period.
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.
176 Barclays PLC Annual Report 2019
home.barclays/annualreport
The daily average, maximum and minimum values of management VaR
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
2019
2018
Average
£m
12
6
10
8
4
3
1
2
(23)
23
Highb
£m
17
11
22
11
5
5
2
3
n/a
29
Lowb
£m
8
3
5
6
3
2
–
1
n/a
17
Average
£m
11
8
7
6
6
3
1
3
(24)
21
Highb
£m
16
19
14
8
9
7
2
4
n/a
27
Lowb
£m
8
3
4
4
3
2
–
2
n/a
15
Notes
a Excludes BAGL from 23 July 2018.
b Diversification effects recognise that forecast losses from different assets or businesses are unlikely to occur concurrently, hence the expected aggregate loss is lower than the sum
of the expected losses from each area. Historical correlations between losses are taken into account in making these assessments. The high and low VaR figures reported for each
category did not necessarily occur on the same day as the high and low VaR reported as a whole. Consequently, a diversification effect balance for the high and low VaR figures
would not be meaningful and is therefore omitted from the above table.
Group Management VaRa
£m
30
20
10
0
Jan 2018
Note
a Excludes BAGL from 23 July 2018.
Jan 2019
Dec 2019
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 2019, the scenario analyses showed that the largest market risk related impacts would be due to a severe deterioration in financial liquidity
and a global recession.
home.barclays/annualreport
Barclays PLC Annual Report 2019 177
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review
Risk performance
Treasury and Capital risk: summary of contents
Liquidity risk performance
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.
■■ Liquidity overview and summary of performance
■■ Liquidity risk stress testing
– Liquidity risk appetite
– Liquidity regulation
– Liquidity coverage ratio
This section provides an overview of the Group’s
liquidity risk.
The liquidity pool is held unencumbered and is intended to
offset stress outflows.
The basis for sound liquidity risk management is a funding
structure that reduces the probability of a liquidity stress
leading to an inability to meet funding obligations as they
fall due.
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.
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 the Group’s 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.
This section outlines the Group’s minimum requirement
for own funds and eligible liabilities (MREL) position
and ratios.
■■ Liquidity pool
– Composition of the liquidity pool
– Liquidity pool by currency
– Management of the liquidity pool
– Contingent liquidity
■■ Funding structure and funding relationships
– Deposit funding
– Wholesale funding
■■ Credit ratings
■■ Contractual maturity of financial assets and liabilities
■■ 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
■■ Minimum requirement for own funds and eligible liabilities
Page
180
180
180
181
181
182
182
182
182
182
183
183
184
185
186
190
190
190
190
191
191
191
192
193
193
193
194
194
195
178 Barclays PLC Annual Report 2019
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RISK REVIEW: TREASURY AND CAPITAL RISK Treasury and Capital risk: summary of contents
Capital risk performance continued
The Group discloses the two sources of foreign exchange
risk that it is exposed to.
■■ 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
– IAS 19 position
– Risk measurement
■■ Interest rate risk in the banking book overview and summary
of performance
■■ Net interest income sensitivity
– by business unit
– by currency
■■ Analysis of equity sensitivity
■■ Volatility of the FVOCI portfolio in the liquidity pool
Interest rate risk in the banking
book performance
A description of the non-traded market risk framework
is provided.
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.
The Group discloses the overall impact of a parallel shift
in interest rates on other comprehensive income and
cash flow hedges.
The Group measures the volatility of the value of
the FVOCI instruments in the liquidity pool through
non-traded market risk VaR.
Page
196
196
196
196
196
196
197
197
198
198
198
199
199
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Barclays PLC Annual Report 2019 179
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review Summary of performance
The liquidity pool at £211bn (December 2018:
£227bn) reflects the Group’s prudent
approach to liquidity management. The
Liquidity Coverage Ratio (LCR) remained well
above the 100% regulatory requirement at
160% (December 2018: 169%), equivalent to
a surplus of £78bn (December 2018: £90bn).
The liquidity pool, LCR and surplus have been
managed down through the course of the
year, supporting increased business funding
requirements while maintaining a prudent
liquidity position.
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 Group
sets its internal liquidity risk appetite (LRA)
based on internal liquidity risk assessments
and external regulatory requirements, namely
the CRR (as amended by CRR II) Liquidity
Coverage Ratio (LCR).
During the year, the Group issued £8.6bn
of minimum requirement for own funds
and eligible liabilities (MREL) instruments
in a range of tenors and currencies.
Barclays Bank PLC continued to issue in the
shorter-term markets and Barclays Bank UK
PLC issued in the shorter-term and secured
markets, helping to maintain their stable
and diversified funding bases.
The Group has continued to reduce its
reliance on short-term wholesale funding,
where the proportion maturing in less than
one year fell to 28% (December 2018: 30%).
Liquidity risk appetite
The liquidity risk assessment measures the
potential contractual and contingent stress
outflows under a range of stress scenarios,
which are then used to determine the size of
the liquidity pool that is immediately available
to meet anticipated outflows should a stress
occur.
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.
Liquidity risk
All disclosures in this section
(pages 180 to 189) are unaudited
unless otherwise stated.
Overview
The Group has a comprehensive
key risk control framework for
managing the Group’s liquidity risk.
The Liquidity Framework meets the
PRA’s standards and is designed to
maintain liquidity resources that are
sufficient in amount and quality, and a
funding profile that is appropriate to
meet the liquidity risk appetite. The
Liquidity Framework is delivered via a
combination of policy formation,
review and governance, analysis,
stress testing, limit setting and
monitoring.
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) credit ratings; and (vi) contractual
maturity of financial assets and
liabilities.
For further detail on liquidity risk
governance and framework, refer
to pages 192 to 194 of the Barclays
PLC Pillar 3 Report 2019 (unaudited).
Key metrics
Liquidity Coverage Ratio
160%
(2018: 169%)
180 Barclays PLC Annual Report 2019
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RISK REVIEW: TREASURY AND CAPITAL RISK Risk performance Key LRA assumptions
For the year ended 31 December 2019
Drivers of Liquidity risk
LRA Combined stress – key assumptions
Wholesale Secured and Unsecured Funding Risk
■■ 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 buy-back obligations, excess client futures margin,
Prime Brokerage (PB) client cash and overlifts
■■ Haircuts applied to the market value of marketable assets held in the liquidity buffer
Retail and Corporate Funding Risk
■■ Retail and Corporate deposit outflows as counterparties seek to diversify their
deposit balances
Intraday Liquidity Risk
■■ Liquidity held to meet increased intraday liquidity usage due to payment and receipts
volatility, loss of unsecured credit lines and haircuts applied to collateral values used to back
secured credit lines in a stress
Intra-Group Liquidity Risk
■■ Liquidity support for material subsidiaries. Surplus liquidity held within certain subsidiaries
is not taken as a benefit to the wider Group
Cross-Currency Liquidity Risk
■■ Deterioration in FX market capacity that may result in restriction in net currency positions
Off-Balance Sheet Liquidity Risk
■■ Drawdown on committed facilities based on facility and counterparty type
■■ Collateral outflows due to a two-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
Franchise-Viability Risk
■■ Liquidity held to enable the firm to meet select non-contractual obligations to ensure market
confidence in the firm is maintained, including debt buy-backs, swap tear-ups and increased
prime brokerage margin debits
Funding Concentration Risk
■■ Liquidity held against largest wholesale funding counterparty refusing to roll
As at 31 December 2019, the Group held eligible liquid assets well in excess of 100% of net stress outflows of the 30-day combined scenario,
which has the highest net outflows of the three short-term liquidity stress scenarios.
The Group also runs a long-term liquidity stress test, which measures the anticipated outflows over a 12-month market-wide scenario.
As at 31 December 2019, the Group remained compliant with this internal metric.
Liquidity regulation
The Group monitors its position against the CRR (as amended by CRR II) Liquidity Coverage Ratio and the 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 been developed to promote a sustainable maturity structure of assets and liabilities.
In June 2019, the EBA published CRR II which defined the final rules and minimum requirements for the NSFR. Barclays expects to be compliant
with these requirements when they become effective in June 2021.
Liquidity coverage ratio
The external LCR requirement is prescribed by the regulator taking into account the relative stability of different sources of funding and potential
incremental funding requirements in a stress.
As at 31 December
Eligible liquidity buffer
Net stress outflows
Surplus
Liquidity coverage ratio
2019
£bn
206
(128)
78
160%
2018
£bn
219
(129)
90
169%
As part of the LRA, Barclays also establishes the minimum LCR limit. The Group plans to maintain its surplus to the internal and regulatory stress
requirements at an efficient level, while continuously assessing risks to market funding conditions and its liquidity position and taking actions to
manage the size of the liquidity pool as appropriate.
home.barclays/annualreport
Barclays PLC Annual Report 2019 181
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review
Liquidity pool
The Group liquidity pool as at 31 December 2019 was £211bn (2018: £227bn). During 2019, the month-end liquidity pool ranged from £211bn
to £256bn (2018: £207bn to £243bn), and the month-end average balance was £235bn (2018: £225bn). The liquidity pool is held unencumbered
and is intended to offset stress outflows. It comprises the following cash and unencumbered assets.
Composition of the Group liquidity pool as at 31 December 2019
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 2019
Total as at 31 December 2018
Liquidity
pool
£bn
153
Liquidity pool of which CRR LCR eligiblec
Cash
£bn
150
Level 1
£bn
–
Level 2A
£bn
–
2018
Liquidity
pool
£bn
181
31
5
–
36
9
7
6
–
22
211
227
–
–
–
–
–
–
–
–
–
150
176
26
4
–
30
8
7
5
–
20
50
40
–
2
–
2
1
–
–
–
1
3
1
27
4
1
32
6
5
3
–
14
227
Notes
a Includes cash held at central banks and surplus cash at central banks related to payment schemes. Of which over 98% (2018: over 99%) was placed with the Bank of England,
US Federal Reserve, European Central Bank, Bank of Japan and Swiss National Bank.
b Of which over 67% (2018: over 71%) comprised UK, US, French, German, Swiss and Dutch securities.
c The LCR eligible liquidity pool is adjusted for trapped liquidity and other regulatory deductions. It also incorporates other CRR (as amended by CRR II) qualifying assets that are
not eligible under Barclays’ internal risk appetite.
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 2019
Liquidity pool as at 31 December 2018
USD
£bn
52
57
EUR
£bn
42
64
GBP
£bn
67
76
Other
£bn
50
30
Total
£bn
211
227
Management of the 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 returns generated
by these highly liquid assets, the risk and reward profile is continuously managed.
As at 31 December 2019, 67% (2018: 70%) of the liquidity pool was located in Barclays Bank PLC, 20% (2018: 20%) in Barclays Bank UK PLC and
6% (2018: 2%) in Barclays Bank Ireland PLC. The residual portion of the liquidity pool is held outside of these entities, predominantly in the US
subsidiaries, to meet entity-specific stress outflows and local regulatory requirements. To the extent the use of this portion of the liquidity pool
is restricted due to local regulatory requirements, it is assumed to be unavailable to the rest of the Group in calculating the LCR.
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 their 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 significantly elevated prices, the Group could generate liquidity via central
bank facilities. The Group maintains a significant amount of collateral positioned at central banks.
For more detail on the Group’s other unencumbered assets, see pages 221 to 222 of the Barclays PLC Pillar 3 Report 2019 (unaudited).
182 Barclays PLC Annual Report 2019
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RISK REVIEW: TREASURY AND CAPITAL RISK Risk performance Funding structure and funding relationships
The basis for sound liquidity risk management is a 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
deposits in the relevant entities, with the surplus primarily funding the liquidity pool. 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 when netted against cash collateral received and paid. Wholesale
debt and equity is used to fund residual assets.
These funding relationships are summarised below:
Assets
Loans and advances at amortised cost
Group liquidity pool
Reverse repurchase agreements, trading
portfolio assets, cash collateral and
settlement balances
Derivative financial instruments
Other assetsa
2019
£bn
339
211
298
229
63
2018
£bn
327
227
303
223
53
Total assets
1,140
1,133
Liabilities
Deposits at amortised cost
<1 Year wholesale funding
>1 Year wholesale funding
Repurchase agreements, trading portfolio
liabilities, cash collateral and settlement
balances
Derivative financial instruments
Other liabilities
Equity
Total liabilities
Note
a Other assets include fair value assets that are not part of reverse repurchase agreements or trading portfolio assets, and other asset categories.
Deposit funding (audited)
Funding of loans and advances
As at 31 December 2019
Barclays UK
Barclays International
Head Office
Barclays Group
Loans and
advances at
amortised
cost
£bn
198
133
8
339
2019
Deposits at
amortised
cost
£bn
206
210
–
416
2019
£bn
416
41
106
247
229
35
66
1,140
Loan:
deposit
ratioa
%
96%
63%
2018
£bn
395
47
107
262
220
38
64
1,133
2018
Loan:
deposit
ratio
%
96%
65%
82%
83%
Note
a The loan: deposit ratio is calculated as loans and advances at amortised cost divided by deposits at amortised cost.
As at 31 December 2019, £181bn (2018: £172bn) 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 (2018: £5bn) of other liabilities are insured by other
governments.
Contractually, current accounts are repayable on demand and savings accounts at short notice. In practice, their observed maturity is typically
longer than their contractual maturity. Similarly, repayment profiles of certain types of assets e.g. mortgages, overdrafts and credit card lending,
differ from their contractual profiles. The Group therefore assesses the behavioural maturity of both customer assets and liabilities to identify
structural balance sheet funding gaps. In doing so, it applies quantitative modelling and qualitative assessments which take into account historical
experience, current customer composition and macroeconomic projections.
The Group’s broad base of customers, numerically and by depositor type, helps protect against unexpected fluctuations in balances and hence
provides a stable funding base for the Group’s operations and liquidity needs.
home.barclays/annualreport
Barclays PLC Annual Report 2019 183
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review Wholesale funding
Barclays Bank Group and Barclays Bank UK Group maintain 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, short-term funding markets and repo markets.
Barclays Bank Group has direct access to US, European and Asian capital markets through its global investment banking operations and to
long-term investors through its clients worldwide. Key sources of wholesale funding include money markets, certificates of deposit, commercial
paper, medium term issuances (including structured notes) and securitisations.
Key sources of wholesale funding for Barclays Bank UK Group include money markets, certificates of deposit, commercial paper, covered bonds
and other securitisations.
The Group expects to continue issuing public wholesale debt 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.
As at 31 December 2019, the Group’s total wholesale funding outstanding (excluding repurchase agreements) was £147.1bn (2018: £154.0bn),
of which £19.6bn (2018: £22.5bn) was secured funding and £127.5bn (2018: £131.5bn) unsecured funding. Unsecured funding includes
£51.1bn (2018: £47.3bn) of privately placed senior unsecured notes issued through a variety of distribution channels including intermediaries
and private banks.
During the year, the Group issued £8.6bn of minimum requirement for own funds and eligible liabilities (MREL) instruments from Barclays PLC
(the Parent company) in a range of different currencies and tenors. Barclays Bank PLC continued to issue in the shorter-term markets and
Barclays Bank UK PLC issued in the shorter-term and secured markets, helping to maintain their stable and diversified funding bases.
As at 31 December 2019, wholesale funding of £40.6bn (2018: £46.7bn) matures in less than one year, of which £16.3bn (2018: £19.1bn) relates
to term funding. Although not a requirement, the liquidity pool exceeded the wholesale funding maturing in less than one year by £170bn
(2018: £180bn).
Barclays Bank Group and Barclays Bank UK Group also support various central bank monetary initiatives including participation in the Bank of
England’s Term Funding Scheme. These are reported under ‘repurchase agreements and other similar secured borrowing’ on the balance sheet.
Maturity profile of wholesale fundinga,b
<1
month
£bn
1-3
months
£bn
3-6
months
£bn
6-12
months
£bn
Barclays PLC (the Parent company)
Senior unsecured (Public benchmark)
Senior unsecured (Privately placed)
Subordinated liabilities
Barclays Bank PLC
(including subsidiaries)
Certificates of deposit and
commercial paper
Asset backed commercial paper
Senior unsecured (Public benchmark)
Senior unsecured (Privately placed)c
Asset backed securities
Subordinated liabilities
Other
Barclays Bank UK PLC
(including subsidiaries)
Certificates of deposit and
commercial paper
Covered bonds
Asset backed securities
Total as at 31 December 2019
Of which secured
Of which unsecured
Total as at 31 December 2018
Of which secured
Of which unsecured
–
–
–
1.1
1.6
0.6
1.1
–
–
0.1
–
–
–
4.5
1.6
2.9
2.5
2.0
0.5
–
–
–
4.2
4.9
–
1.5
0.4
0.2
–
0.4
–
–
11.6
5.3
6.3
15.9
3.7
12.2
0.8
–
–
3.6
0.7
–
2.4
0.6
0.1
–
0.2
1.0
–
9.4
2.3
7.1
8.2
1.1
7.1
0.3
–
–
7.3
–
–
5.9
–
0.9
–
0.2
–
0.5
15.1
0.5
14.6
20.1
3.6
16.5
<1
year
£bn
1.1
–
–
16.2
7.2
0.6
10.9
1.0
1.2
0.1
0.8
1.0
0.5
40.6
9.7
30.9
46.7
10.4
36.3
1-2 years
£bn
2-3 years
£bn
3-4 years
£bn
4-5 years
£bn
>5 years
£bn
4.2
0.2
–
0.9
–
2.9
5.7
–
5.0
–
–
0.9
–
19.8
0.9
18.9
16.7
2.7
14.0
0.9
–
–
0.5
–
0.1
4.8
0.2
3.3
–
–
2.3
–
12.1
2.5
9.6
16.8
1.2
15.6
8.2
0.1
–
0.1
–
–
3.9
0.6
0.1
0.3
–
1.8
–
15.1
2.4
12.7
10.4
2.6
7.8
4.5
0.1
1.0
–
–
1.1
4.0
0.9
–
–
–
–
–
11.6
0.9
10.7
13.2
1.9
11.3
14.2
0.5
6.7
–
–
0.3
20.9
2.1
0.9
1.2
–
1.1
–
47.9
3.2
44.7
50.2
3.7
46.5
Total
£bn
33.1
0.9
7.7
17.7
7.2
5.0
50.2
4.8
10.5
1.6
0.8
7.1
0.5
147.1
19.6
127.5
154.0
22.5
131.5
Notes
a The composition of wholesale funds comprises the balance sheet reported financial liabilities at fair value, debt securities in issue and subordinated liabilities. It does not include
participation in the central bank facilities reported within repurchase agreements and other similar secured borrowing.
b Term funding comprises public benchmark and privately placed senior unsecured notes, covered bonds, asset backed securities and subordinated debt where the original maturity
of the instrument was more than one year.
c Includes structured notes of £42.9bn, of which £8.3bn matures within one year.
184 Barclays PLC Annual Report 2019
home.barclays/annualreport
RISK REVIEW: TREASURY AND CAPITAL RISK Risk performance Currency composition of wholesale debt
As at 31 December 2019, the proportion of wholesale funding by major currencies was as follows:
Currency composition of wholesale funding
Certificates of deposit and commercial paper
Asset backed commercial paper
Senior unsecured (Public benchmark)
Senior unsecured (Privately placed)
Covered bonds/Asset backed securities
Subordinated liabilities
Total as at 31 December 2019
Total as at 31 December 2018
USD
%
63
85
48
60
45
55
60
53
EUR
%
28
8
4
18
27
27
22
27
GBP
%
8
7
43
10
28
16
13
13
Other
%
1
–
5
12
–
2
5
7
To manage cross currency refinancing risk, the Group manages to foreign exchange cash flow limits, which limit risk at specific maturities.
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 its 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 30 January 2020
Barclays Bank PLC
Long-term
Short-term
Barclays Bank UK PLC
Long-term
Short-term
Barclays PLC
Long-term
Short-term
Standard & Poor’s Moody’s
Fitch
A / Stable
A-1
A1 / Stable
P-1
A+ / Stable
F1
A / Stable
A-1
A1 / Negative A+ / Stable
P-1
F1
BBB / Stable
A-2
Baa2 /Stable
P-2
A / Stable
F1
In January 2020 Moody’s upgraded the long-term ratings of Barclays PLC and Barclays Bank PLC by one notch to Baa2 and A1 respectively,
due to their view that the earnings profile of the entities has improved. This followed the positive outlooks that had been placed on these entities
in May 2019 and the outlooks reverted to stable in the most recent action. In November 2019, Moody’s revised the outlook on Barclays Bank
UK PLC to negative from stable, alongside other UK peers following a negative revision to the UK sovereign outlook.
In June 2019, Fitch affirmed all ratings for Barclays PLC, Barclays Bank PLC and Barclays Bank UK PLC. In December 2019, Fitch placed the outlooks
of all entities on stable from rating watch negative (RWN) alongside 18 UK banks to reflect their view that the immediate risk of a disruptive
no deal Brexit scenario was removed.
In June 2019, S&P affirmed all ratings for Barclays PLC, Barclays Bank PLC and Barclays Bank UK PLC.
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 November 2019
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.
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 £5bn respectively, and are provided for in the liquidity pool given the Group’s liquidity risk appetite.
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.
home.barclays/annualreport
Barclays PLC Annual Report 2019 185
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review 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.
Contractual maturity of financial assets and liabilities (audited)
On
demand
£m
2,022
14,824
14,279
149,383
229,063
13
114,195
As at
31 December 2019
Assets
Cash and balances
at central banks
Cash collateral and
settlement balances
Loans and advances
at amortised cost
Reverse repurchase
agreements and other
similar secured lending
Trading portfolio assets
Financial assets at fair
value through the
income statement
Derivative financial
instruments
Financial assets at fair
value through other
comprehensive income
Other financial assets
Total financial assets
Other assets
Total assets
Liabilities
Deposits at amortised cost 348,337
Cash collateral and
settlement balances
Repurchase agreements
and other similar
secured borrowing
Debt securities in issue
Subordinated liabilities
Trading portfolio liabilities
Financial liabilities
designated at fair value
Derivative financial
instruments
Other financial liabilities
Total financial liabilities
Other liabilities
Total liabilities
Cumulative liquidity gap
7
–
–
36,916
228,617
251
–
895
3,053
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
Not more
than three
months
£m
Over ten
years
£m
Total
£m
766
109
81,231
3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
150,258
83,256
10,944
13,108
7,738
7,031
21,771
22,478
37,408
40,702 163,111
339,115
3,097
–
–
–
–
–
–
–
77
–
190
–
–
–
–
–
2
–
3,379
114,195
89,355
13,979
3,443
1,317
1,664
512
953
2,302
5,282
133,086
30
–
–
–
7
24
9
79
24
229,236
6,694
441
524,674 192,558
3,241
25
30,465
1,164
–
12,345
1,159
14
9,521
7,711
–
31,230
6,521
–
29,725
11,896
–
50,266
6,169
–
21,195
–
65,750
1,375
64,278 174,588 1,119,650
20,579
1,140,229
42,357
10,671
3,861
4,067
3,935
930
530
545
554
415,787
64,275
13
–
–
–
–
–
–
–
67,341
2,755
12,795
207
–
10
6,560
78
–
–
4,147
75
–
–
3,123
832
–
10,007
8,387
4,979
–
1,201
3,325
3,266
–
470
18,189
1,075
–
–
14,342
5,979
–
67
5,501
1,665
–
14,517
76,369
18,156
36,916
13,952 127,939
10,890
6,519
3,798
6,981
6,235
7,706
7,127
13,179
204,326
1
2,361
631,133 252,690
–
55
28,277
8
52
14,662
–
50
11,870
36
1,110
35,435
42
138
15,137
42
242
28,254
88
351
28,432
370
409
229,204
5,019
21,745 1,067,635
6,934
1,074,569
65,660
52,015
(106,459) (166,591) (164,403) (166,720) (169,069) (173,274) (158,686) (136,674) (100,828)
186 Barclays PLC Annual Report 2019
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RISK REVIEW: TREASURY AND CAPITAL RISK Risk performance Contractual maturity of financial assets and liabilities (audited)
On
demand
£m
2,389
13,606
12,506
175,534
222,384
31
104,187
As at
31 December 2018
Assets
Cash and balances
at central banks
Cash collateral and
settlement balances
Loans and advances
at amortised cost
Reverse repurchase
agreements and other
similar secured lending
Trading portfolio assets
Financial assets at fair
value through the
income statement
Derivative financial
instruments
Financial assets at fair
value through other
comprehensive income
Other financial assets
Total financial assets
Other assets
Total assets
Liabilities
Deposits at amortised cost 342,967
Cash collateral and
settlement balances
Repurchase agreements
and other similar
secured borrowing
Debt securities in issue
Subordinated liabilities
Trading portfolio liabilities
Financial liabilities
designated at fair value
Derivative financial
instruments
Other financial liabilities
Total financial liabilities
Other liabilities
Total liabilities
Cumulative liquidity gap
1,331
26
–
37,882
219,578
277
619,883
11
761
531,409
14,280
3,542
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
Not more
than three
months
£m
Over ten
years
£m
Total
£m
1,353
74,786
118
19
–
–
64
22
–
2
–
–
–
4
–
–
–
–
177,069
77,222
11,171
7,938
5,416
7,072
26,336
25,559
39,604
48,606
142,198
326,406
1,245
–
–
–
–
–
–
–
586
–
112,297
7,174
3,124
2,312
4,677
–
6
1
4
14
446
–
165
11
–
–
311
11
–
–
–
–
2,308
104,187
829
5,153
149,648
86
21
222,538
3,120
182
204,154
2,784
56
18,095
1,696
–
10,237
2,719
7
12,200
6,080
–
37,695
2,765
–
28,946
7,818
–
47,748
18,659
–
68,180
7,164
–
52,816
1,006
154,536 1,113,200
20,083
1,133,283
30,029
7,282
3,672
3,237
3,983
2,053
520
349
746
394,838
63,973
5
2
–
–
–
–
–
–
67,522
5,542
14,779
306
–
–
5,937
–
–
–
5,159
78
–
–
7,686
45
–
3
6,984
860
–
10,017
6,248
5,156
–
1,201
12,988
3,387
–
484
15,812
6,968
–
–
6,667
3,759
–
18,578
82,286
20,559
37,882
143,635
6,809
9,051
3,577
10,383
5,689
7,116
4,415
11,879
216,834
9
2,984
261,257
–
–
20,033
–
–
17,962
–
–
14,545
3
554
22,770
3
–
29,166
3
–
25,215
3
–
28,031
44
–
219,643
3,815
23,095 1,061,957
7,547
1,069,504
63,779
51,243
(88,474) (145,577) (147,515) (155,240) (157,585) (142,660) (142,880) (120,347)
(80,198)
Expected maturity date may differ from the contractual dates, to account 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
■■ corporate and retail deposits, reported under deposits at amortised cost, are repayable on demand or at short notice on a contractual basis.
In practice, their behavioural maturity is typically longer than their contractual maturity, and therefore these deposits provide stable funding for
the Group’s operations and liquidity needs because of the broad base of customers, both numerically and by depositor type
■■ loans to corporate and retail customers, which are included within loans and advances at amortised cost and financial assets at fair value,
may be repaid earlier in line with terms and conditions of the contract
■■ debt securities in issue, subordinated liabilities, and financial liabilities designated at fair value, may include early redemption features.
home.barclays/annualreport
Barclays PLC Annual Report 2019 187
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk 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.
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
Over ten
years
£m
Total
£m
As at 31 December 2019
Deposits at amortised cost
Cash collateral and
settlement balances
Repurchase agreements and
other similar secured borrowing
Debt securities in issue
Subordinated liabilities
Trading portfolio liabilities
Financial liabilities designated
at fair value
Derivative financial instruments
Other financial liabilities
Total financial liabilities
As at 31 December 2018
Deposits at amortised cost
Cash collateral and settlement
balances
Repurchase agreements and
other similar secured borrowing
Debt securities in issue
Subordinated liabilities
Trading portfolio liabilities
Financial liabilities designated
at fair value
Derivative financial instruments
Other financial liabilities
Total financial liabilities
348,337
42,369
10,682
7,946
4,869
532
554
595
415,884
3,053
64,297
13
–
–
–
–
–
67,363
7
–
–
36,916
2,758
12,850
207
–
13,952
228,617
251
631,133
128,064
2
2,372
252,919
10
6,589
78
–
11,020
–
65
28,457
–
7,305
950
–
10,609
8
126
26,944
11,300
12,330
9,822
–
13,507
80
1,337
53,245
342,967
30,047
7,295
6,924
6,069
3,542
63,985
5
2
–
1,331
26
–
37,882
14,280
219,578
277
619,883
5,542
14,810
306
–
143,766
12
2,984
261,452
–
5,976
–
–
6,948
–
–
20,224
–
12,914
123
–
12,732
–
–
32,695
10,238
13,849
6,147
–
16,546
6
554
53,409
485
19,132
1,286
–
8,054
45
351
29,885
546
–
1,243
13,351
3,568
–
7,679
3
–
26,390
–
16,657
7,192
–
7,519
99
565
32,586
412
–
486
17,639
7,917
–
5,008
4
–
31,466
149
9,398
3,025
–
14,709
84,261
22,560
36,916
19,392
378
448
212,117
229,229
5,515
33,385 1,088,554
816
395,076
–
67,534
–
10,254
4,413
–
18,840
88,819
22,474
37,882
17,621
59
–
224,580
219,662
3,815
33,163 1,078,682
188 Barclays PLC Annual Report 2019
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RISK REVIEW: TREASURY AND CAPITAL RISK Risk performance 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)
On
demand
£m
Not more
than three
months
£m
Over three
months but
not more
than six
months
£m
Over six
months but
not more
than nine
months
£m
Over nine
months but
not more
than one
year
£m
Over one
year but
not more
than two
years
£m
Over two
years but
not more
than three
years
£m
Over three
years but
not more
than five
years
£m
Over five
years but
not more
than ten
years
£m
Over ten
years
£m
Total
£m
As at 31 December 2019
Guarantees, letters of credit
and credit insurance
Other commitments
received
Total off-balance sheet
commitments received
As at 31 December 2018
Guarantees, letters of credit
and credit insurance
Other commitments
received
Total off-balance sheet
commitments received
13,091
106
91
–
13,182
106
6,288
93
6,381
110
42
152
22
–
22
20
–
20
81
–
81
13
–
13
–
–
–
16
–
16
11
–
11
65
–
65
12
–
12
10
–
10
21
–
21
33
–
33
12
–
12
10
–
10
34
13,390
–
91
34
13,481
5
–
5
6,570
135
6,705
Maturity analysis of off-balance sheet commitments given (audited)
Over six
months but
not more
than nine
months
£m
Over three
months but
not more
than six
months
£m
Not more
than three
months
£m
On
demand
£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
23,586
366
86
125
140
143
1,287
3
1
–
328,623
1,133
792
973
353,496
1,502
879
1,098
–
639
779
–
269
412
42
–
98
140
28
–
273
301
3
–
139
142
Over ten
years
£m
Total
£m
8
24,527
–
1,291
225 333,164
233 358,982
16,344
1,102
553
145
170
415
435
641
319
179
20,303
70
1,263
325
317,257
1,734
1,311
333,671
4,099
2,189
55
397
597
14
667
851
11
311
737
3
–
257
424
–
19
–
1,741
105 322,482
695
1,065
338
284
344,526
As at 31 December 2019
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 2018
Contingent liabilities
Documentary credits and
other short-term trade
related transactions
Standby facilities, credit lines
and other commitments
Total off-balance sheet
commitments given
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Barclays PLC Annual Report 2019 189
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review Capital risk
All disclosures in this section
(pages 190-197) are unaudited unless
otherwise stated.
Overview
The CET1 ratio, among other metrics,
is a measure of the capital strength
and resilience of Barclays.
Maintenance of our capital resources
is vital in order to meet the overall
capital requirement, 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) CET1 capital, leverage
and own funds and eligible liabilities
requirements; (ii) capital resources;
(iii) risk weighted assets (RWAs); (iv)
leverage ratios and exposures; and (v)
own funds and eligible liabilities.
More details on monitoring and
managing capital risk may be found
in the risk management sections on
pages 194 to 196 of the Barclays PLC
Pillar 3 Report 2019 (unaudited).
Key metrics
Common Equity Tier 1 ratio
13.8%
Average UK leverage ratio
4.5%
UK leverage ratio
5.1%
Own funds and eligible
liabilities ratio
32.8%
Summary of performance
in the period
The Group continues to be in excess of overall
capital requirements, minimum leverage
requirements and minimum requirements
for own funds and eligible liabilities (MREL).
The CET1 ratio ended the year at 13.8%
(December 2018: 13.2%).
CET1 capital decreased by £0.3bn to £40.8bn.
This was driven by underlying profit generation
of £5.0bn offset by dividends paid and
foreseen of £2.4bn, the additional provision
for PPI of £1.4bn, pension deficit reduction
contribution payments of £0.5bn, a decrease
in the currency translation reserve of £0.5bn
mainly driven by the depreciation of period
end USD against GBP and a loss on the
redemption of Additional Tier 1 (AT1)
securities of £0.4bn.
RWAs decreased by £16.8bn to £295.1bn
primarily driven by the reduction in the
Group’s operational risk RWAs as well as the
depreciation of period end USD against GBP.
The average UK leverage ratio remained stable
at 4.5% (December 2018: 4.5%) primarily
driven by a net increase in AT1 capital, offset
by a modest increase in leverage exposure to
£1,143bn (December 2018: £1,110bn). The UK
leverage ratio remained stable at 5.1%
(December 2018: 5.1%).
Overall capital requirements
The Group’s Overall Capital Requirement
for CET1 is 12.1% comprising a 4.5% Pillar 1
minimum, a 2.5% Capital Conservation Buffer
(CCB), a 1.5% Global Systemically Important
Institution (G-SII) buffer, a 3.0% Pillar 2A
requirement and a 0.6% Countercyclical
Capital Buffer (CCyB).
The Group’s CCyB is based on the buffer rate
applicable for each jurisdiction in which the
Group has exposures. On 28 November 2018,
the Financial Policy Committee (FPC) set the
CCyB rate for UK exposures at 1%. The buffer
rates set by other national authorities for
non-UK exposures are not currently material.
Overall, this results in a 0.6% CCyB for the
Group for Q419. On 16 December 2019, the
FPC announced its intention to increase the
CCyB rate for UK exposures from 1% to 2%.
This will take effect from December 2020 and,
based on current UK exposures, is expected
to increase the Group’s CCyB to
approximately 1.1%.
The Group’s Pillar 2A requirement as per the
PRA’s Individual Capital Requirement is 5.4%
of which at least 56.25% needs to be met with
CET1 capital, equating to approximately 3.0%
of RWAs. Certain elements of the Pillar 2A
requirement are a fixed quantum whilst others
are a proportion of RWAs, based on a point in
time assessment. The Pillar 2A requirement
is subject to at least annual review.
On 27 June 2019, CRR II came into force
amending CRR. As an amending regulation,
the existing provisions of CRR apply unless
they are amended by CRR II.
Certain provisions took immediate effect and
these primarily relate to MREL. Amendments
within the capital risk section include changes
to qualifying criteria for CET1, AT1 and Tier 2
instruments, the inclusion of additional
holdings eligible for deduction, an
amendment to the treatment of deferred tax
assets and the introduction of requirements
for MREL. Grandfathering and transitional
provisions relating to MREL have also been
introduced. Other CRR II amendments are
expected to take effect from 28 June 2021.
Certain aspects of CRR II are dependent on
final technical standards to be issued by the
European Banking Authority (EBA) and
adopted by the European Commission as well
as UK implementation of the rules. The
disclosures in the following section reflect
Barclays’ interpretation of the current rules
and guidance.
Minimum leverage ratio
requirements
The Group is subject to a leverage ratio
requirement of 4.0% as at 31 December 2019.
This comprises the 3.25% minimum
requirement, a G-SII additional leverage ratio
buffer (G-SII ALRB) of 0.53% and a
countercyclical leverage ratio buffer (CCLB) of
0.2%. Although the leverage ratio is expressed
in terms of Tier 1 (T1) 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 0.53% G-SII ALRB was £6.0bn and
against the 0.2% CCLB was £2.3bn.
MREL
The Group is required to meet the higher of:
(i) the MREL set by the Bank of England; and
(ii) the requirements in CRR II, both of which
have RWA and leverage based requirements.
MREL is subject to phased implementation
and will be fully implemented by 1 January
2022, at which time the Group’s indicative
MREL is expected to be two times the sum of
its Pillar 1 and Pillar 2A requirements, as set by
the Bank of England. In addition, CET1 capital
cannot be counted towards both MREL and
the capital buffers, meaning that the buffers
will effectively be applied above both the
Pillar 1 and Pillar 2A requirements relating
to own funds and eligible liabilities. The Bank
of England 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
than currently proposed.
190 Barclays PLC Annual Report 2019
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RISK REVIEW: TREASURY AND CAPITAL RISK Risk performance Capital resources
Capital ratiosa,b,c
As at 31 December
CET1
Tier 1 (T1)
Total regulatory capital
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
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
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
Adjustment under IFRS 9 transitional arrangements
Other regulatory adjustments
CET1 capital
AT1 capital
Capital instruments and related share premium accounts
Qualifying AT1 capital (including minority interests) issued by subsidiaries
Other regulatory adjustments and deductions
AT1 capital
T1 capital
T2 capital
Capital instruments and related share premium accounts
Qualifying T2 capital (including minority interests) issued by subsidiaries
Other regulatory adjustments and deductions
Total regulatory capital
2019
13.8%
17.7%
21.6%
2018
13.2%
17.0%
20.7%
2019
£bn
64.4
(10.9)
(1.1)
(1.7)
(8.1)
(0.5)
(1.0)
0.3
(1.6)
(0.1)
1.1
(0.1)
40.8
10.9
0.7
(0.1)
11.4
2018
£bn
62.6
(9.6)
(0.7)
(1.7)
(8.0)
(0.5)
(0.7)
(0.1)
(1.3)
(0.1)
1.3
–
41.1
9.6
2.4
(0.1)
11.9
52.2
53.0
7.7
4.0
(0.3)
63.6
6.6
5.3
(0.3)
64.6
Notes
a CET1, T1 and T2 capital, and RWAs are calculated applying the transitional arrangements of the CRR as amended by CRR II applicable as at the reporting date. This includes IFRS 9
transitional arrangements and the grandfathering of CRR and CRR II non-compliant capital instruments.
b The fully loaded CET1 ratio, as is relevant for assessing against the conversion trigger in Barclays PLC AT1 securities, was 13.5%, with £39.7bn of CET1 capital and £295.0bn of RWAs
calculated without applying the transitional arrangements of the CRR as amended by CRR II applicable as at the reporting date.
c The Group’s CET1 ratio, as is relevant for assessing against the conversion trigger in Barclays Bank PLC T2 Contingent Capital Notes, was 13.8%. For this calculation CET1 capital
and RWAs are calculated applying the transitional arrangements under the CRR, including the IFRS 9 transitional arrangements. The benefit of the Financial Services Authority (FSA)
October 2012 interpretation of the transitional provisions, relating to the implementation of CRD IV, expired in December 2017.
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Barclays PLC Annual Report 2019 191
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review Movement in CET1 capital
Opening balance as at 1 January
Profit for the period attributable to equity holders
Own credit relating to derivative liabilities
Dividends paid and foreseen
Increase in retained regulatory capital generated from earnings
Net impact of share schemes
Fair value through other comprehensive income reserve
Currency translation reserve
Other reserves
Decrease in other qualifying reserves
Pension remeasurements within reserves
Defined benefit pension fund asset deduction
Net impact of pensions
Goodwill and intangible assets
Adjustment under IFRS 9 transitional arrangements
Decrease in regulatory capital due to adjustments and deductions
Closing balance as at 31 December
CET1 capital decreased £0.3bn to £40.8bn (December 2018: £41.1bn).
2019
£bn
41.1
3.3
0.1
(2.4)
1.0
0.3
0.1
(0.5)
(0.4)
(0.5)
(0.2)
(0.3)
(0.5)
(0.1)
(0.2)
(0.3)
40.8
£3.3bn of capital generated from profits was partially offset by £2.4bn of regulatory dividends paid and foreseen including £0.8bn of AT1 coupons
paid. Other movements in the period were:
■■ a £0.5bn decrease in the currency translation reserve mainly driven by the depreciation of period end USD against GBP
■■ a £0.5bn decrease as a result of movements relating to pensions, largely due to deficit contribution payments of £0.25bn in April 2019
and September 2019
■■ a £0.4bn loss on the redemption of AT1 securities
■■ a £0.2bn decrease in the IFRS 9 transitional add back primarily due to the change in the phasing of transitional relief from 95% in 2018
to 85% in 2019.
192 Barclays PLC Annual Report 2019
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RISK REVIEW: TREASURY AND CAPITAL RISK Risk performance Risk weighted assets
Risk weighted assets (RWAs) by risk type and business
As at 31 December
2019
Barclays UK
Corporate and
Investment Bank
Consumer, Cards
and Payments
Barclays International
Head Office
Barclays Group
As at 31 December
2018
Barclays UK
Corporate and
Investment Bank
Consumer, Cards
and Payments
Barclays International
Head Office
Barclays Group
Credit risk
Std
£bn
5.2
25.7
27.2
52.9
5.1
63.2
3.3
26.1
29.5
55.6
4.3
63.2
IRB
£bn
57.5
62.1
2.7
64.8
5.8
128.1
59.7
64.8
2.2
67.0
5.8
132.5
Counterparty credit risk
Settlement
risk
£bn
–
IRB
£bn
–
Std
£bn
0.2
12.1
16.9
0.1
12.2
–
12.4
0.2
9.8
0.1
9.9
–
10.1
–
16.9
–
16.9
–
14.9
0.1
15.0
–
15.0
0.3
–
0.3
–
0.3
–
0.2
–
0.2
–
0.2
Movement analysis of risk weighted assets
Risk weighted assets
As at 31 December 2018
Book size
Acquisitions and disposals
Book quality
Model updates
Methodology and policy
Foreign exchange movementa
As at 31 December 2019
Market risk
Operational
risk
Total RWAs
£bn
11.8
£bn
74.9
21.5
171.5
CVA
£bn
–
2.5
–
2.5
–
2.5
0.1
3.3
–
3.3
–
3.4
Std
£bn
0.2
12.8
–
12.8
–
13.0
0.1
13.9
–
13.9
–
14.0
IMA
£bn
–
17.6
0.1
17.7
–
17.7
–
16.2
0.6
16.8
–
16.8
7.6
29.1
0.1
41.0
11.8
21.7
7.3
29.0
15.9
56.7
Credit
risk
£bn
195.6
–
(0.8)
(2.9)
1.5
0.8
(2.9)
191.3
Counterparty
credit risk
£bn
28.8
3.9
–
0.3
0.5
(1.4)
–
32.1
Market
risk
£bn
30.8
(1.0)
–
–
–
0.9
–
30.7
Operational
risk
£bn
56.7
(1.5)
–
–
–
(14.2)
–
41.0
37.7
209.2
11.0
295.1
75.2
170.9
39.8
210.7
26.0
311.9
Total
RWAs
£bn
311.9
1.4
(0.8)
(2.6)
2.0
(13.9)
(2.9)
295.1
Note
a Foreign exchange movement does not include foreign exchange for counterparty credit risk or market risk.
RWAs decreased £16.8bn to £295.1bn:
■■ ‘book size’ increased RWAs £1.4bn primarily due to an increase in trading activity, offset by a decrease in operational risk as per
the standardised approach
■■ ‘book quality’ decreased RWAs £2.6bn primarily due to changes in risk profile
■■ ‘model updates’ increased RWAs £2.0bn primarily due to the recalibration of modelled wholesale RWAs
■■ ‘methodology and policy’ decreased RWAs £13.9bn primarily due to removal of the operational risk floor
■■ ‘foreign exchange movements’ decreased RWAs by £2.9bn primarily due to the depreciation of period end USD against GBP.
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Barclays PLC Annual Report 2019 193
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review
Leverage ratios and exposures
The Group is required to disclose an average UK leverage ratio which is based on capital on the last day of each month in the quarter and an
exposure measure for each day in the quarter. The Group is also required to disclose a UK leverage ratio based on capital and exposure on the
last day of the quarter. Both approaches exclude qualifying claims on central banks from the leverage exposures.
Leverage ratiosa,b
As at 31 December
Average UK leverage ratio
Average T1 capitalc
Average UK leverage exposure
UK leverage ratio
CET1 capital
AT1 capital
T1 capitalc
UK leverage exposure
UK leverage exposure
As at 31 December
Accounting assets
Derivative financial instruments
Derivative cash collateral
Securities financing transactions (SFTs)d
Loans and advances and other assetsd
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
SFTs adjustments
Regulatory deductions and other adjustments
Weighted off-balance sheet commitments
Qualifying central bank claims
UK leverage exposureb
2019
£bn
4.5%
51.8
1,143
2018
£bn
4.5%
50.5
1,110
5.1%
5.1%
40.8
10.7
51.6
1,008
2019
£bn
229
57
111
743
1,140
41.1
9.5
50.6
999
2018
£bn
223
48
130
732
1,133
(1)
(2)
(207)
(48)
14
119
(122)
18
(12)
(202)
(42)
19
123
(102)
17
(11)
105
108
(120)
(144)
1,008
999
Notes
a Fully loaded average UK leverage ratio was 4.4%, with £50.7bn of T1 capital and £1,142bn of leverage exposure. Fully loaded UK leverage ratio was 5.0%, with £50.4bn of T1 capital
and £1,007bn of leverage exposure. Fully loaded UK leverage ratios are calculated without applying the transitional arrangements of the CRR as amended by CRR II applicable as at
the reporting date.
b Capital and leverage measures are calculated applying the transitional arrangements of the CRR as amended by CRR II applicable as at the reporting date.
c The T1 capital is calculated in line with the PRA Handbook.
d Comparative numbers have been revised to reflect the allocation of margin lending from loans and advances and other assets to SFTs.
194 Barclays PLC Annual Report 2019
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RISK REVIEW: TREASURY AND CAPITAL RISK Risk performance The average UK leverage ratio remained stable at 4.5% (December 2018: 4.5%). T1 capital increased £1.4bn to £51.8bn, which included a net
increase in AT1 capital, partially offset by a modest increase in exposure of £33bn to £1,143bn primarily driven by SFTs and weighted off-balance
sheet commitments.
The UK leverage ratio also remained stable at 5.1% (December 2018: 5.1%). T1 capital increased £1.0bn to £51.6bn, which included a net increase
in AT1 capital. The UK leverage exposure increased £9bn to £1,008bn primarily driven by loans and advances and other assets.
The difference between the average UK leverage ratio and the UK leverage ratio was primarily driven by lower trading portfolio assets, settlement
exposures and SFT exposures at quarter end.
The Group also discloses a CRR leverage ratioa within its additional regulatory disclosures prepared in accordance with EBA guidelines on
disclosure under Part Eight of the CRR (see Barclays PLC Pillar 3 Report 2019 (unaudited), due to be published on 13 February 2020 and which will
be available at home.barclays/annualreport).
Note
a CRR leverage ratio as amended by CRR II applicable as at the reporting date.
Minimum requirement for own funds and eligible liabilities
CRR II requirements relating to own funds and eligible liabilities came into effect from 27 June 2019. Eligible liabilities have been calculated
reflecting the Group’s interpretation of the current rules and guidance. Certain aspects of CRR II are dependent on final technical standards
to be issued by the EBA and adopted by the European Commission as well as UK implementation of the rules.
Own funds and eligible liabilities ratiosa
As at 31 December
CET1 capital
AT1 capital instruments and related share premium accountsb
T2 capital instruments and related share premium accountsb
Eligible liabilities
Total Barclays PLC (the Parent company) own funds and eligible liabilities
Qualifying AT1 capital (including minority interests) issued by subsidiaries
Qualifying T2 capital (including minority interests) issued by subsidiaries
Total own funds and eligible liabilities, including eligible Barclays Bank PLC instruments
Own funds and eligible liabilitiesa
CET1 capital
AT1 capital instruments and related share premium accountsb
T2 capital instruments and related share premium accountsb
Eligible liabilities
Total Barclays PLC (the Parent company) own funds and eligible liabilities
Qualifying AT1 capital (including minority interests) issued by subsidiaries
Qualifying T2 capital (including minority interests) issued by subsidiaries
Total own funds and eligible liabilities, including eligible Barclays Bank PLC instruments
2019
13.8%
3.6%
2.5%
11.2%
31.2%
0.2%
1.3%
32.8%
£bn
40.8
10.7
7.4
33.0
92.0
0.7
4.0
96.7
2018c
13.2%
3.1%
2.1%
9.7%
28.1%
0.7%
1.6%
30.5%
£bnc
41.1
9.6
6.6
30.4
87.7
2.3
5.1
95.1
Total RWAsa
295.1
311.9
Notes
a CET1, T1 and T2 capital, and RWAs are calculated applying the transitional arrangements of the CRR as amended by CRR II applicable as at the reporting date. This includes IFRS 9
transitional arrangements and the grandfathering of CRR and CRR II non-compliant capital instruments.
b Includes other AT1 capital regulatory adjustments and deductions of £0.1bn (included in AT1 issued by subsidiaries in December 2018: £0.1bn), and other T2 credit risk adjustments
and deductions of £0.2bn (included in T2 issued by subsidiaries in December 2018: £0.3bn).
c The comparatives are based on the Bank of England’s statement of policy on MREL.
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Barclays PLC Annual Report 2019 195
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk 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 are designed to prevent the holding of significant open positions in foreign currencies outside the trading
portfolio managed by Barclays International which is monitored through VaR.
Banking book transactional foreign exchange risk outside of Barclays International is monitored on a daily basis by the market risk function and
minimised by the businesses.
b) Translational foreign exchange exposure
The 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 (audited)
As at 31 December 2019
USD
EUR
JPY
Other currencies
Total
As at 31 December 2018
USD
EUR
JPY
Other currencies
Total
Foreign
currency net
investments
£m
Borrowings
which hedge
the net
investments
£m
Derivatives
which hedge
the net
investments
£m
25,607
3,068
533
2,001
31,209
28,857
2,672
489
2,026
34,044
(10,048)
(3)
–
–
(10,051)
(12,322)
(3)
–
–
(12,325)
(1,111)
–
–
(34)
(1,145)
(2,931)
–
–
(37)
(2,968)
Structural
currency
exposures
pre-
economic
hedges
£m
14,448
3,065
533
1,967
20,013
13,604
2,669
489
1,989
18,751
Remaining
structural
currency
exposures
£m
9,109
1,943
533
1,967
13,552
8,777
523
489
1,989
11,778
Economic
hedges
£m
(5,339)
(1,122)
–
–
(6,461)
(4,827)
(2,146)
–
–
(6,973)
Economic hedges relate to exposures arising on foreign currency denominated preference share and AT1 instruments. These are accounted
for at historical cost under IFRS and do not qualify as hedges for accounting purposes. The gain or loss arising from changes in the GBP value
of these instruments is recognised on redemption in retained earnings.
During 2019, total structural currency exposure net of hedging instruments increased by £1.8bn to £13.6bn (2018: £11.8bn). Foreign currency
net investments decreased by £2.8bn to £31.2bn (2018: £34.0bn) driven predominantly by a £3.2bn decrease in USD offset by a £0.4bn increase
in EUR. The hedges associated with these investments decreased by £4.1bn to £11.2bn (2018: £15.3bn).
Pension risk review
The UK Retirement Fund (UKRF) represents approximately 97% (2018: 97%) 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.
Refer to page 196 of the Barclays PLC Pillar 3 Report 2019 (unaudited) 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 two largest market risks within the asset portfolio are interest rates and equities. The split of scheme assets is shown within Note 33.
The fair value of the UKRF assets was £31.4bn as at 31 December 2019 (2018: £29.0bn).
196 Barclays PLC Annual Report 2019
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RISK REVIEW: TREASURY AND CAPITAL RISK Risk performance Liabilities
The UKRF retirement benefit obligations are a series of future cash flows with relatively long duration. On an IAS 19 basis these cash flows
are sensitive to changes in the expected long-term price inflation rate (RPI) and the discount rate (GBP AA corporate bond yield):
■■ an increase in long-term expected inflation corresponds to an increase in liabilities
■■ a decrease in the discount rate corresponds to an increase in liabilities.
Pension risk is generated through the Group’s defined benefit schemes and this risk is set to reduce over time as the main defined benefit scheme
is closed to new entrants. The chart below outlines the shape of the UKRF’s liability cash flow profile as at 31 December 2019 that takes account
of the future inflation indexing of payments to beneficiaries. The majority of the cash flows (approximately 93%) fall between 0 and 40 years,
peaking between 11 and 20 years and reducing thereafter. The shape may vary depending on changes to inflation and longevity expectations
and any members who elect to transfer out. Transfers out will bring forward the liability cash flows.
For more detail on the UKRF’s financial and demographic assumptions see Note 33 to the financial statements.
Proportion of liability cash flows
Proportion of liability cash flows
%
2019
24.9
29.9
24.7 13.6 5.8
1.1
0-10 years
11-20 years
21-30 years
31-40 years
41-50 years
51+ years
Net IAS 19 position
£bn
2.5
2.0
1.5
1.0
0.5
0.0
£1.0bn
UKRF surplus/deficit (£bn)
£2.1bn
£1.7bn
Dec 2017
Dec 2018
Dec 2019
The graph above shows the evolution of the UKRF’s net IAS 19 position over the last two years. During 2019 the net improvement in the IAS 19
position was largely driven by bank contributions. Credit spreads tightening during the year had a negative impact which was broadly offset by
changes in other market levels, in particular equity prices and interest rates, and updates to demographic assumptions.
Refer to Note 33 for the sensitivity of the UKRF to changes in key assumptions.
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 position at a total portfolio level. This enables the risks, diversification and liability matching characteristics of the UKRF obligations
and investments to be adequately captured. VaR is measured and monitored on a monthly basis. Risks are reviewed and reported regularly at
forums including the 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 on an IAS 19 basis (see Note 33). 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 33 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 Capital Requirement for CET1 capital, Tier 1 capital and total capital. More detail on minimum regulatory requirements
can be found on page 195.
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Barclays PLC Annual Report 2019 197
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review Interest rate risk
in the banking book
All disclosures in this section
(pages 198 to 199) are unaudited
unless otherwise stated.
Overview
The treasury and capital risk
framework covers interest rate
sensitive exposures held in
the banking book, mostly relating
to accrual accounted and FVOCI
instruments. The potential volatility of
net interest income is measured by an
Annual Earnings at Risk (AEaR) metric
which is monitored regularly and
reported to senior management and
the Barclays PLC Board Risk
Committee as part of the limit
monitoring framework.
For further detail on the interest rate
risk in the banking book governance
and framework refer to pages 196
to 197 of the Barclays PLC Pillar 3
Report 2019 (unaudited).
Key metrics
AEaR
+£45m
AEaR across the Group from a positive
25bps shock to forward interest rate
curves.
Summary of performance
in the period
Annual Earnings at Risk (AEaR), is a key
measure of interest rate risk in the banking
book (IRRBB).
Net interest income sensitivity
The table below shows a sensitivity analysis
on pre-tax net interest income for non-traded
financial assets and liabilities, including the
effect of any hedging. NII sensitivity uses the
Annual Earnings at Risk (AEaR) metric as
described on page 196 of the Barclays PLC
Pillar 3 Report 2019 (unaudited).
Note that this metric assumes an
instantaneous parallel change to forward
interest rate curves. The model does not apply
floors to shocked market rates, but does
recognise contractual product specific interest
rate floors where relevant. The main model
assumptions are: (i) one-year ahead time
horizon; (ii) balance sheet is held constant;
(iii) balances are adjusted for assumed
behavioural profiles (i.e. considers that
customers may prepay the mortgages before
the contractual maturity); and (iv) behavioural
assumptions are kept unchanged in all rate
scenarios.
Net interest income sensitivity (AEaR) by business unita,b,c,d (audited)
Barclays
International
£m
Barclays UK
£m
Head Office
£m
As at 31 December 2019
+25bps
-25bps
As at 31 December 2018
+25bps
-25bps
16
(57)
28
(71)
25
(74)
55
(73)
4
(4)
5
(5)
Total
£m
45
(135)
88
(149)
Notes
a Excludes minor investment banking business.
b Expected fixed rate mortgage pipeline completions in Barclays UK assumed to be consistent with level and timing of
pipeline hedging.
c The Group’s customer banking book hedging activity is risk reducing from an NII sensitivity perspective. The hedges in
place remove interest rate risk and smooth income over the medium term. The NII sensitivity for the Group at
31 December 2019 without hedging in place for +/-25bp rate shocks would be £140m/£(229)m respectively.
d NII sensitivity for December 2018 restated due to increased portfolio coverage, primarily the inclusion of the Treasury
portfolio.
NII asymmetry arises due to the current low level of interest rates as some customer product have embedded floors. NII sensitivity to a +25bp
shock to rates has decreased year on year resulting from actions taken to reduce the exposure to falling interest rates and increased bond holding
outright in the liquidity pool.
Net interest income sensitivity (AEaR) by currencya, b (audited)
As at 31 December
GBP
USD
EUR
Other currencies
Total
2019
2018
+25 basis
points
£m
38
29
(10)
(12)
45
-25 basis
points
£m
(93)
(32)
(20)
10
(135)
+25 basis
points
£m
56
36
(5)
1
88
-25 basis
points
£m
(112)
(37)
3
(3)
(149)
Notes
a Excludes minor investment bank businesses.
b NII sensitivity for December 2018 restated due to increased portfolio coverage, primarily the inclusion of the Treasury portfolio.
198 Barclays PLC Annual Report 2019
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RISK REVIEW: TREASURY AND CAPITAL RISK Risk performance Analysis of equity sensitivity
Equity sensitivity measures the overall impact of a +/- 25bps movement in interest rates on retained earnings, fair value through other
comprehensive income (FVOCI), cash flow hedge reserves and pensions. For non-NII items a DV01 metric is used, which is an indicator
of the shift in value for a one basis point movement in the yield curve.
Analysis of equity sensitivitya (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)
Fair value through other comprehensive income reserve
Cash flow hedge reserve
Taxation effects on the above
Effect on equity
As percentage of equity
2019
2018
+25 basis
points
£m
45
(11)
34
1.0%
34
(321)
(534)
214
(608)
(0.9%)
-25 basis
points
£m
(135)
34
(101)
(3.0%)
(101)
329
534
(216)
546
0.8%
+25 basis
points
£m
88
(22)
66
2.6%
66
(253)
(574)
207
(554)
(0.9%)
-25 basis
points
£m
(149)
37
(112)
(4.4%)
(112)
260
574
(209)
514
0.8%
Note
a December 2018 sensitivities restated due to increased portfolio coverage, primarily the inclusion of the Treasury portfolio.
Movements in the FVOCI reserve impact CET1 capital. However, movements in the cash flow hedge reserve and pensions remeasurement reserve
recognised in FVOCI do not affect CET1 capital.
Volatility of the FVOCI portfolio in the liquidity pool
Changes in value of FVOCI exposures flow directly through capital via the FVOCI reserve. The volatility of the value of the FVOCI investments
in the liquidity pool is captured and managed through a value measure rather than an earning measure, i.e. non-traded market risk VaR.
Although the underlying methodology to calculate the non-traded VaR is identical to the one used in traded management VaR, the two measures
are not directly comparable. The non-traded VaR represents the volatility to capital driven by the FVOCI exposures. These exposures are in the
banking book and do not meet the criteria for trading book treatment.
Analysis of volatility of the FVOCI portfolio in the liquidity pool
For the year ended 31 December
Non-traded market value at risk (daily, 95%)
Average
£m
45
2019
High
£m
53
Low
£m
35
Average
£m
45
2018
High
£m
61
Low
£m
32
DVaR trended upwards for the first three quarters of 2019 as outright duration and asset swap spread risk increased. The liquidity pool de-risked
substantially in early Q4, causing an associated reduction in DVaR.
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Barclays PLC Annual Report 2019 199
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review Summary of performance
in the period
During 2019, total operational risk lossesa
decreased to £169m (2018: £230m) and the
number of recorded events for 2019 (2,098)
was at the same level as 2018 (2,068). The
total operational risk losses for the year were
mainly driven by events falling within the
Execution, Delivery and Process Management
and External Fraud categories, which tend to
be high volume but low impact events.
Operational risk profile
Within operational risk, there are a large
number of small risk events. In 2019, 84%
(2018: 84%) of the Group’s reportable
operational risk events by volume had a value
of less than £50,000 each. Cumulatively,
events under this £50,000 threshold
accounted for only 19% (2018: 14%) of the
Group’s total net operational risk losses.
A small proportion of operational risk events
have a material impact on the financial results
of the Group.
Risk performance
All disclosures in this section are
unaudited unless otherwise stated.
Overview
Operational risks are inherent in the
Group’s business activities and it is not
cost effective or possible to attempt to
eliminate all operational risks. The
Operational Risk Framework is therefore
focused on identifying operational risks,
assessing them and managing them
within the Group’s approved risk
appetite.
The Operational Risk principal risk
comprises the following risks: Data
Management & Information Risk;
Financial Reporting Risk; Fraud Risk;
Payments Process Risk; People Risk;
Premises Risk; Physical Security Risk;
Supplier Risk; Tax Risk; Technology
Risk; Transaction Operations Risk and
Execution Risk. The operational risk
profile is also informed by a number of
risk themes: Cyber, Data and Resilience.
These represent threats to the Group
that extend across multiple risk types,
and therefore require an integrated risk
management approach.
For definitions of these risks refer to
pages 199 to 200 of the Barclays PLC
Pillar 3 Report 2019. In order to provide
complete coverage of the potential
adverse impacts on the Group arising
from operational risk, the operational
risk taxonomy extends beyond the risks
listed above to cover operational risks
associated with other principal risks
too.
This section provides an analysis of the
Group’s operational risk profile,
including events above the Group’s
reportable threshold, which have had a
financial impact in 2019. The Group’s
operational risk profile is informed by
bottom-up risk assessments
undertaken by each business unit and
top-down qualitative review by the
Operational Risk specialists for each
risk type. Fraud, Transaction Operations
and Technology continue to be
highlighted as key operational risk
exposures.
For information on conduct risk events
see page 203.
Key metrics
84%
of the Group’s net reportable
operational risk events had a loss
value of £50,000 or less
67%
of events by number are due to external
fraud
60%
of losses are from events aligned
to Execution, Delivery and Process
Management
200 Barclays PLC Annual Report 2019
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Note
a Excludes events having impact of ≥ £10,000 and
excludes Gain or Insurance Recovery impacts,
events that are Conduct or Legal risk, aggregate
and boundary events.
RISK REVIEW: OPERATIONAL RISK ■■ Execution, Delivery and Process
Management impacts decreased to £101m
(2018: £130m) and accounted for 60%
(2018: 57%) of total operational risk losses.
The events in this category are typical of
the banking industry as a whole where
high volumes of transactions are
processed on a daily basis, mapping mainly
to Barclays Transaction Operations risk
type. The overall frequency of events in
this category remained stable year on year
at 28% of total events by volume
(2018: 31%).
■■ External Fraud remains the category with
the highest frequency of events at 67% of
total events in 2019 (2018: 62%). In this
category, high volume, low value events
are driven by transactional fraud often
related to debit and credit card usage.
Ratio of losses in this category increased
to 28% of total 2019 losses (2018: 21%),
driven mainly by increased fraud attacks
on the Group’s systems following
implementation of Cheque Imaging
as part of the clearing process.
■■ Business Disruption and System Failures
accounted for an increased share at 11%
of total impacts (2018: 6%), although
actual losses remained broadly stable at
£18m (2018: £14m) and volume of events
fell slightly to 86 (2018: 99).
■■ Employment Practices and Workplace
Safety impacts show a significant decrease
to £1m (2018: £35m) accounting for 0.4%
of total operational risk losses in 2019
(2018: 15%), while volume of events in
this category also decreased to 17 in 2019
(2018: 46). The 2018 loss was mainly
incurred from a low number of events with
significant impacts (three single legacy
events relating to closed businesses
accounted for 90% of total impacts).
The analysis below presents the Group’s operational risk events by Basel event category:
Operational risk events by BASEL event categorya
% of total risk events by count
% of total risk events by value
Internal fraud
Internal fraud
2019
0.1%
2018
0.4%
External fraud
2019
2018
67.0%
61.5%
2019
0.1%
2018
0.4%
External fraud
2019
28.4%
2018
21.2%
Execution delivery
and process management
Execution delivery
and process management
2019
2018
27.6%
30.8%
2019
2018
60.0%
56.5%
Employment practices
and workplace safety
2019
0.8%
2018
2.2%
Employment practices
and workplace safety
2019
0.4%
2018
15.0%
Damage to physical assets
Damage to physical assets
2019
0.2%
2018
0.3%
2019
0.6%
2018
0.6%
Clients, products
and business practices
Clients, products
and business practices
2019
0.1%
2018
0.0%
2019
0.1%
2018
0.0%
Business disruption
and system failures
Business disruption
and system failures
2019
4.1%
2018
4.8%
2019
2018
10.5%
6.3%
Note
a The data disclosed includes operational risk losses for reportable events having 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 keep evolving,
prior year losses have been updated.
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Barclays PLC Annual Report 2019 201
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review Risk performance
Investment continues to be made in improving
the control environment across the Group.
Particular areas of focus include new and
enhanced fraud prevention systems and tools
to combat the increasing level of fraud
attempts being made and to minimise any
disruption to genuine transactions. Fraud
remains an industry-wide threat and the
Group continues to work closely with external
partners on various prevention initiatives.
Operational resilience is a key area of focus
for the Group. Disruption to our business
activities is a material inherent risk within
the Group and across the financial services
industry, whether arising through impacts
on our technology systems, our real estate
services, availability of personnel or services
supplied by third parties. Failure to build
resilience and recovery capabilities into our
business activities may result in significant
customer detriment, costs to reimburse losses
incurred by the Group’s customers, market
impact and reputational damage. In common
with the rest of the Financial Services industry,
the Group expects continued regulatory
scrutiny in relation to resilience. Technology,
resilience and cybersecurity risks evolve
rapidly so the Group maintains continued
focus and investment in our control
environment to manage these risks, and
actively partners with peers and relevant
organisations to understand and disrupt
threats originating outside the Group.
Cyberattacks are a global threat that are
inherent across all industries. The financial
sector remains a primary target for cyber
criminals, hostile nation states, opportunists
and hacktivists. There are high levels of
sophistication in criminal hacking for the
purpose of stealing money, stealing,
destroying or manipulating data (including
customer data) and/or disrupting operations,
where multiple threats exist including threats
arising from malicious emails, distributed
denial of service (DDoS) attacks, payment
system compromises, insider attackers, supply
chain and vulnerability exploitation. Cyber
events can have a compounding impact on
services and customers, e.g. data breaches in
social networking sites, retail companies and
payments networks.
The threat of cyberattack is recognised by
the Group along with the significant potential
impact on all areas of its business ranging
from operational matters to its scrutiny of
its relationships with its suppliers, customers
and other external stakeholders. Regulators
in the UK, US and Europe continue to focus
on cybersecurity risk management in the
financial sector and have highlighted the
need for financial institutions to improve their
monitoring and control of, and resilience
(particularly of critical services) to,
cyberattacks and to provide timely notification
of them, as appropriate. This has resulted
in a number of proposed laws, regulations
and other requirements that necessitate
implementation of a variety of increased
controls and enhancement activities for
regulated Group entities. These include,
among others, the adoption of cybersecurity
policies and procedures meeting specified
criteria, minimum required security measures,
controls and procedures for enhanced
reporting and public disclosures, compliance
certification requirements, and other cyber
and information risk governance measures.
The Group continues to use an intelligence-
driven defence approach, analysing external
events for current and emerging cyberthreats
which allows the delivery of proactive counter
measures; the Group also completes
cyberthreat scenarios and incident playbooks
to assess our security posture and business
impacts and runs an internal adversarial
capability which simulates hackers to
proactively test controls and responses.
The increased control environment will
continue to enhance our security posture and
our ability to better protect the organisation
and our customers. Cyberattacks however are
increasingly sophisticated and there can be no
assurance that the measures implemented
will be fully effective to prevent or mitigate
future attacks, the consequences of which
could be significant to the Group.
Furthermore, such measures have resulted
and will result in increased technology and
other costs in connection with cybersecurity
mitigation and compliance for the Group.
For further information, refer to the
operational risk management section
on pages 143 and 144.
202 Barclays PLC Annual Report 2019
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RISK REVIEW: OPERATIONAL RISK MODEL RISK, CONDUCT RISK, REPUTATION RISK AND LEGAL RISK
Model risk, Conduct risk,
Reputation risk and
Legal risk
All disclosures in this section are
unaudited unless otherwise stated.
Model risk
Since the inception of model risk as a
principal risk, key achievements to date
include creating a complete model inventory
across the firm, roll out of a robust Model
Risk Management (MRM) framework and
the validation of all high material models. In
2019 the framework and governance of
model risk was further improved by:
■■ enhancing the Barclays PLC Board
oversight of model risk, through the
reporting of the model risk tolerance
framework and periodic updates to the
Barclays PLC Board on the progress of
the MRM implementation
■■ validating a third of the population of low
material models
■■ strengthening the model inventory
identification process, including
enhancing the model life cycle
technology platform
■■ better alignment of documentation
requirements to model materiality.
In 2020 MRM will continue to focus on the
validation of remaining low material models,
bringing 95% of model risk into governance
as well as reviewing performance monitoring
of models already in governance to assess
their compliance with the framework.
Conduct risk
Barclays is committed to continuing to drive
the right culture throughout all levels of the
organisation. The Group will continue to
enhance effective management of conduct
risk and appropriately consider the relevant
tools, governance and management
information in decision-making processes.
Focus on management of conduct risk is
ongoing and amongst other relevant
business and control management
information the Trading Entity Conduct
Dashboards are a key component of this.
The Group continues to review the role and
impact of Conduct Risk Events and issues
in the remuneration process at both the
individual and business level.
Businesses have continued to assess the
potential customer, client and market
impacts of strategic change. As part of the
2019 Medium-Term Planning Process,
associated Strategic Risk Assessment and
Strategic Element of the Business Plan,
material conduct risks associated with
strategic and financial plans were assessed.
Throughout 2019, conduct risks were raised
by each business area for consideration by
relevant Board-level committees. The
committees reviewed the risks raised and
whether management’s proposed actions
were appropriate to mitigate the risks
effectively. The Board received regular
updates with regards to key risks and issues
including those relating to regulatory change
and the effectiveness of the control
environment.
The Group continued to incur costs in
relation to litigation and conduct matters,
refer to Note 26 Legal, competition and
regulatory matters and Note 24 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.
Barclays has operated at the overall set
tolerance for conduct risk throughout 2019.
The tolerance adherence is assessed by the
business areas through Key Indicators which
are aggregated and provide an overall rating
which is reported to relevant Board level
committees. This is supported by additional
tools such as the Risk and Control
Self-Assessment.
For further details on the non-financial
performance measures, refer to pages
18 and 19 of the Strategic Report.
Reputation risk
Barclays is committed to identifying
reputation risks and issues as early as
possible and managing them appropriately.
At a Group level throughout 2019, reputation
risks and issues were overseen by the Board
Reputation Committee (RepCo) until
September 2019 and the Board thereafter
(refer to the Board report on page 44 for
further detail), which reviews the processes
and policies by which Barclays identifies and
manages reputation risk. Within the Barclays
Bank UK Group and the Barclays Bank Group,
reputation risks and issues were overseen by
the respective risk and Board risk committees.
The top live and emerging reputation risks
and issues within the Barclays Bank UK Group
and the Barclays Bank Group are included
within an over-arching quarterly report at
the respective Board level.
RepCo and the Board reviewed risks
escalated 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 and the Board 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;
consumer and household debt; fraud and
scams that could impact Barclays customers
and the resilience of key Barclays systems
and processes.
The Group continued to incur costs in
relation to litigation and conduct matters,
refer to Note 26 Legal, competition and
regulatory matters and Note 24 Provisions
for further details. Costs include customer
redress and remediation, as well as fines and
settlements. Resolution of these matters
remains an ongoing commitment to improve
oversight of culture and conduct and
management of reputation.
In 2019, Corporate Relations received
498 referrals from across the businesses
(486 referrals in 2018) for consideration.
These referrals covered a variety of
potentially controversial sectors and topics
including, but not limited to, environmental
and social risks.
As part of Barclays 2019 Medium Term
Planning process, material reputation risks
associated with strategic and financial plans
were also assessed.
Legal risk
The Group remains committed to
continuous improvements to manage legal
risk effectively. A number of enhancements
have been implemented during 2019,
including updating the Group framework for
managing legal risk and associated policies
as well as reviewing legal risk tolerances and
risk appetite. Updated legal risk mandatory
training was also implemented across the
Group, reinforced by ongoing engagement
and education of the Group’s businesses and
functions.
Throughout 2019, the Group operated within
set tolerances for legal risk. Tolerance
adherence is assessed through key
indicators, which are reviewed through the
relevant risk and control committees. In
addition to ongoing monitoring, legal risk
controls are reviewed and assessed annually
as part of the Risk and Control Self-
Assessment process.
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Barclays PLC Annual Report 2019 203
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review Supervision and regulation
Supervision of the Barclays Group
The Barclays Group’s operations, including
its overseas branches, subsidiaries and
associates, are subject to a large number
of rules and regulations that are a condition
for authorisation to conduct banking and
financial services business in each of the
jurisdictions in which the Barclays Group
operates. These apply to business operations,
impact financial returns and include capital,
leverage and liquidity requirements,
authorisation, registration and reporting
requirements, restrictions on certain activities,
conduct of business regulations and many
others. Regulatory developments impact the
Barclays Group globally. We focus particularly
on EU, UK and US regulation due to the
location of the Barclays Group’s principal areas
of business. Regulations elsewhere may also
have a significant impact on the Barclays
Group due to the location of its branches,
subsidiaries and, in some cases, clients. For
more information on the risks related to the
supervision and regulation of the Barclays
Group, including regulatory change, see the
Risk Factor entitled ‘Regulatory change
agenda and impact on business model’ on
page 130.
Supervision in the UK and EU
The Barclays Group’s operations in Europe are
authorised and regulated by a combination
of its UK home regulators and host regulators
in the European countries where the Barclays
Group operates. The impact of the UK’s
departure from the EU in this respect and,
more broadly, its impact on the UK domestic
regulatory framework, is yet to be finally
determined. In the UK, day-to-day regulation
and supervision of the Barclays Group is
divided between the Prudential Regulation
Authority (PRA) (a division of the Bank of
England (BoE)) and the Financial Conduct
Authority (FCA). In addition, the Financial
Policy Committee (FPC) of the BoE has
influence on the prudential requirements
that may be imposed on the banking
system through its powers of direction
and recommendation.
Barclays Bank PLC and Barclays Bank UK PLC
are authorised credit institutions and subject
to prudential supervision by the PRA and
subject to conduct regulation and supervision
by the FCA. The Barclays Group is also subject
to prudential supervision by the PRA on a
group consolidated basis. Barclays Capital
Securities Limited is authorised and
supervised by the PRA as a PRA-designated
investment firm and subject to conduct
regulation and supervision by the FCA.
Barclays Services Limited is an appointed
representative of Barclays Bank PLC and
Clydesdale Financial Services Limited.
Barclays Bank Ireland PLC is licensed as a
credit institution by the Central Bank of Ireland
(CBI) and is designated as a significant
institution falling under direct supervision
on a solo basis by the European Central Bank
(ECB). Barclays Bank Ireland PLC’s EU
branches are supervised by the ECB and are
also subject to direct supervision for local
conduct purposes by national supervisory
authorities in the jurisdictions where they
are established.
The Barclays Group is also subject to
regulatory initiatives undertaken by the
UK Payment Systems Regulator (PSR),
as a participant in payment systems
regulated by the PSR.
The PRA’s continuing supervision of the
Barclays Group is conducted through a variety
of regulatory tools, including the collection
of information by way of prudential returns
or cross-firm reviews, reports obtained from
skilled persons, regular supervisory visits to
firms and regular meetings with management
and Directors to discuss issues such as
strategy, governance, financial resilience,
operational resilience, risk management,
and recovery and resolution.
Parliament gave the FCA a single strategic
objective – to ensure that relevant markets
function well – and three operational
objectives: to protect consumers, enhance
market integrity and promote competition.
The FCA’s supervision of the UK firms in the
Barclays Group is carried out through a
combination of proactive engagement, regular
thematic work and project work based on the
FCA’s sector assessments, which analyse the
different areas of the market and the risks that
may lie ahead.
Both the PRA and the FCA apply standards
that either anticipate or go beyond
requirements established by global or EU
standards, whether in relation to capital,
leverage and liquidity, resolvability and
resolution or matters of conduct.
The FCA has focused on conduct risk and on
customer outcomes and will continue to do
so. This has included a focus on the design
and operation of products, the behaviour of
customers and the operation of markets.
The FCA is conducting ongoing work on
fair pricing in financial services, affordability
and fair treatment of vulnerable customers.
These initiatives may impact future revenues
and increase conduct costs and costs
of remediation.
The FCA and the PRA also apply the Senior
Managers and Certification Regime (the
SMCR) which imposes a regulatory approval,
individual accountability and fitness and
propriety framework in respect of senior
or key individuals within relevant firms.
Supervision in the US
The Barclays Group’s US activities and
operations are subject to umbrella supervision
by the Board of Governors of the Federal
Reserve System (FRB), as well as additional
supervision, requirements and restrictions
imposed by other federal and state regulators
and self-regulatory organisations (SROs).
Barclays PLC, Barclays Bank PLC and its
US branches and subsidiaries are subject
to a comprehensive regulatory framework
involving numerous statutes, rules and
regulations. In some cases, US requirements
may impose restrictions on the Barclays
Group’s global activities, in addition to its
activities in the US.
Barclays PLC, Barclays Bank PLC and Barclays
US LLC (BUSL) are regulated as bank holding
companies (BHCs) by the FRB. BUSL is the
Barclays Group’s top-tier US holding company
that holds substantially all of the Barclays
Group’s US subsidiaries (including Barclays
Capital Inc. and Barclays Bank Delaware).
BUSL is subject to requirements in respect of
capital adequacy, capital planning and stress
testing, risk management and governance,
liquidity, leverage limits, large exposure limits,
activities restrictions and financial regulatory
reporting. Barclays Bank PLC’s US branches
are also subject to enhanced prudential
supervision requirements relating to, among
other things, liquidity and risk management.
Barclays PLC, Barclays Bank PLC and BUSL
have elected to be treated as financial holding
companies (FHCs) under the Bank Holding
Company Act of 1956. FHC status allows
these entities to engage in a variety of
financial and related activities, directly or
through subsidiaries, including underwriting,
dealing and market making in securities.
Failure to maintain FHC status could result in
increasingly stringent penalties and,
ultimately, in the closure or cessation of
certain operations in the US.
204 Barclays PLC Annual Report 2019
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RISK REVIEW In addition to umbrella oversight by the FRB,
many of the Barclays Group’s 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 supervision and regulation by, respectively,
the New York State Department of Financial
Services (NYSDFS) and the Florida Office of
Financial Regulation, as well as the applicable
Federal Reserve Banks. Barclays Bank
Delaware, a Delaware chartered commercial
bank, is subject to supervision and regulation
by the Delaware Office of the State Bank
Commissioner, the Federal Deposit Insurance
Corporation (FDIC), and the Consumer
Financial Protection Bureau (CFPB). The
deposits of Barclays Bank Delaware are
insured by the FDIC and Barclays PLC, Barclays
Bank PLC and BUSL are required to act as a
source of strength for Barclays Bank Delaware.
This could, among other things, require these
entities to inject capital into Barclays Bank
Delaware if it fails to meet applicable
regulatory capital requirements. Barclays Bank
Delaware is subject to direct supervision
and regulation by the CFPB, which has the
authority to examine and take enforcement
action related to compliance with US federal
consumer financial laws and regulations.
The Barclays Group’s US securities broker/
dealer and investment banking operations,
primarily conducted through Barclays Capital
Inc., are also subject to ongoing supervision
and regulation by the Securities and Exchange
Commission (SEC), the Financial Industry
Regulatory Authority (FINRA) and other
government agencies and SROs under US
federal and state securities laws.
The Barclays Group’s US commodity futures,
commodity options and swaps-related and
client clearing operations are subject to
ongoing supervision and regulation by the
Commodity Futures Trading Commission
(CFTC), the National Futures Association and
other SROs. Barclays Bank PLC is also a US
registered swap dealer and is subject to the
FRB swaps rules with respect to margin and
capital requirements.
Supervision in Asia Pacific
The Barclays Group’s operations in Asia Pacific
are supervised and regulated by a broad range
of national banking and financial services
regulators.
Brexit
There remains much uncertainty regarding
the state of the future relationship between
the UK and the EU and therefore the potential
impact of the UK’s withdrawal from the EU on
the financial regulatory framework in the UK.
Following the UK’s withdrawal from the EU on
31 January 2020, pursuant to the withdrawal
agreement negotiated between the UK and
the EU in October 2019, firms incorporated
and authorised in the UK are able to continue
to provide services into the EU27, and firms
incorporated and authorised in the EU27 are
able to continue to provide services into the
UK in accordance with the terms of the
withdrawal agreement for the duration of the
transition period set out in the agreement.
Following the expiry of that transitional period
in December 2020, the ability of UK firms to
access the EU market and vice versa would
depend upon the terms of any future trade
deal between the UK and the EU, including
whether such deal provides for any access
rights in respect of financial services. It would
also depend upon whether the EU grants
equivalence to the UK as a third country
pursuant to equivalence regimes in existing
EU financial services legislation. If, after the
expiry of the transitional period in December
2020, there is no deal or arrangement
covering financial services in place and
assuming no third country “equivalence”-
based recognition in place, the Barclays Group
entities in the UK would no longer be able to
access EU markets as they do today. As a
result of the onshoring of EU legislation in the
UK, UK firms would (at least initially) be
subject to substantially the same rules and
regulations as before Brexit. The UK may seek
to make changes to these rules going forward,
particularly in the event of no deal or
arrangement covering financial services,
where they are not subject to any
requirements to maintain particular rules or
standards for equivalence purposes.
Financial regulatory framework
(a) Prudential regulation
Certain Basel III standards were implemented
in EU law through the Capital Requirements
Regulation (CRR) and the Capital
Requirements Directive IV (CRD IV). Beyond
the minimum standards required by CRD IV,
the PRA has expected the Barclays Group,
in common with other major UK banks and
building societies, to meet a 7% Common
Equity Tier 1 (CET1) ratio at the level of the
consolidated group since 1 January 2016.
Global systemically important banks (G-SIBs),
such as the Barclays Group, are subject to a
number of additional prudential requirements,
including the requirement to hold additional
loss-absorbing capacity and additional capital
buffers above the level required by Basel III
standards. The level of the G-SIB buffer is set
by the Financial Stability Board (FSB)
according to a bank’s systemic importance
and can range from 1% to 3.5% of risk-
weighted assets (RWAs). The G-SIB buffer
must be met with CET1. In November 2019,
the FSB published an update to its list of
G-SIBs, maintaining the 1.5% G-SIB buffer
that applies to the Barclays Group.
The Barclays Group is also subject to a
‘combined buffer requirement’ consisting
of (i) a capital conservation buffer, and
(ii) a countercyclical capital buffer (CCyB).
The CCyB is based on rates determined by
the regulatory authorities in each jurisdiction
in which the Barclays Group maintains
exposures. These rates may vary in either
direction. In December 2019, the FPC raised
the UK CCyB rate from 1% to 2% with binding
effect from December 2020.
The PRA requires UK firms to hold additional
capital to cover risks which the PRA assesses
are not fully captured by the Pillar 1 capital
requirement. The PRA sets this additional
capital requirement (Pillar 2A) at least
annually, derived from each firm’s individual
capital guidance. Under current PRA rules, the
Pillar 2A must be met with at least 56% CET1
capital and no more than 25% Tier 2 capital.
In addition, the capital that firms use to meet
their minimum requirements (Pillar 1 and
Pillar 2A) cannot be counted towards meeting
the combined buffer requirement.
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Barclays PLC Annual Report 2019 205
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review The PRA may also impose a ‘PRA buffer’ to
cover risks over a forward-looking planning
horizon, including with regard to firm-specific
stresses or management and governance
weaknesses. If the PRA buffer is imposed on a
specific firm, it must be met separately to the
combined buffer requirement, and must be
met fully with CET1 capital.
The systemic risk buffer (which can be set
between 0% and 3% of RWAs) is a firm-
specific buffer, that is designed to increase
the capacity of ring-fenced bodies, such as
Barclays Bank UK PLC, to absorb stress, and
which must be met solely with CET1 capital.
The buffer rate applicable to the Barclays
Group’s ring-fenced sub-group is 1% of RWAs.
The systemic risk buffer is now incorporated
in the calculation of banks’ stress test hurdle
rates, which are the target capital ratios set
by the PRA, with a view to capturing domestic
as well as global systemic importance.
Final BCBS standards on counterparty credit
risk, leverage, large exposures and a Net
Stable Funding Ratio (NSFR) are being
implemented under EU law via the Risk
Reduction Measures package, which was
published in the Official Journal in June 2019
and includes the CRR II regulation, the CRD V
directive and the BRRD II directive.
The BCBS’s finalisation of ‘Basel III – post-
crisis regulatory reforms’ in December 2017,
among other things, eliminated model-based
approaches for certain categories of RWAs,
revised the standardised approach’s risk
weights for a variety of exposure categories,
replaced the four current approaches for
operational risk (including the advanced
measurement approach) with a single
standardised 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 the Barclays Group, a leverage ratio buffer
of 0.75%). The majority of the final Basel III
changes are due to be implemented
commencing 1 January 2022, with a five-year
phase-in period for the output floor, although
the precise timing as it applies to the Barclays
Group depends on national and EU legislative
processes. The new market risk framework,
including rules made as a result of the
‘fundamental review of the trading book’,
is expected to be implemented in the UK first
as a reporting requirement, with further
legislation needed to replace the existing,
binding market risk requirements.
In the US, in October 2019, the FRB and other
US regulatory agencies released final rules
to tailor the applicability of prudential
requirements for large domestic US banking
organisations, foreign banking organisations
and their intermediate holding companies
(IHCs), including BUSL. In the final rule, BUSL
is a “Category III” IHC. BUSL is therefore
subject to full standardised liquidity
requirements, including the liquidity coverage
ratio, which has been implemented by the US
regulatory agencies, and the NSFR, which has
been proposed by the US regulatory agencies
but does not have a clear time frame
for finalisation.
In June 2018 and October 2019, the FRB
finalised rules regarding single counterparty
credit limits (SCCL). The SCCL apply to the
largest US BHCs and foreign banks’ (including
the Barclays Group’s) US operations. The SCCL
creates two separate limits for foreign banks,
the first on combined US operations (CUSO)
and the second on the US IHC (BUSL). The
SCCL for US BHCs, including BUSL, will go into
effect in 2020 and requires that exposure to an
unaffiliated counterparty of BUSL not exceed
25% of BUSL’s Tier 1 capital. With respect to
the CUSO, the SCCL rule allows certification to
the FRB that a foreign bank complies with
comparable home country regulation.
In November 2019, the FRB issued a proposal
to extend by 18 months the initial compliance
date for foreign banks’ CUSO to allow the
home countries of foreign banks time to
finalize comparable home country regulation.
Under the proposal, Barclays Bank PLC would
not need to comply with the CUSO
requirement until 1 July 2021. In order to give
the FRB time to finalize the November
proposal, in December 2019 the FRB
separately granted Barclays Bank PLC relief
from the SCCL CUSO requirement through a
letter indicating that Barclays Bank PLC is not
required to provide the CUSO certification
until 1 July 2020.
Stress testing
The Barclays Group and certain of its
members are subject to supervisory stress
testing exercises in a number of jurisdictions,
designed to assess the resilience of banks to
adverse economic or financial developments
and ensure that they have robust, forward-
looking capital planning processes that
account for the risks associated with their
business profile. Assessment by regulators
is on both a quantitative and qualitative basis,
the latter focusing on such elements as data
provision, stress testing capability including
model risk management and internal
management processes and controls.
(b) Recovery and Resolution
Stabilisation and resolution framework
The 2014 Bank Recovery and Resolution
Directive (BRRD) established a framework
for the recovery and resolution of EU credit
institutions and investment firms.
Amendments to BRRD (referred to as BRRD II)
were made via the finalisation of the EU Risk
Reduction Measures. Member states are
required to transpose BRRD II into national
law by 28 December 2020 (subject to
certain exceptions).
On 28 December 2017, a related EU directive
came into force harmonising the priority
ranking of unsecured debt instruments under
national insolvency laws. The directive has
been transposed into national law in the UK,
dividing a financial institution’s non-preferred
debts into three classes in a descending
ranking order (ordinary, secondary and
tertiary non-preferential debts).
UK resolution authorities are empowered by
law to intervene in and resolve a UK financial
institution that is failing or likely to fail. The
BoE (in consultation with the PRA and HM
Treasury as appropriate) has several
stabilisation options where a banking
institution is failing or likely to fail, including,
for example, to transfer some or all of the
securities or business of the bank to a
commercial purchaser or a ‘bridge bank’
owned by the BoE or to transfer the banking
institution into temporary public ownership.
When exercising any of its stabilisation
powers, the BoE must generally provide that
shareholders bear first losses, followed by
creditors in accordance with the priority of
their claims in insolvency.
In order to enable the exercise of its
stabilisation powers, the BoE may impose a
temporary stay on the rights of creditors to
terminate, accelerate or close out contracts,
or override events of default or termination
rights that might otherwise be invoked as
a result of a resolution action and modify
contractual arrangements in certain
circumstances (including a variation of the
terms of any securities). In addition, the BoE
has the power to override, vary, or impose
conditions or contractual obligations between
a UK bank, its holding company and its group
undertakings, in order to enable any transferee
or successor bank to operate effectively after
any of the resolution tools have been applied.
HM Treasury may also amend the law for the
purpose of enabling it to use its powers under
this regime effectively, potentially with
retrospective effect. These powers apply
regardless of any contractual restrictions
and compensation that may be payable.
206 Barclays PLC Annual Report 2019
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RISK REVIEW Supervision and regulation While regulators in many jurisdictions have
indicated a preference for single point of entry
resolution for the Barclays Group, additional
resolution or bankruptcy provisions may apply
to certain Barclays Group entities or branches.
In the US, BUSL is subject to the Orderly
Liquidation Authority established by Title II of
the Dodd-Frank Act, a regime for the orderly
liquidation of systemically important financial
institutions by the FDIC, as an alternative to
proceedings under the US Bankruptcy Code.
In addition, the licensing authorities of each
US branch of Barclays Bank PLC and of
Barclays Bank Delaware have the authority to
take possession of the business and property
of the applicable branch or entity they license
and/or to revoke or suspend such licence.
In the US, Title I of the DFA, as amended, and
the implementing regulations issued by the
FRB and the FDIC require each bank holding
company with assets of $250bn or more,
including those within the Barclays Group,
to prepare and submit a plan for the orderly
resolution of subsidiaries and operations in
the event of future material financial distress
or failure. The Barclays Group’s next
submission of the US Resolution Plan in
respect of its US operations will be due on
1 July 2020.
Barclays Bank Ireland PLC, as a significant
institution under the Single Resolution
Mechanism Regulation (SRMR), is subject
to the powers of the Single Resolution Board
(SRB) as the Eurozone resolution authority.
The CBI and the ECB require Barclays Bank
Ireland PLC to submit a standalone BRRD-
compliant recovery plan on an annual basis.
The SRB has the power to require data
submissions specific to Barclays Bank Ireland
PLC under powers conferred upon it by the
BRRD and the SRMR. The SRB will exercise
these powers to determine the optimal
resolution strategy for Barclays Bank Ireland
PLC in the context of the BoE’s preferred
resolution strategy of single point of entry
with bail-in at Barclays PLC. The SRB also has
the power under the BRRD and the SRMR to
develop a resolution plan for Barclays Bank
Ireland PLC.
TLAC and MREL
The BRRD requires competent authorities
to impose a Minimum Requirement for own
funds and Eligible Liabilities (MREL) on
financial institutions to facilitate their orderly
resolution without broader financial disruption
or recourse to public funds. In November
2015, the FSB finalised its proposals to
enhance the loss-absorbing capacity of G-SIBs
and set a new minimum requirement for ‘total
loss-absorbing capacity’ (TLAC). The FSB also
published guiding principles on internal TLAC
in July 2017.
The EU is implementing the TLAC standard
(including internal TLAC) via the MREL
requirement for G-SIBs and the relevant
amendments are contained in the Risk
Reduction Measures package. Under the BoE’s
2018 statement of policy on MREL, the BoE
will set MREL for UK G-SIBs as necessary to
implement the TLAC standard and institution
or group-specific MREL requirements will
depend on the preferred resolution strategy
for that institution or group. Internal MREL
for operating subsidiaries will be scaled within
a 75-90% range of the external requirement
that would apply to the subsidiary if it were
a resolution entity. The starting point for the
scalar will be 90% for ring-fenced bank
sub-groups.
The MREL requirements are being phased in
as from 1 January 2019. From 1 January 2020,
G-SIBs with resolution entities incorporated in
the UK, including the Barclays Group, will be
subject to an MREL requirement equivalent
to the higher of: (i) the sum of two times the
Pillar 1 requirement and one times the Pillar
2A requirement; or (ii) the higher of two
times the leverage ratio or 6% of leverage
exposures. The MREL requirements will be
fully implemented by 1 January 2022, at which
time such G-SIBs will be required to meet an
MREL equivalent to the higher of: (i) two times
the sum of their Pillar 1 and Pillar 2A
requirements; or (ii) the higher of two times
their leverage ratio or 6.75% of leverage
exposures.
In addition, the BoE is required by law to
permanently write-down, or convert into
equity, Tier 1 capital instruments and Tier 2
capital instruments at the point of non-
viability of the bank. This power will be
extended to include eligible liabilities
(such as liabilities under MREL instruments
(see TLAC and MREL below)) once BRRD II
is implemented.
The BoE’s preferred approach for the
resolution of the Barclays Group is a bail-in
strategy with a single point of entry at
Barclays PLC. Under such a strategy, Barclays
PLC’s subsidiaries would remain operational
while Barclays PLC’s eligible liabilities would
be written down or converted to equity in
order to recapitalise the Barclays Group and
allow for the continued provision of services
and operations throughout the resolution.
The order in which the bail-in tool is applied
reflects the hierarchy of capital instruments.
Accordingly, the more subordinated the claim,
the more likely losses will be suffered.
The PRA has made rules that require
authorised firms to draw up recovery plans
and resolution packs, as required by the BRRD.
Recovery plans are designed to outline credible
actions that authorised firms could implement
in the event of severe stress in order to restore
their business to a stable and sustainable
condition. Removal of potential impediments
to an orderly resolution of a banking group or
one or more of its subsidiaries is considered
as part of the BoE’s and PRA’s supervisory
strategy for each firm, and the PRA can
require firms to make significant changes in
order to enhance resolvability. The Barclays
Group currently provides the PRA with a
recovery plan annually and with a resolution
pack as requested.
In July 2019, the BoE and PRA published final
policies on the Resolvability Assessment
Framework (RAF), designed to increase
transparency and accountability and clarify
the responsibilities on firms with respect
to resolution. The RAF consists of three
components: (i) how the BoE will assess
resolvability; (ii) the requirement for certain
firms to perform an assessment of their
preparations for resolution, submit a report to
the PRA and publish a summary of their most
recent report; and (iii) the BoE’s publication of
a statement concerning the resolvability of
each in-scope firm. The BoE will assess firms
against three resolvability outcomes they must
meet by 2022: (i) adequate financial resources;
(ii) being able to continue to do business
through resolution and restructuring; and (iii)
being able to communicate and co-ordinate
within the firm and with authorities.
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Barclays PLC Annual Report 2019 207
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review Barclays Bank Ireland PLC is subject to the
SRB’s MREL policy, as issued in January 2019,
in respect of the internal MREL that it will be
required to issue to Barclays Bank Group.
The SRB’s MREL policy will be revised in the
near future to reflect the implementation of
the Risk Reduction Measures package in the
EU. The SRB’s current calibration of MREL is
two times the sum of: (i) the firm’s Pillar 1
requirement; (ii) its Pillar 2 requirement; and
(iii) its combined buffer requirement, minus
125 basis points. The SRB’s policy does not
envisage the application of any scalar in
respect of the internal MREL requirement.
In the US, the FRB’s TLAC rule includes
provisions that require BUSL to have:
(i) a specified outstanding amount of eligible
long-term debt; (ii) a specified outstanding
amount of TLAC (consisting of common and
preferred equity regulatory capital plus eligible
long-term debt); and (iii) a specified common
equity buffer. In addition, the FRB’s TLAC rule
prohibits BUSL, for so long as the Barclays
Group’s overall resolution plan treats BUSL
as a non-resolution entity, from issuing TLAC
to entities other than those within the
Barclays Group.
Bank Levy and FSCS
The BRRD requires EU member states to
establish a pre-funded resolution financing
arrangement with funding equal to 1% of
covered deposits by 31 December 2024 to
cover the costs of bank resolutions. The UK
has implemented this requirement by way of
a tax on the balance sheets of banks known
as the ‘Bank Levy’.
In addition, the UK has a statutory
compensation fund called the Financial
Services Compensation Scheme (FSCS),
which is funded by way of annual levies
on most financial services firms authorised
under FSMA.
(c) Structural reform
In the UK, the Financial Services (Banking
Reform) Act 2013 put in place a framework for
ring-fencing certain operations of large banks
and secondary legislation passed in 2014
elaborated on the operation and application of
the ring-fence. Ring-fencing requires, among
other things, the separation of the retail and
smaller deposit-taking business activities of
UK banks into a legally distinct, operationally
separate and economically independent entity,
which is not permitted to undertake a range
of activities.
US regulation places further substantive limits
on the activities that may be conducted by
banks and holding companies, including
foreign banking organisations such as the
Barclays Group. The ‘Volcker Rule’, which was
part of the DFA and which came into effect
in the US in 2015, prohibits banking entities
from undertaking certain proprietary trading
activities and limits such entities’ ability to
sponsor or invest in certain private equity
funds and hedge funds (in each case broadly
defined). As required by the rule, the Barclays
Group has developed and implemented
an extensive compliance and monitoring
programme addressing proprietary trading
and covered fund activities (both inside and
outside of the US). In August 2019 the Volcker
regulatory agencies finalised amendments
to the Volcker Rule’s proprietary trading
provisions, which became effective on
1 January 2020 (with a mandatory compliance
date of 1 January 2021). The amendments
generally provide greater flexibility for banking
entities, and in particular for business units
that operate solely outside the US. The Volcker
Rule agencies have indicated that further
changes are likely to be proposed in 2020
with regard to the Volcker covered funds
provisions.
(d) Market infrastructure regulation
In recent years, regulators as well as
global-standard setting bodies such as the
International Organisation of Securities
Commissions (IOSCO) have focused on
improving transparency and reducing risk in
markets, particularly risks related to over-the-
counter (OTC) transactions. This focus has
resulted in a variety of new regulations across
the G20 countries and beyond that require or
encourage on-venue trading, clearing, posting
of margin and disclosure of pre-trade and
post-trade information. Some of the most
significant developments are described below.
The European Market Infrastructure
Regulation, as amended, (EMIR) has
introduced requirements designed to improve
transparency and reduce the risks associated
with the derivatives market, some of which
are still to be fully implemented. EMIR has
potential operational and financial impacts
on the Barclays Group, including by imposing
new collateral requirements. Over the coming
months, European regulators will undergo
a review of the exchange of collateral rules,
raising the possibility of some alterations to
the existing rules. European regulators are
also currently consulting on details of the
recent amendments to EMIR, which could
potentially have a significant impact on our
clearing business.
CRD IV complements EMIR by applying higher
capital requirements for bilateral, uncleared
OTC derivative trades. Lower capital
requirements for cleared derivative trades
are only available if the central counterparty
(CCP) through which the trade is cleared
is recognised as a ‘qualifying central
counterparty’ (QCCP) which has been
authorised or recognised under EMIR.
The Markets in Financial Instruments Directive
and Markets in Financial Instruments
Regulation (collectively referred to as MiFID II)
have largely been applicable since 3 January
2018. MiFID II affects many of the investment
markets in which the Barclays Group operates,
the instruments in which it trades and the
way it transacts with market counterparties
and other customers. MiFID II is currently
undergoing a review process in order to
determine those areas of the regulation
that require further amendment. These
amendments are being considered
particularly in light of the EU’s ongoing focus
on the development of a stronger Capital
Markets Union.
As part of the EU’s sustainable finance action
plan, new regulatory requirements are being
introduced to provide greater transparency
on the environmental and social impact
of financial investments. These include
(i) the Regulation on Sustainability-Related
Disclosures, which introduces disclosure
obligations regarding the way in which
financial institutions integrate environmental,
social and governance factors in their
investment decisions, and (ii) the Taxonomy
Regulation, which provides for a general
framework for the development of an EU-wide
classification system for environmentally
sustainable economic activities. These new
requirements will have an impact on the
Barclays Group as an intermediary
performing investment services for customers
and investors.
The EU Benchmarks Regulation applies to the
administration, contribution and use of
benchmarks within the EU. Financial
institutions within the EU are prohibited from
using benchmarks unless their administrators
are authorised, registered or otherwise
recognised in the EU, subject to transitional
provisions expiring on 1 January 2022. The
FCA has stated that it does not intend to
support LIBOR after the end of 2021.
International initiatives are therefore underway
to develop alternative benchmarks and
backstop arrangements.
208 Barclays PLC Annual Report 2019
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RISK REVIEW Supervision and regulation US regulators have imposed similar rules
as the EU with respect to the mandatory
on-venue trading and clearing of certain
derivatives, and post-trade transparency,
as well as in relation to the margining of
OTC derivatives.
US regulators are continuing to review and
consider their rules with respect to their
application on a cross-border basis, including
with respect to their registration requirements
in relation to non-US swap dealers and
security-based swap dealers. The regulators
may adopt further rules, or provide further
guidance, regarding cross-border applicability.
In December 2017, the CFTC and the European
Commission recognised the trading venues
of each other’s jurisdiction to allow market
participants to comply with mandatory
on-venue trading requirements while trading
on certain venues recognised by the other
jurisdiction. In April 2019, the CFTC issued
temporary relief that would permit trading
venues and market participants located in
the UK to continue to rely on this mutual
recognition framework following a withdrawal
of the UK from the EU.
Certain participants in US swap markets are
required to register with the CFTC as ‘swap
dealers’ or ‘major swap participants’ and/or,
following the compliance date for relevant
SEC rules, with the SEC as ‘security-based
swap dealers’ or ‘major security-based swap
participants’. Such registrants are subject to
CFTC, and will be subject to SEC, regulation
and oversight. Entities required to register as
swap dealers are subject to business conduct,
record keeping and reporting requirements
under CFTC rules. Barclays Bank PLC is subject
to regulation by the FRB, and has provisionally
registered with the CFTC as a swap dealer.
Accordingly, Barclays Bank PLC is subject to
CFTC rules on business conduct, record-
keeping and reporting and to FRB rules on
capital and margin.
The CFTC has approved certain comparability
determinations that permit substituted
compliance with non-US regulatory regimes
for certain swap regulations. Substituted
compliance is permitted for certain
transaction-level requirements, where
applicable, only with respect to transactions
between a non-US swap dealer and a non-US
counterparty, whereas entity-level
determinations generally apply on an
entity-wide basis regardless of counterparty
status. In April 2019, the CFTC issued
temporary relief that would permit swap
dealers located in the UK to continue to rely
on existing CFTC substituted compliance
determinations with respect to EU
requirements in the event of a withdrawal of
the UK from the EU. In addition, the CFTC has
issued guidance that would require a non-US
swap dealer to comply with certain CFTC
rules in connection with transactions that
are “arranged, negotiated or executed” from
the US. The CFTC has provided temporary
no-action relief from application of the
guidance. In December 2019 the CFTC
proposed rules that would, for certain CFTC
requirements, codify on a permanent basis,
the temporary no-action relief for transactions
that are arranged, negotiated or executed in
the US. The proposed rules would also codify
certain aspects of the CFTC’s current
cross-border framework with respect to
internal and external business conduct
requirements, and it is expected that the CFTC
will introduce additional proposed rules
addressing mandatory clearing, trading and
reporting requirements. In October 2017, the
CFTC issued an order permitting substituted
compliance with EU margin rules for certain
uncleared derivatives. However, as the
Barclays Group is subject to the margin rules
of the FRB, it will not benefit from the CFTC’s
action unless the FRB takes a similar
approach.
The SEC finalised the 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. In December of 2019
the SEC adopted a final cross-border rule that,
upon publication in the federal register, will
trigger the timeline for security-based swap
dealer registration, which will be required 18
months following the effective date of those
rules, currently expected in September 2021.
When security-based swap dealer registration
is required, it is anticipated that Barclays Bank
PLC and/or one or more of its affiliates will be
required to register in that capacity and thus
will be required to comply with the SEC’s rules
for security-based swap dealers. These rules
may impose costs and other requirements or
restrictions that could impact our business.
As with similar CFTC rules, substituted
compliance will be available for certain
security-based swap dealer requirements;
however, the SEC has not yet issued any
comparability determinations, and the
ultimate scope and applicability of such
determinations remains unclear.
(e) Conduct, culture
and other regulation
Conduct and culture
The PRA and FCA measures to increase the
individual accountability of senior managers
and other covered individuals in the banking
sector include: the ‘Senior Managers Regime’,
which applies to a limited number of
individuals with senior management
responsibilities within a firm; the ‘Certification
Regime’, which is intended to assess and
monitor the fitness and propriety of a wider
range of employees who could pose a risk of
significant harm to the firm or its customers;
and conduct rules that individuals subject to
either regime must comply with. From March
2017, the conduct rules have applied more
widely to other staff of firms within the scope
of the regime, including the Barclays Group.
Our regulators have also enhanced their focus
on the promotion of cultural values as a key
area for banks, although they generally view
the responsibility for reforming culture as
primarily sitting with the industry.
Data protection and PSD2
Most countries in which the Barclays Group
operates have comprehensive laws governing
the collection and use of personal information.
Prominent media reporting of recent
cybersecurity breaches or data losses and
the significant penalties being handed down
by European privacy regulators have
heightened interest in data privacy worldwide.
The introduction of the EU’s General Data
Protection Regulation (GDPR) does not
significantly alter the core principles
established under the earlier Data Protection
Directive, but it creates a harmonised privacy
regime across European member states with
penalties up to the higher of 4% of global
turnover or €20m. The GDPR also institutes
new mandatory breach notification
requirements, enhances the rights of
individual data subjects and introduces an
accountability principle concerned with
openly demonstrating compliance. The
international nature of our business and IT
infrastructure means personal information
may be available in countries other than from
where it originated. The GDPR has extra-
territorial effect where a business established
outside the EU is processing personal data
of individuals located in the EU (e.g. European
based customers or clients) and such
processing relates to the offering of goods
or services to such individuals, or the
monitoring of their behaviour in the EU.
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Barclays PLC Annual Report 2019 209
Financial reviewFinancial statementsShareholder informationStrategic reportGovernanceRisk review 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, the Barclays
Group 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 programmes
administered by the US government, including
the US Office of Foreign Assets Control and
the US Department of State, which restrict
certain business activities with certain
individuals, entities, groups, countries
and territories.
In some cases, US state and federal
regulations addressing sanctions, money
laundering and other financial crimes may
impact entities, persons or activities located
outside the US, including Barclays PLC and
its subsidiaries. The enforcement of these
regulations has been a major focus of US
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.
In the United States, the California Consumer
Privacy Protection Act (CCPA), effective
1 January 2020, requires companies that
process information regarding California
residents to make new disclosures to
consumers about their data collection,
use and sharing practices, allows consumers
to opt out of certain data sharing with third
parties and provides a new cause of action
for data breaches. It remains unclear what
modifications will be made, if any, to the CCPA
and its regulations and how these will be
interpreted. The introduction of the CCPA has
prompted several other US states to consider
similar legislation. Elsewhere non-EU
countries such as Bermuda, Brazil, India,
Cayman Islands, China, Guernsey, Jersey, Isle
of Man, and Switzerland have introduced or
updated existing legislation, or are considering
new laws, with provisions that are either
inspired by the GDPR or that otherwise
provide enhanced rights to data subjects.
The revised Payment Services Directive (PSD2)
introduces additional security requirements
when customers and clients are accessing
accounts or making payments online.
In August 2019, the FCA agreed an 18-month
plan for firms to implement these
requirements, referred to as Strong Customer
Authentication (SCA).
Cybersecurity and operational resilience
Regulators in Europe and the US continue
to focus on cybersecurity risk management
and organisational operational resilience and
overall soundness across all financial services
firms, with customer and market expectations
of continuous access to financial services
at an all-time high. This has a led to a number
of proposed laws and changes to regulatory
frameworks being published, such as the UK
regulators’ proposals for a new operational
resilience regime, that necessitate the
implementation of a variety of increased
controls and enhancement activities for
regulated Barclays Group entities. To comply
with these new requirements, firms such as
the Barclays Group have adopted or will adopt
a variety of increased controls and processes,
including, among others, the amendment of
cybersecurity policies and procedures to
include specified criteria, additional security
measures for enhanced reporting and public
disclosures, compliance certification
requirements, operational resilience and more
advanced recovery solutions, as well as other
cyber and information risk governance
measures. These increased controls will
enhance industry standardisation, expand and
enhance our resilience capabilities as well as
increase our ability to protect and maintain
customer service during potential disruptions.
Such measures are likely to result in increased
technology and compliance costs for the
Barclays Group.
Sanctions and financial crime
The UK Bribery Act 2010 introduced a new
form of corporate criminal liability focused
broadly on a company’s failure to prevent
bribery on its behalf. The Criminal Finances
Act 2017 introduced new corporate criminal
offences of failing to prevent the facilitation
of UK and overseas tax evasion. Both pieces
of legislation have broad application and
in certain circumstances may have extra-
territorial impact on entities, persons or
activities located outside the UK, including
Barclays PLC and its subsidiaries. The UK
Bribery Act requires the Barclays Group to
have adequate procedures to prevent bribery
which, due to the extra-territorial nature of
the Act, makes this both complex and costly.
Additionally, the Criminal Finances Act
requires the Barclays Group to have
reasonable prevention procedures in place
to prevent the criminal facilitation of tax
evasion by persons acting for, or on behalf of,
the Barclays Group.
In May 2018, the Sanctions and Anti-Money
Laundering Act became law in the UK. The Act
allows for the adoption of an autonomous UK
Sanctions regime, as well as a more flexible
licensing regime post-Brexit.
In July 2018, the 5th EU Anti-Money
Laundering Directive entered into force.
Amongst other things, the Directive
introduces changes to the Enhanced Due
Diligence measures that are required in
respect of customer relationships or
transactions involving high risk non-EU
countries. EU Member States are required to
implement the requirements of the Directive
by January 2020. The UK Government has
confirmed that it will implement the
requirements of the Directive, regardless
of the outcome of Brexit, and on 10 January
2020 changes to the UK Money Laundering
Regulations came into force.
210 Barclays PLC Annual Report 2019
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RISK REVIEW Supervision and regulation FINANCIAL REVIEW
Contents
A review of the Group’s performance,
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
212
214
215
216
217
218
226
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Barclays PLC Annual Report 2019 211
Financial statementsShareholder informationRisk reviewStrategic reportGovernanceFinancial review Key performance indicators
Non-IFRS performance measures
The Group’s 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 businesses’
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
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 226 to 230 for further
information and calculations of non-IFRS
performance measures included throughout
this section, and the most directly comparable
IFRS measures.
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.
Barclays continues to target greater
than 10% RoTE, excluding litigation
and conduct. However, given global
macroeconomic uncertainty and the
current low interest rate environment,
it has become more challenging to
achieve this in 2020. Notwithstanding
these headwinds, the Group believes
it can achieve a meaningful
improvement in returns in 2020.
Cost control remains a priority and
management continues to target a
cost: income ratio of lower than 60%
over time.
Definition
Why is it important and how the Group performed
Common Equity Tier 1 (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.
CET1 ratio is a measure of capital that is
predominantly common equity defined by the
CRR, as amended by the CRR II applicable as
at the reporting date.
CET1 ratio
13.8%
2018: 13.2%
2017: 13.3%
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 CET1 ratio increased to 13.8% (2018: 13.2%).
CET1 capital decreased by £0.3bn to £40.8bn. This
was driven by underlying profit generation of
£5.0bn offset by dividends paid and foreseen of
£2.4bn, the additional provision for PPI of £1.4bn,
pension deficit reduction contribution payments of
£0.5bn, a decrease in the currency translation
reserve of £0.5bn, mainly driven by the
depreciation of period end USD against GBP, and a
loss on the redemption of AT1 securities of £0.4bn.
RWAs decreased by £16.8bn to £295.1bn primarily
driven by the reduction in the Group’s operational
risk RWAs, as well as the depreciation of period end
USD against GBP.
Group target: CET1 ratio of c.13.5%. Revised from
c.13.0% during the period, to reflect the removal of
the operational risk RWAs floor which increased the
CET1 ratio by c.60bps.
212 Barclays PLC Annual Report 2019
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FINANCIAL REVIEW Definition
Why is it important and how the Group performed
Average UK leverage ratio
The ratio is calculated as the average
transitional Tier 1 capital divided by average
UK leverage exposure. The average exposure
measure excludes qualifying central bank
claims.
Return on average tangible
shareholders’ equity
RoTE is calculated as profit after tax
attributable to ordinary shareholders, 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 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 remained stable at
4.5% (2018: 4.5%) primarily driven by a net
increase in AT1 capital, offset by a modest increase
in leverage exposure to £1,143bn (2018: £1,110bn).
Group target: maintaining the UK leverage ratio
above the expected minimum requirement.
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, excluding litigation and
conduct, increased to 9.0% (2018: 8.5%), in line
with the 2019 target. Based on an average target
CET1 ratio of 13.2%, RoTE was also 9%.
RoTE for the Group was 5.3% (2018: 3.6%) due to
an attributable profit of £2,461m (2018: £1,597m)
which included charges for litigation and conduct
of £1.8bn, reflecting an additional PPI provision.
Group target: Group RoTE, excluding litigation
and conduct, of greater than 10%.
Average UK leverage ratio
4.5%
2018: 4.5%
2017: 4.9%
Group RoTE excluding litigation
and conduct
9.0%
2018: 8.5%
2017: (1.2%)
Group RoTE
5.3%
2018: 3.6%
2017: (3.6%)
Operating expenses
Operating expenses excluding litigation and
conduct.
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.
Group operating expenses were £13.6bn, in line
with 2019 guidance, while total operating expenses
were £15.4bn (2018: £16.2bn).
Cost: income ratio
Operating expenses divided by
total income.
This is a measure management uses to assess
the productivity of the business operations.
Managing 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, excluding litigation
and conduct, decreased to 63% (2018: 66%) as
favourable income and cost efficiencies were
partially offset by continued investment.
The Group cost: income ratio, including litigation
and conduct, decreased to 71% (2018: 77%) due
to increased income and favourable total operating
expenses, which included an additional PPI
provision.
Group target: a cost: income ratio of below 60%
over time.
Operating expenses
£13.6bn
2018: £13.9bna
2017: £14.2bn
Total operating expenses
£15.4bn
2018: £16.2bn
2017: £15.5bn
Cost: income ratio
excluding litigation
and conduct
63%
2018: 66%
2017: 68%
Cost: income ratio
71%
2018: 77%
2017: 73%
Note
a Group operating expenses, excluding litigation and conduct, and a GMP charge of £140m.
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Barclays PLC Annual Report 2019 213
Financial statementsShareholder informationRisk reviewStrategic reportGovernanceFinancial review
Consolidated summary
income statement
For the year ended 31 December
Continuing operations
Net interest income
Net fee, commission and other income
Total income
Credit impairment charges
Operating costs
UK bank levy
Operating expenses
GMP charge
Litigation and conduct
Total operating expenses
2019
£m
2018
£m
2017
£m
2016
£m
2015
£m
9,407
12,225
21,632
9,062
12,074
21,136
9,845
11,231
21,076
10,537
10,914
21,451
10,608
11,432
22,040
(1,912)
(1,468)
(2,336)
(2,373)
(1,762)
(13,359)
(226)
(13,585)
–
(1,849)
(15,434)
(13,627)
(269)
(13,896)
(140)
(2,207)
(16,243)
(13,884)
(365)
(14,249)
–
(1,207)
(15,456)
(14,565)
(410)
(14,975)
–
(1,363)
(16,338)
(13,723)
(426)
(14,149)
–
(4,387)
(18,536)
Other net income/(expenses)
71
69
257
490
(596)
Profit before tax
Tax chargea
Profit 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 holders
Attributable profit/(loss)
Selected financial statistics
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Return on average tangible shareholders’ equity
Cost: income ratio
Performance measures excluding litigation and conductb
Profit before tax
Attributable profit/(loss)
Return on average tangible shareholders’ equity
Cost: income ratio
4,357
(1,003)
3,354
–
(80)
–
(813)
2,461
14.3p
14.1p
5.3%
71%
6,206
4,194
9.0%
63%
3,494
(911)
2,583
–
(234)
–
(752)
1,597
9.4p
9.2p
3.6%
77%
5,701
3,733
8.5%
66%
3,541
(2,066)
1,475
(2,195)
(249)
(140)
(639)
(1,748)
(10.3p)
(10.1p)
(3.6%)
73%
4,748
(598)
(1.2%)
68%
3,230
(865)
2,365
591
(346)
(402)
(457)
1,751
10.4p
10.3p
3.6%
76%
4,593
3,036
6.2%
70%
1,146
(1,079)
67
626
(348)
(324)
(345)
(324)
(1.9p)
(1.9p)
(0.7%)
84%
5,533
3,640
7.6%
64%
Notes
a From 2019, due to an IAS 12 update, the tax relief on payments in relation to AT1 instruments has been recognised in the tax charge of the income statement, whereas it was
previously recorded in retained earnings. Comparatives have been restated, reducing the tax charge for 2018 by £211m, 2017 by £174m, 2016 by £128m and 2015 by £70m. This
change does not impact earnings per share or return on average tangible shareholders’ equity. Further detail can be found in Note 1.
b Refer to pages 228 to 230 for further information and calculations of performance measures excluding litigation and conduct.
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.
214 Barclays PLC Annual Report 2019
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FINANCIAL REVIEW FINANCIAL REVIEW
Income statement commentary
2019 compared to 2018
RoTE, excluding litigation and conduct,
increased to 9.0% (2018: 8.5%), in line with
the 2019 target. Statutory EPS was 14.3p
(2018: 9.4p) and diluted EPS was 14.1p
(2018: 9.2p).
Profit before tax was £4,357m (2018:
£3,494m), including an additional provision
for PPI of £1,400m (2018: £400m). Excluding
litigation and conduct, profit before tax was
£6,206m (2018: £5,701m), with higher
income and lower operating expenses partially
offset by increased year on year credit
impairment charges. The 4% appreciation of
average USD against GBP positively impacted
income and profits and adversely impacted
credit impairment charges and operating
expenses.
Total income increased 2% to £21,632m.
Barclays UK income was stable, as ongoing
margin pressure and continued reduced risk
appetite in UK cards were offset by mortgage
and deposit balance growth. Barclays
International income increased 5%, with CIB
income up 5% and CC&P income up 4%.
Within CIB, Markets income increased due to
continued market share gainsa, while Banking
fees income was stable and a reduction in
Corporate lending income was partially offset
by an increase in Transaction banking income.
Higher CC&P income reflected growth in US
co-branded cards and payments partnerships.
Credit impairment charges increased to
£1,912m (2018: £1,468m). The 2019 charge
includes the impact of macroeconomic
scenario updates and an overall reduction
in unsecured gross exposures. Prior year
comparatives included the impact of
favourable macroeconomic scenario updates
and a £150m charge regarding the anticipated
economic uncertainty in the UK.
Operating expenses decreased to £13,585m
(2018: £13,896m) in line with 2019 guidance,
as cost efficiencies were partially offset by
continued investment. Barclays UK and
Barclays International each generated positive
cost: income jaws, resulting in the Group cost:
income ratio, excluding litigation and conduct,
reducing to 63% (2018: 66%).
Total operating expenses of £15,434m
(2018: £16,243m) included litigation and
conduct charges of £1,849m (2018: £2,207m).
The effective tax rate was 23.0% (2018:
26.1%). Excluding litigation and conduct,
the effective tax rate was 18.0% (2018: 17.2%).
The Group’s effective tax rate for future
periods is expected to remain around 20%,
excluding litigation and conduct.
Attributable profit was £2,461m (2018:
£1,597m). Excluding litigation and conduct,
attributable profit was £4,194m (2018:
£3,733m), generating an RoTE of 9.0%
(2018: 8.5%) and EPS of 24.4p (2018: 21.9p).
Note
a Data Source: Coalition, FY19 Preliminary Competitor Analysis. Market share represents Barclays share of the total industry Revenue Pool. Analysis is based on Barclays internal
business structure and internal revenues.
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Barclays PLC Annual Report 2019 215
Financial statementsShareholder informationRisk reviewStrategic reportGovernanceFinancial review Consolidated summary
balance sheet
As at 31 December
Assets
Cash and balances at central banks
Cash collateral and settlement balances
Loans and advances at amortised cost
Reverse repurchase agreements and other similar secured lending
Trading portfolio assets
Financial assets at fair value through the income statement
Derivative financial instruments
Financial investments
Financial assets at fair value through other comprehensive income
Assets included in disposal groups classified as held for sale
Other assets
Total assets
Liabilities
Deposits at amortised cost
Cash collateral and settlement balances
Repurchase agreements and other similar secured borrowings
Debt securities in issuea
Subordinated liabilities
Trading portfolio liabilities
Financial liabilities designated at fair value
Derivative financial instruments
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 £7.0bn (2018: £8.5bn).
2019
£m
2018
£m
2017
£m
2016
£m
2015
£m
150,258
83,256
339,115
3,379
114,195
133,086
229,236
177,069
77,222
326,406
2,308
104,187
149,648
222,538
–
–
171,082
77,168
324,048
12,546
113,760
116,281
237,669
58,915
102,353
90,135
345,900
13,454
80,240
78,608
346,626
63,317
49,711
82,980
357,586
28,187
77,348
76,830
327,709
90,267
65,750
52,816
–
–
–
–
–
21,954
21,089
1,140,229 1,133,283
1,193
20,586
1,133,248
71,454
21,039
1,213,126
7,364
22,030
1,120,012
415,787
67,341
14,517
76,369
18,156
36,916
204,326
229,204
394,838
67,522
18,578
82,286
20,559
37,882
216,834
219,643
398,701
68,143
40,338
73,314
23,826
37,351
173,718
238,345
–
–
–
11,953
11,362
1,074,569 1,069,504
13,496
1,067,232
4,594
10,871
4,760
44,204
64,429
1,231
65,660
4,311
9,632
5,153
43,460
62,556
1,223
63,779
1,140,229 1,133,283
22,045
8,941
5,383
27,536
63,905
2,111
66,016
1,133,248
309p
262p
17,322
1.32
1.18
309p
262p
17,133
1.28
1.12
322p
276p
17,060
1.35
1.13
390,744
80,648
19,760
75,932
23,383
34,687
96,031
340,487
65,292
14,797
1,141,761
21,842
6,449
6,051
30,531
64,873
6,492
71,365
1,213,126
344p
290p
16,963
1.23
1.17
390,307
75,015
25,035
69,150
21,467
33,967
91,745
324,252
5,997
17,213
1,054,148
21,586
5,305
1,898
31,021
59,810
6,054
65,864
1,120,012
324p
275p
16,805
1.48
1.36
216 Barclays PLC Annual Report 2019
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FINANCIAL REVIEW FINANCIAL REVIEW
Balance sheet commentary
Total assets
Total assets increased £7bn to £1,140bn.
Total liabilities
Total liabilities increased £5bn to £1,075bn.
Cash and balances at central banks has
decreased by £27bn to £150bn. The cash
balance has reduced as the Group actively
managed the cash component of the liquidity
pool it holds to meet its funding and
regulatory requirements. This management
has seen a change in the composition of the
liquidity pool and an increase in the
proportion of debt securities held within it.
The change in holding of liquid debt securities
can be seen through the increase in assets
held at fair value through other
comprehensive income of £13bn to £66bn.
Cash collateral and settlement balances
increased by £6bn to £83bn, primarily driven
by derivative fair value changes.
Loans and advances at amortised cost
increased £13bn to £339bn, principally driven
by a £6bn increase in mortgage lending in
Barclays UK and a £3bn increase in debt
securities held as part of treasury funding
and liquidity pool requirements.
Trading portfolio assets increased £10bn to
£114bn due to increased trading activity,
principally relating to the Equities business.
Financial assets at fair value through the
income statement decreased £17bn to £133bn
as a result of more capital efficient secured
lending within Barclays International.
Derivative financial instrument assets
increased £6bn to £229bn, driven by a
decrease in major interest rate curves, partially
offset by a decrease in foreign exchange
volumes.
Deposits at amortised cost increased £21bn
to £416bn driven by increased deposit taking
within Personal and Business Banking and the
broadening of the CIB business across Europe.
Debt securities in issue decreased £6bn to
£76bn due to the maturity of a number of
issuances which were not refinanced.
Financial liabilities designated at fair value
decreased £13bn to £204bn as a result of
more capital efficient secured lending within
Barclays International.
Derivative financial instruments liabilities
increased £9bn to £229bn, driven by a
decrease in major interest rate curves, partially
offset by a decrease in foreign exchange
volumes. This is consistent with the
movement in derivative financial instrument
assets.
Total shareholders’ equity
Total shareholders’ equity increased £1.8bn
to £64.4bn.
Share capital and share premium increased
£0.3bn to £4.6bn as a result of shares issued
under employee share schemes and the Scrip
Dividend Programme.
Other equity instruments increased £1.3bn
to £10.9bn due to the issuance of three AT1
instruments with principal amounts of $2.0bn,
£1.0bn and £1.0bn, partially offset by
redemptions with principal amounts of
$1.2bn, €1.1bn and £0.7bn. AT1 securities are
perpetual subordinated contingent convertible
securities structured to qualify as AT1
instruments under prevailing capital rules
applicable as at the relevant issue date.
The fair value through other comprehensive
income reserve represents the unrealised
change in the fair value through other
comprehensive income investments since
initial recognition. The reserve remained
broadly flat at £0.2bn.
The cash flow hedging reserve increased
£0.3bn to £1.0bn as a result of the fair value
movements on interest rate swaps held for
hedging purposes, as interest rate forward
curves flattened across major currencies.
The currency translation reserve decreased
£0.5bn to £3.3bn due to strengthening of
GBP against USD and EUR of 3% and 5%
respectively, when comparing year-end
closing rates.
The own credit reserve decreased £0.3bn
to £0.4bn debit, reflecting a tightening of
Barclays’ credit spreads increasing the fair
value of liabilities on balance sheet.
Retained earnings increased £0.7bn to
£44.2bn due to profits of £2.5bn, partially
offset by dividends paid of £1.2bn, foreign
exchange impact on redemption of AT1
instruments of £0.4bn and pension reserve
remeasurement of £0.2bn.
Tangible net asset value per share was
unchanged at 262p (2018: 262p) as 14.3p
earnings per share were offset by dividend
payments of 7p per share and net negative
reserve movements of 7p, predominantly
in the currency translation reserve.
home.barclays/annualreport
Barclays PLC Annual Report 2019 217
Financial statementsShareholder informationRisk reviewStrategic reportGovernanceFinancial review Analysis of results by business
Barclays UK
Income statement information
Net interest income
Net fee, commission and other income
Total income
Credit impairment charges
Net operating income
Operating costs
UK bank levy
Operating expenses
Litigation and conduct
Total operating expenses
Other net income/(expenses)
Profit before tax
Attributable profita
Balance sheet information
Loans and advances to customers at amortised cost
Total assets
Customer deposits at amortised cost
Loan: deposit ratio
Risk weighted assets
Period end allocated tangible equity
Key facts
Average LTV of mortgage portfoliob
Average LTV of new mortgage lendingb
Number of branches
Mobile banking active customers
30-day arrears rate – Barclaycard Consumer UK
Number of employees (full time equivalent)
Performance measures
Return on average allocated tangible equity
Average allocated tangible equity
Cost: income ratio
Loan loss rate (bps)c
Net interest margin
Performance measures excluding litigation and conductd
Profit before tax
Attributable profit
Return on average allocated tangible equity
Cost: income ratio
2019
£m
2018
£m
2017
£m
5,888
1,465
7,353
(712)
6,641
(3,996)
(41)
(4,037)
(1,582)
(5,619)
–
1,022
281
6,028
1,355
7,383
(826)
6,557
(4,075)
(46)
(4,121)
(483)
(4,604)
3
1,956
1,198
6,086
1,297
7,383
(783)
6,600
(4,030)
(59)
(4,089)
(759)
(4,848)
(5)
1,747
893
£193.7bn
£257.8bn
£205.5bn
96%
£74.9bn
£10.3bn
£187.6bn
£249.7bn
£197.3bn
96%
£75.2bn
£10.2bn
£183.8bn
£237.4bn
£193.4bn
95%
£70.9bn
£9.6bn
51%
68%
963
8.4m
1.7%
21,400
49%
65%
1,058
7.3m
1.8%
22,600
2.7%
£10.3bn
76%
36
3.09%
11.9%
£10.0bn
62%
43
3.23%
2,604
1,813
17.5%
55%
2,439
1,670
16.7%
56%
48%
64%
1,208
6.4m
1.8%
22,800
9.8%
£9.1bn
66%
42
3.49%
2,506
1,626
17.8%
55%
Notes
a From 2019, due to an IAS 12 update, the tax relief on payments in relation to AT1 instruments has been recognised in the tax charge of the income statement, whereas it was
previously recorded in retained earnings. Comparatives have been restated. This change does not impact EPS or return on average tangible shareholders’ equity.
b Average loan to value of mortgages is balance weighted and reflects both residential and buy-to-let mortgage portfolios within the Home Loans portfolio. The prior period has been
updated to align to this basis of preparation.
c 2017 comparative calculation based on gross loans and advances at amortised cost before the balance sheet presentation change and IAS 39 impairment charge.
d Refer to pages 228 to 230 for further information and calculations of performance measures excluding litigation and conduct.
218 Barclays PLC Annual Report 2019
home.barclays/annualreport
FINANCIAL REVIEW Analysis of Barclays UK
Analysis of total income
Personal Banking
Barclaycard Consumer UK
Business Banking
Total income
Analysis of credit impairment charges
Personal Banking
Barclaycard Consumer UK
Business Banking
Total credit impairment charges
Analysis of loans and advances to customers at amortised cost
Personal Banking
Barclaycard Consumer UK
Business Banking
Total loans and advances to customers at amortised cost
Analysis of customer deposits at amortised cost
Personal Banking
Barclaycard Consumer UK
Business Banking
Total customer deposits at amortised cost
2019 compared to 2018
Profit before tax, excluding litigation and
conduct, increased 7% to £2,604m and RoTE
increased to 17.5% (2018: 16.7%) reflecting
the resilience of the business in a challenging
income environment. Including litigation and
conduct charges of £1,582m (2018: £483m),
profit before tax was £1,022m (2018:
£1,956m).
Total income was stable at £7,353m (2018:
£7,383m). A 2% reduction in net interest
income to £5,888m (resulting in a lower NIM
of 3.09% (2018: 3.23%)) reflected higher
refinancing activity by mortgage customers,
lower IEL balances in UK cards and the mix
effect from growth in secured lending. Net fee,
commission and other income increased 8%
to £1,465m, due to increased debt sales and
the impact of treasury operations.
Personal Banking income was stable at
£4,009m (2018: £4,006m), reflecting ongoing
mortgage margin pressure, offset by
mortgage and deposit balance growth,
improved deposit margins and treasury
operations.
Barclaycard Consumer UK income decreased
5% to £1,992m reflecting a continued reduced
risk appetite and reduced borrowing by
customers, which resulted in a lower level of
IEL balances, partially offset by increased debt
sales.
Business Banking income increased 6% to
£1,352m driven by deposit growth, with
improved deposit margins, and the non-
recurrence of client remediation in 2018.
Credit impairment charges decreased 14%
to £712m reflecting the non-recurrence of a
£100m specific charge in Q418 relating to the
impact of anticipated economic uncertainty
in the UK. Unsecured gross exposures were
lower as a result of increased debt sales and
an improved risk profile, both principally in UK
cards. The 30 and 90 day arrears rates in UK
cards decreased to 1.7% (Q418: 1.8%) and
0.8% (Q418: 0.9%) respectively.
Operating expenses decreased 2% to £4,037m
as cost efficiencies were partially offset by
planned investment and inflation. The cost:
income ratio, excluding litigation and conduct,
was 55% (2018: 56%).
2019
£m
4,009
1,992
1,352
7,353
(195)
(472)
(45)
(712)
2018
£m
4,006
2,104
1,273
7,383
(173)
(590)
(63)
(826)
2017
£m
4,214
1,977
1,192
7,383
(221)
(541)
(21)
(783)
£151.9bn
£14.7bn
£27.1bn
£193.7bn
£146.0bn
£15.3bn
£26.3bn
£187.6bn
£141.3bn
£16.4bn
£26.1bn
£183.8bn
£159.2bn
–
£46.3bn
£205.5bn
£154.0bn
–
£43.3bn
£197.3bn
£153.1bn
–
£40.3bn
£193.4bn
Loans and advances to customers at
amortised cost increased 3% to £193.7bn
reflecting £6.4bn of mortgage growth.
Customer deposits at amortised cost
increased 4% to £205.5bn demonstrating
franchise strength across both Personal and
Business Banking.
RWAs were stable at £74.9bn (2018: £75.2bn)
as a reduction in UK cards (reflecting
increased debt sales, lower IEL balances and
an improved risk profile) was offset by growth
in mortgages.
home.barclays/annualreport
Barclays PLC Annual Report 2019 219
Financial statementsShareholder informationRisk reviewStrategic reportGovernanceFinancial review Analysis of results by business
Barclays International
Income statement information
Net interest income
Net trading income
Net fee, commission and other income
Total income
Credit impairment charges
Net operating income
Operating costs
UK bank levy
Operating expenses
Litigation and conduct
Total operating expenses
Other net income
Profit before tax
Attributable profita
Balance sheet information
Loans and advances at amortised cost
Trading portfolio assets
Derivative financial instrument assets
Financial assets at fair value through the income statement
Cash collateral and settlement balances
Other assets
Total assets
Deposits at amortised cost
Derivative financial instrument liabilities
Loan: deposit ratio
Risk weighted assets
Period end allocated tangible equity
Key facts
Number of employees (full time equivalent)
Performance measures
Return on average allocated tangible equity
Average allocated tangible equity
Cost: income ratio
Loan loss rate (bps)b
Net interest margin
Performance measures excluding litigation and conductc
Profit before tax
Attributable profit
Return on average allocated tangible equity
Cost: income ratio
2019
£m
2018
£m
2017
£m
3,941
4,199
6,535
14,675
(1,173)
13,502
(9,163)
(174)
(9,337)
(116)
(9,453)
69
4,118
2,816
3,815
4,450
5,761
14,026
(658)
13,368
(9,324)
(210)
(9,534)
(127)
(9,661)
68
3,775
2,599
4,307
3,971
6,104
14,382
(1,506)
12,876
(9,321)
(265)
(9,586)
(269)
(9,855)
254
3,275
967
£132.8bn
£113.3bn
£228.9bn
£128.4bn
£79.4bn
£178.6bn
£861.4bn
£210.0bn
£228.9bn
63%
£209.2bn
£29.6bn
£126.8bn
£127.2bn
£104.0bn
£113.0bn
£222.1bn £236.2bn
£104.1bn
£144.7bn
£74.3bn
£71.9bn
£204.1bn
£189.8bn
£856.1bn
£862.1bn
£187.3bn
£197.2bn
£237.8bn
£219.6bn
65%
68%
£210.3bn
£210.7bn
£27.5bn
£29.9bn
11,200
12,400
11,500
9.0%
£31.2bn
64%
86
4.07%
8.4%
£31.0bn
69%
50
4.11%
3.4%
£28.1bn
69%
75
4.16%
4,234
2,906
9.3%
64%
3,902
2,705
8.7%
68%
3,544
1,227
4.4%
67%
Notes
a From 2019, due to an IAS 12 update, the tax relief on payments in relation to AT1 instruments has been recognised in the tax charge of the income statement, whereas it was
previously recorded in retained earnings. Comparatives have been restated. This change does not impact EPS or return on average tangible shareholders’ equity.
b 2017 comparative calculation based on gross loans and advances at amortised cost before the balance sheet presentation change and IAS 39 impairment charge.
c Refer to pages 228 to 230 for further information and calculations of performance measures excluding litigation and conduct.
220 Barclays PLC Annual Report 2019
home.barclays/annualreport
FINANCIAL REVIEW Analysis of Barclays International
Corporate and Investment Bank
Income statement information
FICC
Equities
Markets
Advisory
Equity capital markets
Debt capital markets
Banking fees
Corporate lending
Transaction banking
Corporate
Othera
Total income
Credit impairment (charges)/releases
Net operating income
Operating costs
UK bank levy
Operating expenses
Litigation and conduct
Total operating expenses
Other net income
Profit before tax
Attributable profitb
Balance sheet information
Loans and advances at amortised cost
Trading portfolio assets
Derivative financial instrument assets
Financial assets at fair value through the income statement
Cash collateral and settlement balances
Other assets
Total assets
Deposits at amortised cost
Derivative financial instrument liabilities
Risk weighted assets
Performance measures
Return on average allocated tangible equity
Average allocated tangible equity
Cost: income ratio
Performance measures excluding litigation and conductc
Profit before tax
Attributable profit
Return on average allocated tangible equity
Cost: income ratio
2019
£m
2018
£m
2017
£m
3,364
1,887
5,251
776
329
1,430
2,535
765
1,680
2,445
–
10,231
(157)
10,074
(6,882)
(156)
(7,038)
(109)
(7,147)
28
2,955
1,980
2,863
2,037
4,900
708
300
1,523
2,531
878
1,627
2,505
(171)
9,765
150
9,915
(7,093)
(188)
(7,281)
(68)
(7,349)
27
2,593
1,781
2,875
1,629
4,504
678
354
1,580
2,612
1,093
1,629
2,722
40
9,878
(213)
9,665
(7,231)
(244)
(7,475)
(267)
(7,742)
133
2,056
269
£86.4bn
£92.0bn
£104.0bn
£113.3bn
£222.1bn
£228.8bn
£144.2bn
£127.7bn
£73.4bn
£78.5bn
£155.3bn
£160.4bn
£795.6bn £790.5bn
£136.3bn
£146.2bn
£219.6bn
£228.9bn
£170.9bn
£171.5bn
£88.2bn
£112.9bn
£236.1bn
£103.8bn
£71.9bn
£175.8bn
£788.7bn
£128.0bn
£237.7bn
£176.2bn
7.6%
£25.9bn
70%
6.9%
£26.0bn
75%
1.1%
£24.0bn
78%
3,064
2,064
8.0%
69%
2,661
1,843
7.1%
75%
2,323
528
2.2%
76%
Notes
a From 2019, treasury items previously included in Other have been allocated to businesses.
b From 2019, due to an IAS 12 update, the tax relief on payments in relation to AT1 instruments has been recognised in the tax charge of the income statement, whereas it was
previously recorded in retained earnings. Comparatives have been restated. This change does not impact EPS or return on average tangible shareholders’ equity.
c Refer to pages 228 to 230 for further information and calculations of performance measures excluding litigation and conduct.
home.barclays/annualreport
Barclays PLC Annual Report 2019 221
Financial statementsShareholder informationRisk reviewStrategic reportGovernanceFinancial review
Analysis of results by business
Analysis of Barclays International continued
Consumer, Cards and Payments
Income statement information
Net interest income
Net fee, commission, trading and other income
Total income
Credit impairment charges
Net operating income
Operating costs
UK bank levy
Operating expenses
Litigation and conduct
Total operating expenses
Other net income
Profit before tax
Attributable profita
Balance sheet information
Loans and advances at amortised cost
Total assets
Deposits at amortised cost
Risk weighted assets
Key facts
30-day arrears rates – Barclaycard US
US cards customer FICO score distribution
<660
>660
Total number of Barclaycard payments clients
Value of payments processedb
Performance measures
Return on average allocated tangible equity
Average allocated tangible equity
Cost: income ratio
Loan loss rate (bps)c
Performance measures excluding litigation and conductd
Profit before tax
Attributable profit
Return on average allocated tangible equity
Cost: income ratio
2019
£m
2018
£m
2017
£m
2,822
1,622
4,444
(1,016)
3,428
(2,281)
(18)
(2,299)
(7)
(2,306)
41
1,163
836
2,731
1,530
4,261
(808)
3,453
(2,231)
(22)
(2,253)
(59)
(2,312)
41
1,182
818
2,754
1,750
4,504
(1,293)
3,211
(2,090)
(21)
(2,111)
(2)
(2,113)
121
1,219
698
£40.8bn
£65.8bn
£63.8bn
£37.7bn
£40.8bn
£71.6bn
£60.9bn
£39.8bn
£38.6bn
£67.4bn
£59.3bn
£34.1bn
2.7%
2.7%
2.6%
14%
86%
c.376,000
£354bn
14%
86%
15%
85%
c.374,000 c.366,000
£322bn
£344bn
15.8%
£5.3bn
52%
234
1,170
842
15.9%
52%
16.5%
£5.0bn
54%
185
1,241
862
17.3%
53%
16.7%
£4.2bn
47%
321
1,221
699
16.8%
47%
Notes
a From 2019, due to an IAS 12 update, the tax relief on payments in relation to AT1 instruments has been recognised in the tax charge of the income statement, whereas it was
previously recorded in retained earnings. Comparatives have been restated. This change does not impact EPS or return on average tangible shareholders’ equity.
b Includes £272bn of merchant acquiring payments.
c 2017 comparative calculation based on gross loans and advances at amortised cost before the balance sheet presentation change and IAS 39 impairment charge.
d Refer to pages 228 to 230 for more information and calculations of performance measures excluding litigation and conduct.
222 Barclays PLC Annual Report 2019
home.barclays/annualreport
FINANCIAL REVIEW Financial assets at fair value through the
income statement decreased £16.3bn to
£128.4bn driven by a focus on capital-efficient
secured financing.
Other assets decreased £11.2bn to £178.6bn
predominantly due to a reduction in cash at
central banks held as part of the liquidity pool.
Deposits at amortised cost increased £12.8bn
to £210.0bn due to increased deposits within
CIB including the broadening of the business
across Europe.
RWAs decreased to £209.2bn (December
2018: £210.7bn) driven predominantly by
depreciation of USD against GBP.
2019 compared to 2018
Profit before tax, excluding litigation and
conduct, increased 9% to £4,234m with an
RoTE of 9.3% (2018: 8.7%), reflecting returns
in the CIB of 8.0% (2018: 7.1%) and CC&P of
15.9% (2018: 17.3%).
The 4% appreciation of average USD against
GBP positively impacted income and profits,
and adversely impacted credit impairment
charges and operating expenses.
Total income increased to £14,675m (2018:
£14,026m).
CIB income increased 5% to £10,231m.
Markets income increased 7% to £5,251m
reflecting further gains in market share in a
declining revenue poola.
FICC income increased 17% to £3,364m
reflecting a strong performance in rates and
growth in securitised products. Equities
income decreased 7% to £1,887m driven by
equity derivatives, which were impacted by
reduced client activity. Included in Markets
was a £180m gain related to the Tradeweb
position and a net loss of £77m due to the
impact of treasury operations and hedging
counterparty risk.
Banking fees income was stable at £2,535m.
The business continued to gain market share
in a declining fee poolb. Within Corporate,
Transaction banking income increased 3% to
£1,680m reflecting growth in deposits. This
was offset by a decrease in Corporate lending
income to £765m (2018: £878m). Excluding
mark-to-market movements on loan hedges,
Corporate lending income was broadly stable.
CC&P income increased 4% to £4,444m
reflecting growth in US co-branded cards and
payments partnerships.
Credit impairment charges increased to
£1,173m (2018: £658m). CIB credit
impairment charges increased to £157m
(2018: release of £150m) due to the non-
recurrence of favourable macroeconomic
scenario updates and single name recoveries
in 2018. CC&P credit impairment charges
increased to £1,016m (2018: £808m),
reflecting the non-recurrence of favourable US
macroeconomic scenario updates in 2018, as
well as higher unsecured gross exposures due
to balance growth in cards. Credit metrics
remained stable, with 30 and 90 day arrears
rates in US cards of 2.7% (Q418: 2.7%) and
1.4% (Q418: 1.4%) respectively.
Operating expenses decreased 2% to
£9,337m. CIB operating expenses decreased
3% to £7,038m as cost efficiencies were
partially offset by continued investment. CC&P
operating expenses increased 2% to £2,299m
reflecting continued investment.
Loans and advances increased £5.6bn to
£132.8bn mainly due to an increase in debt
securities.
Trading portfolio assets increased £9.3bn to
£113.3bn due to increased trading activity,
principally relating to the Equities business.
Derivative financial instrument assets and
liabilities increased £6.8bn to £228.9bn and
£9.3bn to £228.9bn respectively, driven by a
decrease in major interest rate curves, partially
offset by a decrease in foreign exchange
volumes.
Notes
a Data Source: Coalition, FY19 Preliminary Competitor Analysis. Market share represents Barclays share of the total industry Revenue Pool. Analysis is based on Barclays internal
business structure and internal revenues.
b Data Source: Dealogic, for the period covering 1 January to 31 December 2019.
home.barclays/annualreport
Barclays PLC Annual Report 2019 223
Financial statementsShareholder informationRisk reviewStrategic reportGovernanceFinancial review Analysis of results by business
Head Office
Income statement information
Net interest income
Net fee, commission and other income
Total income
Credit impairment (charges)/releases
Net operating expenses
Operating costs
UK bank levy
Operating expenses
GMP charge
Litigation and conduct
Total operating expenses
Other net income/(expenses)
Loss before tax
Attributable lossa
Balance sheet information
Total assets
Risk weighted assets
Period end allocated tangible equity
Key facts
Number of employees (full time equivalent)
Performance measures
Average allocated tangible equity
Performance measures excluding litigation and conductb
Loss before tax
Attributable loss
2019
£m
(422)
26
(396)
(27)
(423)
(200)
(11)
(211)
–
(151)
(362)
2
(783)
(636)
2018
£m
(781)
508
(273)
16
(257)
(228)
(13)
(241)
(140)
(1,597)
(1,978)
(2)
(2,237)
(2,200)
2017
£m
(435)
276
(159)
(17)
(176)
(277)
(41)
(318)
–
(151)
(469)
(189)
(834)
(864)
£21.0bn
£11.0bn
£5.6bn
£21.5bn
£26.0bn
£4.9bn
£39.7bn
£31.8bn
£10.0bn
48,200
48,500
45,600
£5.1bn
£3.1bn
£9.3bn
(632)
(525)
(640)
(642)
(683)
(727)
Notes
a From 2019, due to an IAS 12 update, the tax relief on payments in relation to AT1 instruments has been recognised in the tax charge of the income statement, whereas it was
previously recorded in retained earnings. Comparatives have been restated. This change does not impact EPS or return on average tangible shareholders’ equity.
b Refer to pages 228 to 230 for more information and calculations of performance measures excluding litigation and conduct.
Average allocated tangible equity increased
to £5.1bn (2018: £3.1bn) mainly due to excess
capital held in Head Office as a result of the
Group’s average CET1 ratio for 2019 being
above the 13.0% used in the allocation of
equity to the businesses.
RWAs decreased to £11.0bn (December 2018:
£26.0bn) mainly driven by the removal of the
Group’s operational risk RWAs floor.
2019 compared to 2018
Loss before tax, excluding litigation and
conduct, was £632m (2018: £640m).
Including litigation and conduct charges of
£151m (2018: £1,597m), loss before tax was
£783m (2018: £2,237m), which reflected the
non-recurrence of the £1,420m Residential
Mortgage Backed Securities settlement in
2018.
Total income was an expense of £396m
(2018: £273m), which included the funding
costs of legacy capital instruments, treasury
items and hedge accounting expenses,
partially offset by the recognition of dividends
on Barclays’ stake in Absa Group Limited. The
increase in income expense was mainly due to
the non-recurrence of a £155m one-off gain in
2018 from the settlement of receivables
relating to the Lehman Brothers acquisition.
224 Barclays PLC Annual Report 2019
home.barclays/annualreport
FINANCIAL REVIEW Barclays Non-Core
Income statement information
Total income
Credit impairment charges
Net operating expenses
Operating costs
Litigation and conduct
Total operating expenses
Other net income
Loss before tax
Attributable lossb
2019
£m
2018
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2017a
£m
(530)
(30)
(560)
(256)
(28)
(284)
197
(647)
(409)
Notes
a Represents financial results for the six months ended 30 June 2017.
b From 2019, due to an IAS 12 update, the tax relief on payments in relation to AT1 instruments has been recognised in the tax charge of the income statement, whereas it was
previously recorded in retained earnings. Comparatives have been restated. This change does not impact EPS or return on average tangible shareholders’ equity.
The Barclays 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.
Discontinued Operation: Africa Banking
Income statement information
Total income
Credit impairment charges
Net operating income
Operating expenses excluding UK bank levy and impairment of Barclays’ holding in BAGL
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 before tax
Tax charge
Loss after tax
Attributable loss
Note
a The Africa Banking income statement represents five months of results as a discontinued operation to 31 May 2017.
Following the reduction of the Group’s interest
in BAGL in 2017, Barclays’ remaining holding
of 14.9%, for the year ended 31 December
2019, is reported as a financial asset at fair
value through other comprehensive income in
the Head Office segment, with Barclays’ share
of Absa Group Limited’s dividend recognised
in the Head Office income statement.
Barclays’ shareholding in Absa Group Limited
of 14.9% is treated as a 250% risk weighted
asset, since the PRA agreed to Barclays fully
deconsolidating BAGL for regulatory reporting
purposes, effective 30 June 2018. Barclays had
been applying proportional consolidation for
regulatory purposes since Q2 2017.
2019
£m
2018
£m
2017a
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,786
(177)
1,609
(1,130)
5
484
(1,090)
(1,435)
(2,041)
(154)
(2,195)
(2,335)
home.barclays/annualreport
Barclays PLC Annual Report 2019 225
Financial statementsShareholder informationRisk reviewStrategic reportGovernanceFinancial review Non-IFRS performance measures
The Group’s 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 businesses’ 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 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.
Non-IFRS performance measures glossary
Measure
Loan: deposit ratio
Period end allocated tangible equity
Average tangible shareholders’ equity
Average allocated tangible equity
Return on average tangible
shareholders’ equity
Return on average allocated tangible equity
Cost: income ratio
Loan loss rate
Net interest margin
Tangible net asset value per share
Definition
Loans and advances at amortised cost divided by deposits at amortised cost. The components
of the calculation have been included on page 183.
Allocated tangible equity is calculated as 13.0% (2018: 13.0%) of RWAs for each business,
adjusted for 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.
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 equity holders of the parent, as a proportion of
average shareholders’ equity excluding non-controlling interests and other equity instruments
adjusted for the deduction of intangible assets and goodwill. The components of the calculation
have been included on page 227.
Statutory profit after tax attributable to ordinary equity holders of the parent, as a proportion of
average allocated tangible equity. The components of the calculation have been included on
page 227.
Total operating expenses divided by total income.
Quoted in basis points and represents total impairment charges divided by gross loans and
advances held at amortised cost at the balance sheet date. The components of the calculation
have been included on page 151.
Net interest income divided by the sum of average customer assets. The components of the
calculation have been included on page 227.
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 230.
Performance measures excluding
litigation and conduct
Calculated by excluding litigation and conduct charges from performance measures.
The components of the calculations have been included on pages 228 to 230.
226 Barclays PLC Annual Report 2019
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FINANCIAL REVIEW Margins analysis
For the year ended 31 December
Barclays UK
Barclays Internationalb
Total Barclays UK and Barclays International
Otherc
Total Barclays Group
2019
Average
customer assets
£m
190,849
98,824
289,673
Net interest
income
£m
5,888
4,021
9,909
(502)
9,407
Net interest
margin
%
3.09
4.07
3.42
Net interest
income
£m
6,028
3,966
9,994
(932)
9,062
2018a
Average
customer assets
£m
186,881
96,434
283,315
Net interest
margin
%
3.23
4.11
3.53
Notes
a The Group’s treasury results are reported directly within Barclays UK and Barclays International from Q218 following ring-fencing, resulting in gains and losses made on certain
activities being recognised as Other income, rather than in Net interest income.
b Barclays International margins include interest earning lending balances within the investment banking business.
c Other includes Head Office and non-lending related investment banking businesses not included in Barclays International margins.
The Group net interest margin decreased 11bps to 3.42% and Barclays UK net interest margin decreased 14bps to 3.09%, primarily reflecting increased
refinancing activity by mortgage customers and competitive pressure, lower IEL in UK cards and the mix effect from growth in secured lending.
The Group combined product and equity structural hedge notional as at 31 December 2019 was £171bn, with an average duration of 2.5 to 3
years. Group net interest income includes gross structural hedge contributions of £1.8bn (2018: £1.7bn) and net structural hedge contributions
of £0.5bn (2018: £0.8bn). Gross structural hedge contributions represent the absolute level of interest earned from the fixed receipts on the basket
of swaps in the structural hedge, while the net structural hedge contributions represent the net interest earned on the difference between the
structural hedge rate and prevailing floating rates.
Returns
Return on average tangible equity is calculated as profit for the period attributable to ordinary equity holders of the parent divided by average
tangible equity for the period, excluding non-controlling and other equity interests for businesses. Allocated tangible equity has been calculated
as 13.0% (2018: 13.0%) of RWAs for each business, adjusted for 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 2019
Barclays UK
Corporate and Investment Bank
Consumer, Cards and Payments
Barclays International
Head Office
Barclays Group
For the year ended 31 December 2018
Barclays UK
Corporate and Investment Bank
Consumer, Cards and Payments
Barclays International
Head Office
Barclays Group
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
Profit/(loss)
attributable
to ordinary
equity
holders of
the parent
£m
Average
tangible
equity
£bn
Return on
average
tangible
equity
%
281
1,980
836
2,816
(636)
2,461
1,198
1,781
818
2,599
(2,200)
1,597
893
269
698
967
(864)
(409)
(2,335)
(1,748)
10.3
25.9
5.3
31.2
5.1
46.6
10.0
26.0
5.0
31.0
3.1
44.1
9.1
24.0
4.2
28.1
9.3
2.4
n/m
48.9
2.7
7.6
15.8
9.0
n/m
5.3
11.9
6.9
16.5
8.4
n/m
3.6
9.8
1.1
16.7
3.4
n/m
n/m
n/m
(3.6)
Note
a Average allocated tangible equity for Africa Banking is included within Head Office.
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Barclays PLC Annual Report 2019 227
Financial statementsShareholder informationRisk reviewStrategic reportGovernanceFinancial review Non-IFRS performance measures
Performance measures excluding litigation and conduct
Cost: income ratio
Total operating expenses
Impact of litigation and conduct
Operating expenses
For the year ended 31 December 2019
Corporate
and
Investment
Bank
£m
(7,147)
109
(7,038)
Barclays
UK
£m
(5,619)
1,582
(4,037)
Consumer,
Cards and
Payments
£m
(2,306)
7
(2,299)
Barclays
International
£m
(9,453)
116
(9,337)
Head
Office
£m
(362)
151
(211)
Barclays
Group
£m
(15,434)
1,849
(13,585)
Total income
7,353
10,231
4,444
14,675
(396)
21,632
Cost: income ratio excluding litigation and conduct
55%
69%
52%
64%
n/m
63%
Profit before tax
Profit/(loss) before tax
Impact of litigation and conduct
Profit/(loss) before tax excluding litigation and conduct
Profit attributable to ordinary equity holders of the parent
Attributable profit/(loss)
Post-tax impact of litigation and conduct
Profit/(loss) attributable to ordinary equity holders of the parent
excluding litigation and conduct
Return on average tangible shareholders’ equity
Average shareholders’ equity
Average goodwill and intangibles
Average tangible shareholders’ equity
1,022
1,582
2,604
2,955
109
3,064
1,163
7
1,170
281
1,532
1,980
84
1,813
2,064
836
6
842
4,118
116
4,234
2,816
90
(783)
151
(632)
4,357
1,849
6,206
(636)
111
2,461
1,733
2,906
(525)
4,194
£13.9bn
(£3.6bn)
£10.3bn
£25.9bn
–
£25.9bn
£6.3bn
(£1.0bn)
£5.3bn
£32.2bn
(£1.0bn)
£31.2bn
£8.5bn
(£3.4bn)
£5.1bn
£54.6bn
(£8.0bn)
£46.6bn
Return on average tangible shareholders’ equity excluding litigation
and conduct
17.5%
8.0%
15.9%
9.3%
n/m
9.0%
Basic earnings per ordinary share
Basic weighted average number of shares
Basic earnings per ordinary share excluding litigation and conduct
17,200m
24.4p
228 Barclays PLC Annual Report 2019
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FINANCIAL REVIEW
Cost: income ratio
Total operating expenses
Impact of litigation and conduct
Operating expenses
For the year ended 31 December 2018
Corporate
and
Investment
Bank
£m
(7,349)
68
(7,281)
Barclays
UK
£m
(4,604)
483
(4,121)
Consumer,
Cards and
Payments
£m
(2,312)
59
(2,253)
Barclays
International
£m
(9,661)
127
(9,534)
Head
Office
£m
(1,978)
1,597
(381)
Barclays
Group
£m
(16,243)
2,207
(14,036)
Total income
7,383
9,765
4,261
14,026
(273)
21,136
Cost: income ratio excluding litigation and conduct
56%
75%
53%
68%
n/m
66%
Profit before tax
Profit/(loss) before tax
Impact of litigation and conduct
Profit/(loss) before tax excluding litigation and conduct
Profit attributable to ordinary equity holders of the parent
Attributable profit/(loss)
Post-tax impact of litigation and conduct
Profit/(loss) attributable to ordinary equity holders of the parent
excluding litigation and conduct
Return on average tangible shareholders’ equity
Average shareholders’ equity
Average goodwill and intangibles
Average tangible shareholders’ equity
1,956
483
2,439
2,593
68
2,661
1,198
472
1,781
62
1,670
1,843
1,182
59
1,241
818
44
862
3,775
127
3,902
(2,237)
1,597
(640)
3,494
2,207
5,701
2,599
106
(2,200)
1,558
1,597
2,136
2,705
(642)
3,733
£13.6bn
(£3.6bn)
£10.0bn
£26.2bn
(£0.2bn)
£26.0bn
£6.1bn
(£1.1bn)
£5.0bn
£32.3bn
(£1.3bn)
£31.0bn
£6.2bn
(£3.1bn)
£3.1bn
£52.1bn
(£8.0bn)
£44.1bn
Return on average tangible shareholders’ equity excluding litigation
and conduct
16.7%
7.1%
17.3%
8.7%
n/m
8.5%
Basic earnings per ordinary share
Basic weighted average number of shares
Basic earnings per ordinary share excluding litigation and conduct
17,075m
21.9p
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Barclays PLC Annual Report 2019 229
Financial statementsShareholder informationRisk reviewStrategic reportGovernanceFinancial review Non-IFRS performance measures
Cost: income ratio
Total operating expenses
Impact of litigation and conduct
Operating expenses
For the year ended 31 December 2017
Corporate
and
Investment
Bank
£m
(7,742)
267
(7,475)
Barclays
UK
£m
(4,848)
759
(4,089)
Consumer,
Cards and
Payments
£m
(2,113)
2
(2,111)
Barclays
International
£m
(9,855)
269
(9,586)
Head
Officea
£m
(469)
151
(318)
Barclays
Groupb
£m
(15,456)
1,207
(14,249)
Total income
7,383
9,878
4,504
14,382
(159)
21,076
Cost: income ratio excluding litigation and conduct
55%
76%
47%
67%
n/m
68%
Profit before tax
Profit/(loss) before tax
Impact of litigation and conduct
Profit/(loss) before tax excluding litigation and conduct
Profit attributable to ordinary equity holders of the parent
Attributable profit/(loss)
Post-tax impact of litigation and conduct
Profit/(loss) attributable to ordinary equity holders of the parent
excluding litigation and conduct
1,747
759
2,506
893
733
1,626
2,056
267
2,323
1,219
2
1,221
3,275
269
3,544
(834)
151
(683)
3,541
1,207
4,748
269
259
528
698
1
699
967
260
(864)
137
(1,748)
1,150
1,227
(727)
(598)
Return on average tangible shareholders’ equity
Average shareholders’ equity
Average goodwill and intangibles
Average tangible shareholders’ equity
£13.6bn
(£4.4bn)
£9.1bn
£24.9bn
(£1.0bn)
£24.0bn
£5.6bn
(£1.4bn)
£4.2bn
£30.5bn
(£2.4bn)
£28.1bn
£10.6bn
(£1.4bn)
£9.3bn
£57.1bn
(£8.2bn)
£48.9bn
Return on average tangible shareholders’ equity excluding
litigation and conduct
17.8%
2.2%
16.8%
4.4%
n/m
(1.2%)
Basic earnings per ordinary share
Basic weighted average number of shares
Basic earnings per ordinary share excluding litigation and conduct
Notes
a Average allocated tangible equity for Africa is included within Head Office.
b Barclays Group results also included Barclays Non-Core and the Africa Banking discontinued operation.
Tangible net asset value per share
Total equity excluding non-controlling interests
Other equity instruments
Goodwill and intangibles
Tangible shareholders’ equity attributable to ordinary shareholders of the parent
Shares in issue
Tangible net asset value per share
16,996m
(3.5p)
2019
£m
64,429
(10,871)
(8,119)
45,439
2018
£m
62,556
(9,632)
(7,973)
44,951
2017
£m
63,905
(8,941)
(7,849)
47,115
17,322m 17,133m 17,060m
262p
262p
276p
230 Barclays PLC Annual Report 2019
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FINANCIAL REVIEW
FINANCIAL STATEMENTS
Contents
Detailed analysis of our statutory accounts,
independently audited and providing in-depth
disclosure on the financial performance of the Group.
Barclays has adopted the British Bankers’ Association (BBA) Code for Financial Reporting Disclosure as
adopted by UK Finance in 2017 and has prepared the 2019 Annual Report in compliance with the BBA Code.
Barclays is committed to continuously reflect the objectives of reporting set out in the BBA Code.
Consolidated financial statements
Notes to the financial statements
Performance/return
Assets and liabilities held at fair value
Assets at amortised cost and other investments
Accruals, provisions, contingent liabilities
and legal proceedings
Capital instruments, equity and reserves
Employee benefits
Scope of consolidation
Other disclosure matters
■■ 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
■■ Operating expenses
■■ Tax
■■ Earnings per share
■■ Dividends on ordinary shares
■■ Trading portfolio
■■ Financial assets at fair value through the income statement
■■ Derivative financial instruments
■■ Financial assets at fair value through other comprehensive
income
■■ Financial liabilities designated at fair value
■■ Fair value of financial instruments
■■ Offsetting financial assets and financial liabilities
■■ Loans and advances and deposits at amortised cost
■■ Property, plant and equipment
■■ Leases
■■ Goodwill and intangible assets
■■ 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
■■ Staff costs
■■ Share-based payments
■■ Pensions and post-retirement benefits
■■ Principal subsidiaries
■■ Structured entities
■■ Investments in associates and joint ventures
■■ Securitisations
■■ Assets pledged, collateral received and assets transferred
■■ Related party transactions and Directors’ remuneration
■■ Auditor’s remuneration
■■ Discontinued operations and assets included in disposal
groups classified as held for sale and associated liabilities
■■ Barclays PLC (the Parent company)
■■ Related undertakings
Page
Note
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Barclays PLC Annual Report 2019 231
i
F
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
Financial reviewShareholder informationRisk reviewStrategic reportGovernance
INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s report
to the members of Barclays PLC
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 report to the
audit committee.
We were first appointed as auditor by the
Directors on 31 March 2017. The period of
total uninterrupted engagement is for the 3
financial years ended 31 December 2019. 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.
1 Our opinion is unmodified
We have audited the financial statements
of Barclays PLC (“the Parent company”) for
the year ended 31 December 2019 which
comprise the consolidated and Parent
company balance sheets as at 31 December
2019 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 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 2019 and of the
Group’s profit for the year then ended;
■■ have been properly prepared in accordance
with International Financial Reporting
Standards as adopted by the European
Union (IFRSs as adopted by the EU);
■■ 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.
2 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.
In the prior year, we reported a key audit
matter in respect of the impact of
uncertainties due to the UK exiting the
European Union. As a result of developments
since the prior year report, including the
Group’s own preparation, the relative
significance of this matter on our audit work,
including in relation to the impairment
allowance which remains a key audit matter,
has reduced. Accordingly, we no longer
consider this a key audit matter.
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.
232 Barclays PLC Annual Report 2019
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Key audit matter
How our audit addressed the key audit matter
Impairment allowances on loans and advances at
amortised cost, including off-balance sheet elements
31 December 2019 £6.6bn, 31 December 2018 £7.0bn
Refer to page 55 (Board Audit Committee Report), page 259
(accounting policy on accounting for the impairment of financial
assets), page 147 (credit risk disclosures), and page 259
(financial disclosure note 7 Credit impairment charges)
Subjective estimate
The estimation of expected credit losses (“ECL”) on financial
instruments, involves significant judgement and estimates. The
key areas where we identified greater levels of management
judgement and therefore increased levels of audit focus in the
Group’s estimation of ECLs are:
■■ Model estimations – Inherently judgemental modelling is
used to estimate ECLs which involves determining
Probabilities of Default “PD”), Loss Given Default (“LGD”),
and Exposures at Default (“EAD”). The PD models are the key
drivers of the ECLs and also impact the staging of assets and
as a result are considered the most significant judgemental
aspect of the Group’s ECL modelling approach especially for
the UK and US credit cards, UK consumer loans and
corporate portfolios.
■■ Economic scenarios – IFRS 9 requires the Group to measure
ECLs on an unbiased forward-looking basis reflecting a range
of future economic conditions. Significant management
judgement is applied in determining the economic scenarios
used and the probability weightings applied to them
especially when considering the current uncertain economic
environment in the UK and US, including the manner in
which the UK withdraws from the European Union. This
especially impacts the UK and US credit cards, UK mortgages,
UK consumer loans and corporate portfolios.
■■ Qualitative adjustments – Adjustments to the model-driven
ECL results are raised by management to address known
impairment model limitations or emerging trends. They
represent approximately 5.4% net of the ECL. Such
adjustments are inherently uncertain and significant
management judgement is involved in estimating these
amounts especially in relation to the UK and US credit cards
and corporate portfolios.
The effect of these matters is that, as part of our risk assessment,
we determined that the impairment of loans and advances to
customers including off balance sheet elements has a high
degree of estimation uncertainty, with a potential range of
reasonable outcomes greater than our materiality for the
financial statements as a whole, and possibly many times that
amount. The credit risk sections of the financial statements
disclose the sensitivities estimated by the Group.
Disclosure quality
The disclosures regarding the Group’s application of IFRS 9 are
key to explaining the key judgements and material inputs to the
IFRS 9 ECL results.
Our procedures included:
Controls testing: We performed end to end process walk-throughs to identify
the key systems, applications and controls used in the ECL processes. We
tested the relevant general IT and applications controls over key systems used
in the ECL process.
Key aspects of our controls testing involved the following:
■■ For the relevant portfolios, testing the design and operating effectiveness
of the key controls over the completeness and accuracy of the key inputs
and assumptions into the IFRS 9 impairment models;
■■ Testing the design and operating effectiveness of the key controls over the
application of the staging criteria;
■■ Evaluating controls over validation, implementation and model monitoring;
■■ Evaluating controls over authorisation and calculation of post model
adjustments and management overlays; and
■■ Testing key controls relating to selection and implementation of material
macro-economic variables and the controls over the scenario selection
and probabilities.
Our financial risk modelling expertise: For the UK and US credit cards, UK
consumer loans and corporate portfolios we involved our own financial risk
modelling specialists in the following:
■■ Evaluating the appropriateness of the Group’s IFRS 9 impairment
methodologies (including the staging criteria used);
■■ Re-performing the calculation of certain components of the ECL model
calculation (including the staging criteria);
■■ For a sample of models which were changed or updated during the year,
evaluating whether the changes (including the updated model code) were
consistent with the Barclays’ approved IFRS 9 impairment methodologies
by re-performing key model validation procedures; and
■■ For a sample of material models, assessing the reasonableness of the
model predictions by comparing them against actual results and
evaluating the resulting differences.
Our economic scenario expertise: We involved our own economic specialists
to assist us in assessing the appropriateness of the Group’s methodology for
determining the economic scenarios used and the probability weightings
applied to them. We assessed key economic variables such as UK and US GDP,
unemployment and house prices indices, which included agreeing samples of
economic variables to external sources. We also assessed the overall
reasonableness of the economic forecasts by comparing the Group’s forecasts
to our own modelled forecasts, with a focus on the UK and US credit card, UK
mortgages, UK consumer loans and corporate portfolios. We also assessed
the reasonableness of the Group’s considerations of the ECL impact of
anticipated economic uncertainty in the UK.
Test of details: Key aspects of our testing involved:
■■ Sample testing over key inputs and assumptions impacting ECL
calculations to assess the reasonableness of economic forecasts, weights,
and PD assumptions applied; and
■■ Selecting a sample of post model adjustments, considering the size and
complexity of management overlays, in order to assess the reasonableness of
the adjustments by challenging key assumptions, inspecting the calculation
methodology and tracing a sample of the data used back to source data.
Assessing transparency: We assessed whether the disclosures appropriately
disclose and address the uncertainty which exists when determining the
expected credit losses. As a part of this, we assessed the sensitivity analysis
that is disclosed. In addition, we assessed whether the disclosure of the key
judgements and assumptions made was sufficiently clear.
Our results:
The results of our testing were satisfactory and we considered the ECL
charge, provision recognised and the related disclosures to be acceptable
(2018 result: acceptable).
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Barclays PLC Annual Report 2019 233
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s report
to the members of Barclays PLC
Key audit matter
How our audit addressed the key audit matter
Provision for conduct redress costs (PPI)
Our procedures included:
31 December 2019 £1.2bn, 31 December 2018 £0.9bn
Refer to page 55 (Board Audit Committee Report), page 300
(accounting policy on accounting for provisions), and page 300
(financial disclosure note 24 Provisions)
Subjective estimate
The calculation of the provision for Payment Protection
Insurance (“PPI”) redress costs for the Group requires the
Directors to make a number of key assumptions regarding the
redress still to be paid. The determination of these is judgmental
and requires the Directors to consider a range of information.
The Group received a higher than expected volume of
complaints, enquiries and requests for information in the run up
to the FCA time-bar in August 2019, including a volume related
to enquiries received from the Official Receiver. The most
significant assumptions in the PPI provision calculation are the
proportion of complaints and other claims for which redress will
be payable and judgements around the legal position of
enquiries from the Official Receiver and these areas are where
we have focused our procedures.
The Directors have developed a model which estimates the
proportion of complaints, enquiries and requests for information
(“RFIs”) for which redress will be payable and the associated
redress cost.
The Directors have assessed the appropriateness of the provision
with reference to historical observed complaints data, and more
recent experience observed in complaints and other claims
received in the period shortly before the time-bar.
The effect of these matters is that, as part of our risk assessment,
we determined that PPI provision costs have significant
estimation uncertainty, with a potential range of reasonable
outcomes greater than our materiality for the financial
statements as a whole.
Disclosure quality
The related PPI disclosures provide the key assumptions
underpinning the calculation of the provision and sensitivity of
the provision to the changes in those assumptions and are
therefore key to understanding the judgement which has been
applied.
Historical comparison: We evaluated the assumptions and data used,
particularly those in relation to complaint volumes and validity which led to
an adjustment to provision estimates in 2019.
Enquiry of regulators: We inspected correspondence with the FCA and other
regulators to identify any regulatory observations on the PPI redress provision.
We also made enquiries of the FCA discussing 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 complaints data and assumptions applied in the
estimation of redress payments to be made.
Sensitivity analysis: We considered the appropriateness of the scenarios used
to model the potential range of outcomes. We also considered the sensitivity
of the model to variations in redress assumptions by inspecting the
calculation methodology and challenging the key assumptions using our
industry knowledge.
Enquiry of lawyers: For Official Receiver enquiries we enquired of the Group’s
external legal counsel and inspected legal reports and correspondence from
the Official Receiver to challenge whether the provision reflects most recent
developments.
Independent re-performance: We built our own model to allow us to
determine a range of potential future outcomes under multiple independently
selected scenarios and used these to assess the appropriateness of the
Group’s point estimate. We developed a number of these scenarios using
analysis of Barclays’ historical complaint data. Where there were differences in
the inputs and ranges we challenged the Group’s rationale for these and
assessed whether they were reasonable.
Assessing transparency: We assessed whether the disclosures appropriately
disclose and address the significant uncertainty which exists when estimating
the PPI redress provision. 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 provision
recognised, and sensitivity disclosures made, to be acceptable. (2018 result:
acceptable).
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Key audit matter
How our audit addressed the key audit matter
Valuation of financial instruments held at fair value
Our procedures included:
Risk assessment: We performed risk assessment procedures over the entire
Level 2 and Level 3 balances within the Group’s financial statements (i.e. all of
the non-listed fair value financial instruments held by the Group). As part of
these risk assessment procedures we identified which portfolios have a risk of
material misstatement including those arising from significant judgements
over valuation either due to unobservable inputs or complex models
Control testing: We tested the design and operating effectiveness of key
controls relating specifically to these portfolios. These included:
■■ controls over independent price verification (“IPV”), performed by a
control function, of key market pricing inputs, including completeness of
positions and valuation inputs subject to IPV.
■■ controls over FVAs, including exit adjustments (to mark the portfolio to bid
or offer prices), model shortcoming reserves to address model limitations
and XVAs.
■■ controls over the validation, completeness, implementation and usage of
valuation models. This included controls over assessment of model
limitations and assumptions.
Independent re-performance: With the assistance of our own valuation
specialists we independently re-priced a selection of trades from across the
significant audit risk portfolios and challenged management on the valuations
where they were outside our tolerance.
Methodology choice: Our own valuation specialists assisted us in challenging
the appropriateness of significant models and methodologies used in
calculating fair values, risk exposures and in calculating FVAs, including
comparison to industry practice.
Comparing valuations: For a selection of material collateral disputes we
challenged management’s valuation methodology where significant fair value
differences were observable with the market participant on the other side of
the trade.
Historical comparison: We inspected significant gains and losses on trade
exits or restructurings and challenged whether these data points indicate
elements of fair value not incorporated in the current valuation
methodologies. We also inspected movements in unobservable inputs
throughout the period to challenge whether any gain or loss generated was
appropriate.
Assessing transparency: We assessed the adequacy of the Group’s financial
statements disclosures in the context of the relevant accounting standards.
Our results:
The results of our testing were satisfactory and we considered the fair value
of Level 3 and harder-to-value Level 2 financial instrument assets and
liabilities recognised to be acceptable (2018 result: acceptable).
Refer to page 56 (Board Audit Committee Report), page 249
(accounting policy for financial assets and liabilities) and page
279 (financial disclosure note 17 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 significant judgement by management in relation to
the choice of the valuation models, pricing inputs and post-model
pricing adjustments, including fair value adjustments (FVAs) and
credit and funding adjustments (together referred to as XVAs)
Where significant pricing inputs are unobservable, management has
no reliable, relevant market data available in determining the fair
value and hence estimation uncertainty can be high. These financial
instruments are classified as Level 3, with management having
controls in place over the boundary between Level 2 and 3 positions.
Our significant audit risk is therefore primarily over significant Level 3
portfolios.
In addition, there may also be valuation complexity associated with
Level 2 portfolios, specifically where valuation modelling techniques
result in significant limitations or where there is greater uncertainty
around the choice of an appropriate pricing methodology, and
consequently more than one valuation model is used for that
product across the market.
The effect of these matters is that, as part of our risk assessment, we
determined that the subjective estimates in fair value measurement
of certain portfolios, as detailed above, have a high degree of
estimation uncertainty, with a potential range of reasonable
outcomes greater than our materiality for the financial statements as
a whole, and possibly many times that amount.
At 31 December 2019, Level 3 instruments (£18.7bn) represented
2.6% of the Group’s financial assets carried at fair value and 0.9% of
the Group’s financial liabilities carried at fair value.
Within this population the fair value instrument portfolios in the
Group with the most significant judgements are:
■■ Fair value loan portfolios – we identified two fair value loan
portfolios as having a significant audit risk: the Education, Social
Housing and Local Authority (‘ESHLA’) loan portfolio and fair
value loans related to the Group’s syndication activities. As at
31 December 2019 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. The fair
value loan portfolio related to syndication activities also has
significant judgement in the valuation due to the lack of
observable prices.
■■ Derivative portfolios – we identified four portfolios each with a
significant risk attached to the valuation methodology due to the
lack of observable pricing inputs.
■■ Preference shares – we identified a portfolio of preference shares
where the valuation is judgemental due to the unobservable
inputs.
In addition, to these Level 3 portfolios, we also identified one derivatives
portfolio that we considered to be harder to value Level 2 due to an
element of modelling complexity associated with the product.
Disclosure quality
The IFRS 13 fair value measurement disclosures are key to
explaining the valuation techniques, key judgements,
assumptions and material inputs.
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Barclays PLC Annual Report 2019 235
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s report
to the members of Barclays PLC
Key audit matter
How our audit addressed the key audit matter
Provisions for legal, competition and regulatory
related matters
31 December 2019 £376m, 31 December 2018 £414m
Refer to pages 300 and 302 (accounting policies on provisions and
on contingent liabilities and commitments), page 300 (financial
disclosure note 24 Provisions) and page 303 (financial disclosure
note 26 Legal, competition and regulatory matters)
Exposure completeness
The Group and Parent company operate in a highly litigious and
regulated environment and faces legal, competition and regulatory
challenges which can lead to potential claims and exposures
(together ‘legal, competition and regulatory matters’). In certain
legal, competition and regulatory matters significant judgement 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 provision
to be recognised is inherently subjective.
The effect of these matters is that, as part of our risk assessment,
we determined that the provisions for legal, competition and
regulatory matters have a high degree of estimation uncertainty,
with a potential range of reasonable outcomes greater than our
materiality for the financial statements as a whole.
Contingent liabilities
When a provision is not recognised for possible significant
outflows, but there is more than a remote likelihood of an adverse
outcome, the disclosure requirements under IAS 37 is key to
understanding the risks and potential effect on the Group and
Parent company.
Our procedures included:
Inspection of Board of Directors meeting minutes: We inspected the Board
of Directors meeting minutes to obtain an understanding of the status of all
significant legal, competition and regulatory matters.
Assessment of regulatory correspondence: We inspected correspondence
with the relevant regulatory authorities to identify actual or possible
non-compliance with laws and regulations that may have a material effect on
the financial statements and for the most significant matters, enquired
directly with the relevant regulator.
Enquiry of lawyers: For significant legal, competition and regulatory matters
we enquired of the Group and Parent company’s internal legal counsel and
inspected internal notes and reports. For the most significant legal,
competition and regulatory matters we also received formal confirmations
from external counsel and 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 a present
obligation exists.
Test of details: For the significant legal, competition and regulatory matters,
we independently assessed the estimated value of the provisions, based on
our enquiries of lawyers and information obtained from our other procedures.
Assessing transparency: We assessed whether the disclosures detailing
significant legal, competition and regulatory matters adequately disclose the
contingent liabilities and the significant uncertainties that exist.
Our results:
The results of our testing were satisfactory and we considered the provisions
recognised, and the contingent liabilities disclosures made, to be acceptable
(2018 result: acceptable).
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Key audit matter
User access management
How our audit addressed the key audit matter
Our procedures included
Control performance
The Group’s accounting and reporting processes are dependent
on automated controls enabled by IT systems. User access
management controls are an important component of the
general IT control environment assuring that unauthorised
access to systems do not impact the effective operation of the
automated controls in the financial reporting processes.
Key user access management controls continue to be reported
as not being consistently implemented and effectively operated
across the Group. Ineffective controls included privileged access,
segregation of duties and user access recertification.
A series of remediation programmes were in place during the
year to address previously identified control deficiencies. The
Group has also enhanced compensating controls to address the
issues raised, most of them relating to user access management.
If the above controls for user access management are deficient
and not remediated or adequately mitigated, the pervasive
nature of these controls may undermine our ability to place
reliance on automated and IT dependent controls in our audit.
Recoverability of Parent company’s investment
in subsidiaries
The carrying amount of the Parent company’s investments in
subsidiaries represents 60% (2018: 61%) of the Company’s total
assets. Their recoverability is not at a high risk of significant
misstatement or subject to significant judgement. However, due
to their materiality in the context of the Parent company
financial statements, and considering the Group’s current market
capitalisation, this is considered to be the area that had the
greatest effect on our overall Parent company audit.
Control testing: We tested the design and operating effectiveness of the
relevant controls over user access management including:
■■ Authorising access rights for new joiners;
■■ Timely removal of user access rights;
■■ Logging and monitoring of user activities;
■■ Privileged user and developer access to production systems, the
procedures to assess granting, potential use, and the removal of these
access rights;
■■ Segregation of duties including access to multiple systems that could
circumvent segregation controls; and
■■ Re-certification of user access rights.
Control re-performance: To assess whether additional detective
compensating controls adequately address the risk of unauthorised access,
we re-performed on a sample basis management’s assessment of potential
unauthorised access by privileged accounts and users, whose access rights
were not recertified.
Our results:
Our testing did not identify unauthorised user activities in the systems
relevant to financial reporting which would have required us to expand the
extent of our planned detailed testing.
Our procedures included:
Test of details: We compared the carrying amount of each subsidiary to its
draft balance sheet to identify whether their net assets, being an
approximation of their minimum recoverable amount, were in excess of their
carrying amount and assessing whether those subsidiaries have historically
been profit-making. In addition, for the two most significant subsidiaries,
being Barclays Bank PLC and Barclays Bank UK PLC,we have assessed
recoverability through projection of future cash flows to ascertain if an
impairment is required. Further we assessed the reasonableness of the Board
approved future cash flow forecasts used and evaluating how discount rates
used compared to our reasonable ranges.
Assessing subsidiary audits: We assessed the work performed by the
subsidiary audit teams on the sample of those subsidiaries selected for test of
details and considered the results of that work on those subsidiaries’ profits
and net assets.
Our results:
We found the Parent company’s assessment of the recoverability of the
investment in subsidiaries to be acceptable
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Barclays PLC Annual Report 2019 237
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s report
to the members of Barclays PLC
Group materiality £250m
(2018: £250m)
3 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 £250 million (2018:
£250 million), determined with reference to
a benchmark of Group profit before tax from
continuing operations, normalised to exclude
charges related to conduct as disclosed in
the consolidated financial statements of
£1.4 billion, of which it represents 4.3%.
In 2018, we normalised Group profit before
tax to exclude charges for litigation and
conduct risk.
Profit before tax from continuing
operations £5,757m*
(2018: £5,701m*)
A
B
C
Profit before tax from continuing operations
Group materiality
* Normalised to exclude charges related to conduct (2018:
normalised to exclude charges related to conduct and
litigation).
Group total income 93%
(2018: 95%)
7
93
5
95
Materiality for the Parent company financial
statements as a whole was set at £245 million
(2018: £235 million), determined with
reference to a benchmark of net assets, of
which it represents 0.4%.
We agreed to report to the Board Audit
Committee any corrected or uncorrected
identified misstatements exceeding
£12 million (2018: £12 million), in addition to
other identified misstatements that warranted
reporting on qualitative grounds.
Scope – general
We subjected two of the Group’s reporting
components to full scope audits for Group
purposes. Our approach to scoping the two
components was as follows: for one
component, we instructed that component
audit team to conduct and report to us on
their own full scope Group audit and specified
three components within that Group that
should be subject to a full scope audit
overseen by them; for the other component,
we directly instructed the component audit
team to conduct and report to us on a full
scope audit. In the prior year, we received
reporting directly from five components.
The components within the scope of our work
accounted for the percentages illustrated
below.
Group total assets 93%
(2018: 91%)
The remaining 7% (2018: 5%) of total Group
income and 7% (2018: 7%) of total Group
assets is represented by a number of other
reporting components, none of which were
individually significant. For these residual
components, we performed analysis at an
aggregated Group level to re-examine our
assessment that there were no significant
risks of material misstatement within these.
The work on all components was performed
by component auditors and the remaining
work, 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.
93
91
7
7
2
Full scope for Group audit purposes 2019
Full scope for Group audit purposes 2018
Specified risk-focused audit procedures 2018
Residual components
A £250m
Whole financial statements materiality
(2018: £250m)
B £150m
biggest component materiality
Range of materiality for
the two components (£135m-£150m)
(2018: £37m to £145m)
C £12m
Misstatements reported to the Board Audit Committee
(2018: £12m)
Team structure
The Group team led a global planning
conference to discuss key audit risks and
to obtain input from component and other
participating locations. 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 reviewed and approved the
component materiality for both components
including scoping and risk assessment. The
materiality for the two components ranged
from £100 million to £135 million, having
regard to the sizes and risk profiles of the
components.
The Group team visited all of the components
in scope for Group reporting purposes to
assess the audit risk and strategy. Conference
meetings and calls were also held with these
component auditors throughout the conduct
of the audit. At these visits and meetings, we
reviewed the components’ key working
papers, 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 has centralised certain Group-wide
processes 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. These Group wide processes
are subject to specified audit procedures,
predominantly the testing of transaction
processing, reconciliations and review
238 Barclays PLC Annual Report 2019
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controls. Additional procedures are performed
at certain reporting components to address
the audit risks not covered by the work
performed over these Group-wide processes
in India. The Group team and certain
component teams visited the locations in
India where these Group-wide processes
reside and performed consistent procedures
as described above for component site visits.
4 We have nothing to report on
going concern
The Directors have prepared the financial
statements on the going concern basis as they
do not intend to liquidate the Company or the
Group or to cease their operations, and as
they have concluded that the Company’s and
the Group’s financial position means that this
is realistic. They have also concluded that
there are no material uncertainties that could
have cast significant doubt over their ability to
continue as a going concern for at least a year
from the date of approval of the financial
statements (“the going concern period”).
Our responsibility is to conclude on the
appropriateness of the Directors’ conclusions
and, had there been a material uncertainty
related to going concern, to make reference to
that in this audit report. However, as we
cannot predict all future events or conditions
and as subsequent events may result in
outcomes that are inconsistent with
judgements that were reasonable at the time
they were made, the absence of reference to a
material uncertainty in this auditor’s report is
not a guarantee that the Group and the
Company will continue in operation.
In our evaluation of the Directors’ conclusions,
we considered the inherent risks to the
Group’s and Company’s business model and
analysed how those risks might affect the
Group’s and Company’s financial resources or
ability to continue operations over the going
concern period. The risks that we considered
most likely to adversely affect the Group’s and
Company’s available financial resources over
this period were:
■■ availability of funding and liquidity in the
event of a market wide stress scenario
including the impact of the manner in
which the UK withdraws from the
European Union; and
■■ impact on regulatory capital requirements
in the event of an economic slowdown
or recession.
As these were risks that could potentially cast
significant doubt on the Group’s and the
Company’s ability to continue as a going
concern, we considered sensitivities over the
level of available financial resources indicated
by the Group’s financial forecasts taking
account of reasonably possible (but not
unrealistic) adverse effects that could arise
from these risks individually and collectively
and evaluated the achievability of the actions
the Directors consider they would take to
improve the position should the risks
materialise.
Based on this work, 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
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 related statement under the Listing
Rules is materially inconsistent with our
audit knowledge.
We have nothing to report in these respects,
and we did not identify going concern as a key
audit matter.
5 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.
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 emerging and 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 (page 41) that they
have carried out a robust assessment of
the emerging and principal risks facing the
Group, including those that would threaten
its business model, future performance,
solvency and liquidity;
■■ the material and emerging risks disclosures
describing these risks within the Viability
Statement 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.
Our work is limited to assessing these matters
in the context of only the knowledge acquired
during our financial statements audit. As we
cannot predict all future events or conditions
and as subsequent events may result in
outcomes that are inconsistent with
judgements that were reasonable at the time
they were made, the absence of anything to
report on these statements is not a guarantee
as to the Group’s and Company’s longer-term
viability.
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 Audit Committee does not
appropriately address matters
communicated by us to the Audit
Committee.
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Barclays PLC Annual Report 2019 239
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s report
to the members of Barclays PLC
detail in respect of legal, competition and
regulatory matters is set out in the key audit
matters disclosures in section 2 of this report.
Owing to the inherent limitations of an audit,
there is an unavoidable risk that we may not
have detected some material misstatements
in the financial statements, even though we
have properly planned and performed our
audit in accordance with auditing standards.
For example, the further removed non-
compliance with laws and regulations
(irregularities) is from the events and
transactions reflected in the financial
statements, the less likely the inherently
limited procedures required by auditing
standards would identify it. In addition, as
with any audit, there remained a higher risk of
non-detection of irregularities, as these may
involve collusion, forgery, intentional
omissions, misrepresentations, or the override
of internal controls. We are not responsible for
preventing non-compliance and cannot be
expected to detect non-compliance with all
laws and regulations.
8 The purpose of our audit work
and to whom we owe our
responsibilities
This report is made solely to the Parent
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
Parent 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 Parent company and the Parent
company’s members, as a body, for our audit
work, for this report, or for the opinions we
have formed.
Michelle Hinchliffe
(Senior Statutory Auditor) for and on
behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
12 February 2020
We are required to report to you if the
Corporate Governance Statement does not
properly disclose a departure from the
provisions of the UK Corporate Governance
Code specified by the Listing Rules for our
review.
We have nothing to report in these respects.
6 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.
7 Respective responsibilities
Directors’ responsibilities
As explained more fully in their Directors’
responsibilities statement set out on page 84,
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 areas of laws and regulations
that could reasonably be expected to have a
material effect on the financial statements
from our general commercial and sector
experience through discussion with the
Directors and other management (as required
by auditing standards), and from inspection of
the Group’s regulatory and legal
correspondence and discussed with the
Directors and other management the policies
and procedures regarding compliance with
laws and regulations. We communicated
identified laws and regulations throughout our
team and remained alert to any indications of
non-compliance throughout the audit. This
included communication from the Group
team to component audit teams of relevant
laws and regulations identified at the Group
level.
The potential effect of these laws and
regulations on the financial statements varies
considerably.
Firstly, the Group is subject to laws and
regulations that directly affect the financial
statements including financial reporting
legislation (including related companies
legislation), distributable profits legislation
and taxation legislation, and we assessed the
extent of compliance with these laws and
regulations as part of our procedures on the
related financial statement items.
Secondly the Group is subject to many other
laws and regulations where the consequences
of non-compliance could have a material
effect on amounts or disclosures in the
financial statements, for instance through the
imposition of fines or litigation, or the loss of
the Group’s license to operate. We identified
the following areas as those most likely to
have such an effect: specific aspects 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.
Auditing standards limit the required audit
procedures to identify non-compliance with
these laws and regulations to enquiry of the
Directors and other management and
inspection of regulatory and legal
correspondence, if any. Through these
procedures, we became aware of actual or
suspected non-compliance and considered
the effect as part of our procedures on the
related financial statement items. Further
240 Barclays PLC Annual Report 2019
home.barclays/annualreport
CONSOLIDATED FINANCIAL STATEMENTS
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
Net operating income
Staff costs
Infrastructure costs
Administration and general expenses
Provisions for litigation and conduct
Operating expenses
Share of post-tax results of associates and joint ventures
Profit on disposal of subsidiaries, associates and joint ventures
Profit before tax
Taxation
Profit after tax in respect of continuing operations
Loss after tax in respect of discontinued operation
Profit/(loss) after tax
Attributable to:
Equity holders of the parent
Other equity instrument holders
Total equity holders of the parent
Non-controlling interests in respect of continuing operations
Non-controlling interests in respect of discontinued operation
Profit/(loss) after tax
Earnings per share
Basic earnings/(loss) per ordinary share
Basic earnings per ordinary share in respect of continuing operations
Basic loss per ordinary share in respect of discontinued operation
Diluted earnings/(loss) per share
Diluted earnings per ordinary share in respect of continuing operations
Diluted loss per ordinary share in respect of discontinued operation
Notes
2019
£m
2018a
£m
2017a
£m
3
3
4
4
5
6
7
31
8
8
8
8
9
30
30
10
10
10
10
10
10
15,456
(6,049)
9,407
9,122
(2,362)
6,760
4,235
1,131
99
21,632
(1,912)
19,720
(8,315)
(2,970)
(2,300)
(1,849)
(15,434)
61
10
4,357
(1,003)
3,354
–
3,354
2,461
813
3,274
80
–
3,354
p
14.3
14.3
–
14.1
14.1
–
14,541
(5,479)
9,062
8,893
(2,084)
6,809
4,566
585
114
21,136
(1,468)
19,668
(8,629)
(2,950)
(2,457)
(2,207)
(16,243)
69
–
3,494
(911)
2,583
–
2,583
1,597
752
2,349
234
–
2,583
p
9.4
9.4
–
9.2
9.2
–
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)
(2,740)
(1,207)
(15,456)
70
187
3,541
(2,066)
1,475
(2,195)
(720)
(1,748)
639
(1,109)
249
140
(720)
p
(10.3)
3.5
(13.8)
(10.1)
3.4
(13.5)
Note
a From 2019, due to an IAS 12 update, the tax relief on payments in relation to AT1 instruments has been recognised in the tax charge of the income statement, whereas it was
previously recorded in retained earnings. Comparatives have been restated, reducing the tax charge for 2018 by £211m and 2017 by £174m. This change does not impact EPS.
Further detail can be found in Note 1.
home.barclays/annualreport
Barclays PLC Annual Report 2019 241
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements CONSOLIDATED FINANCIAL STATEMENTS
Consolidated statement
of comprehensive income
For the year ended 31 December
Profit/(loss) after tax
Profit after tax in respect of continuing operations
Loss after tax in respect of discontinued operation
Other comprehensive income/(loss) that may be recycled to profit or loss from continuing operations:
Currency translation reserve
Currency translation differencesa
Fair value through other comprehensive income reserve movements relating to debt securitiesb
Net gains/(losses) from changes in fair value
Net (gains)/losses transferred to net profit on disposal
Net losses due to impairment
Net (losses)/gains due to fair value hedging
Other movements
Tax
Cash flow hedging reserve
Net gains/(losses) from changes in fair value
Net gains transferred to net profit
Tax
Available for sale reserveb
Other
Other comprehensive income/(loss) 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
Fair value through other comprehensive income reserve movements relating to equity instruments
Own credit
Tax
Other comprehensive income/(loss) not recycled to profit or loss from continuing operations
2019
£m
3,354
3,354
–
2018
£m
2,583
2,583
–
2017
£m
(720)
1,475
(2,195)
(544)
834
(1,337)
2,901
(502)
1
(2,172)
(5)
(57)
724
(277)
(105)
–
16
(20)
(280)
(95)
(316)
150
(541)
(553)
48
4
236
(26)
65
(344)
(332)
175
–
30
137
412
(260)
77
(118)
111
–
–
–
–
–
–
(626)
(643)
321
449
(5)
(1,841)
115
–
(7)
(66)
42
Other comprehensive income/(loss) for the year from continuing operations
(561)
248
(1,799)
Other comprehensive income for the year from discontinued operation
–
–
1,301
Total comprehensive income/(loss) for the year:
Total comprehensive income/(loss) for the year, net of tax from continuing operations
Total comprehensive loss for the year, net of tax from discontinued operation
Total comprehensive income/(loss) for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Total comprehensive income/(loss) for the year
2,793
–
2,793
2,713
80
2,793
2,831
–
2,831
2,597
234
2,831
(324)
(894)
(1,218)
(1,575)
357
(1,218)
Notes
a Includes £15m gain (2018: £41m loss; 2017: £189m loss) on recycling of currency translation differences.
b Following the adoption of IFRS 9 Financial Instruments on 1 January 2018, the fair value through other comprehensive income reserve was introduced replacing the available for sale
reserve.
242 Barclays PLC Annual Report 2019
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CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheet
For the year ended 31 December
Assets
Cash and balances at central banks
Cash collateral and settlement balances
Loans and advances at amortised cost
Reverse repurchase agreements and other similar secured lending
Trading portfolio assets
Financial assets at fair value through the income statement
Derivative financial instruments
Financial assets at fair value through other comprehensive income
Investments in associates and joint ventures
Goodwill and intangible assets
Property, plant and equipment
Current tax assets
Deferred tax assets
Retirement benefit assets
Other assets
Total assets
Liabilities
Deposits at amortised cost
Cash collateral and settlement balances
Repurchase agreements and other similar secured borrowing
Debt securities in issue
Subordinated liabilities
Trading portfolio liabilities
Financial liabilities designated at fair value
Derivative financial instruments
Current tax liabilities
Deferred tax liabilities
Retirement benefit liabilities
Other liabilities
Provisions
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 241 to 337 on 12 February 2020.
Nigel Higgins
Group Chairman
James E Staley
Group Chief Executive
Tushar Morzaria
Group Finance Director
Notes
2019
£m
2018
£m
19
12
13
14
15
36
22
20
9
9
33
19
27
12
16
14
9
9
33
23
24
28
28
29
30
150,258
83,256
339,115
3,379
114,195
133,086
229,236
65,750
721
8,119
4,215
412
3,290
2,108
3,089
177,069
77,222
326,406
2,308
104,187
149,648
222,538
52,816
762
7,973
2,535
798
3,828
1,768
3,425
1,140,229 1,133,283
415,787
67,341
14,517
76,369
18,156
36,916
204,326
229,204
313
23
348
8,505
2,764
394,838
67,522
18,578
82,286
20,559
37,882
216,834
219,643
628
51
315
7,716
2,652
1,074,569 1,069,504
4,594
10,871
4,760
44,204
64,429
1,231
65,660
4,311
9,632
5,153
43,460
62,556
1,223
63,779
1,140,229 1,133,283
home.barclays/annualreport
Barclays PLC Annual Report 2019 243
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated statement
of changes in equity
Balance as at 1 January 2019
Profit after tax
Currency translation movements
Fair value through other comprehensive income reserve
Cash flow hedges
Retirement benefit remeasurements
Own credit reserve
Other
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
Other reserve movements
Balance as at 31 December 2019
Balance as at 31 December 2017
Effects of changes in accounting policiesc
Balance as at 1 January 2018
Profit after taxd
Currency translation movements
Fair value through other comprehensive income reserve
Cash flow hedges
Retirement benefit remeasurements
Own credit reserve
Other
Total comprehensive income for the year
Issue of new ordinary shares
Issue of shares under employee share schemes
Capital reorganisation
Issue and exchange of other equity instruments
Other equity instruments coupons paidd
Redemption of preference shares
Debt to equity reclassificatione
Increase in treasury shares
Vesting of shares under employee share schemes
Dividends paid
Other reserve movements
Balance as at 31 December 2018
Called up
share capital
and share
premiuma
£m
4,311
–
–
–
–
–
–
–
–
182
101
–
–
–
–
–
–
–
4,594
Other equity
instrumentsa
£m
9,632
813
–
–
–
–
–
–
813
–
–
1,238
(813)
–
–
–
–
1
10,871
22,045
–
22,045
–
–
–
–
–
–
–
–
88
51
(17,873)
–
–
–
–
–
–
–
–
4,311
8,941
–
8,941
752
–
–
–
–
–
–
752
–
–
–
692
(752)
–
–
–
–
–
(1)
9,632
Other
reservesb
£m
5,153
–
(544)
71
342
–
(252)
–
(383)
–
–
–
–
–
(224)
214
–
–
4,760
5,383
(136)
5,247
–
834
(486)
(501)
–
58
–
(95)
–
–
–
–
–
–
–
(267)
268
–
–
5,153
Total equity
excluding
non-
controlling
interests
£m
62,556
3,274
(544)
71
342
(194)
(252)
16
2,713
182
579
832
(813)
–
(224)
(190)
(1,201)
(5)
64,429
Non-
controlling
interests
£m
1,223
80
–
–
–
–
–
–
80
–
–
–
–
–
–
–
(80)
8
1,231
63,905
(2,150)
61,755
2,349
834
(486)
(501)
313
58
30
2,597
88
500
–
384
(752)
(732)
–
(267)
(231)
(768)
(18)
62,556
2,111
–
2,111
234
–
–
–
–
–
–
234
–
–
–
–
–
(1,309)
419
–
–
(234)
2
1,223
Retained
earnings
£m
43,460
2,461
–
–
–
(194)
–
16
2,283
–
478
(406)
–
–
–
(404)
(1,201)
(6)
44,204
27,536
(2,014)
25,522
1,597
–
–
–
313
–
30
1,940
–
449
17,873
(308)
–
(732)
–
–
(499)
(768)
(17)
43,460
Total
equity
£m
63,779
3,354
(544)
71
342
(194)
(252)
16
2,793
182
579
832
(813)
–
(224)
(190)
(1,281)
3
65,660
66,016
(2,150)
63,866
2,583
834
(486)
(501)
313
58
30
2,831
88
500
–
384
(752)
(2,041)
419
(267)
(231)
(1,002)
(16)
63,779
Notes
a For further details refer to Note 28.
b For further details refer to Note 29.
c Effects of changes in accounting policy relate to the adoption of IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers on 1 January 2018. The impact of
IFRS 15 Revenue from Contracts with Customers was an increase to retained earnings of £67m with the remainder due to the impact of IFRS 9 Financial Instruments.
d From 2019, due to an IAS 12 update, the tax relief on payments in relation to equity instruments has been recognised in the tax charge of the income statement, whereas it was
previously recorded in retained earnings. Comparatives have been restated, increasing profit after tax by £211m. Further detail can be found in Note 1.
e Following a review of subordinated liabilities issued by Barclays Bank PLC, certain instruments deemed to have characteristics that qualify them as equity have been reclassified.
244 Barclays PLC Annual Report 2019
home.barclays/annualreport
CONSOLIDATED FINANCIAL STATEMENTS
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:
Credit impairment charges
Depreciation, amortisation and impairment of property, plant, equipment and intangibles
Other provisions, including pensions
Net loss/(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 increase in cash collateral and settlement balances
Net (increase)/decrease in loans and advances to banks and customers
Net (increase)/decrease in reverse repurchase agreements and other similar lending
Net 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 (decrease)/increase in trading liabilities
Net decrease/(increase) in financial assets and liabilities at fair value through the income statement
Net (increase)/decrease in other assets
Net decrease in other liabilities
Corporate income tax paid
Net cash from operating activities
Purchase of financial assets at fair value through other comprehensive income
Purchase of available for sale investments
Proceeds from sale or redemption of financial assets at fair value through other comprehensive income
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
Issue of shares and other equity instruments
Repurchase of shares and other equity instruments
Issuance of debt securitiesa
Net purchase of treasury shares
Net cash from financing activities
Effect of exchange rates on cash and cash equivalents
Net (decrease)/increase in cash and cash equivalents from continuing operations
Net cash from discontinued operation
Net (decrease)/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
Cash collateral and settlement balances with banks with original maturity less than three months
Treasury and other eligible bills with original maturity less than three months
Trading portfolio assets with original maturity less than three months
Notes
2019
£m
2018
£m
2017
£m
4,357
3,494
3,541
9
27
27
28
1,912
1,520
2,336
7
602
(7,091)
(14,275)
(1,071)
11,038
(4,061)
2,863
(10,008)
(966)
4,054
(412)
(2,872)
(228)
(12,295)
(92,365)
–
81,202
–
(1,793)
46
–
–
84
(12,826)
(1,912)
1,352
(3,248)
3,582
(2,668)
3,994
(410)
690
(3,347)
(27,778)
–
(27,778)
211,165
183,387
150,258
8,021
24,628
480
–
183,387
1,468
1,261
2,594
28
(4,366)
(574)
(10,602)
(1,711)
23,969
3,525
(3,571)
9,958
531
(12,686)
489
(4,755)
(548)
8,504
(106,669)
–
107,539
–
(1,402)
18
–
–
1,191
677
(1,658)
221
(3,246)
1,964
(3,582)
–
(486)
(6,787)
4,160
6,554
–
6,554
204,612
211,166
177,069
7,676
25,504
917
–
211,166
2,336
1,241
1,875
(325)
1,031
(3,713)
18,569
908
5,339
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
7,592
25,228
682
28
204,612
Note
a Issuance of debt securities included in financing activities relate to instruments that qualify as eligible liabilities and satisfy regulatory requirements for MREL instruments which
came into effect during 2019.
Interest received was £34,016m (2018: £26,254m; 2017: £21,784m) and interest paid was £23,186m (2018: £16,124m; 2017: £10,310m).
The Group is required to maintain balances with central banks and other regulatory authorities and these amounted to £4,893m (2018: £4,717m;
2017: £3,360m).
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.
home.barclays/annualreport
Barclays PLC Annual Report 2019 245
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements FINANCIAL STATEMENTS OF BARCLAYS PLC
Parent company accounts
Statement of comprehensive income
For the year ended 31 December
Dividends received from subsidiaries
Net interest income/(expense)
Other income
Operating expenses
Profit before tax
Taxation
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
42
42
2019
£m
1,560
214
1,760
(267)
3,267
(86)
3,181
2018a
£m
15,360
(101)
923
(312)
15,870
79
15,949
–
–
3,181
15,949
2,368
813
3,181
2,368
813
3,181
15,197
752
15,949
15,197
752
15,949
2017a
£m
674
(10)
690
(96)
1,258
12
1,270
60
1,330
631
639
1,270
691
639
1,330
Note
a From 2019, due to an IAS 12 update, the tax relief on payments in relation to AT1 instruments has been recognised in the tax charge of the income statement, whereas it was
previously recorded in retained earnings. Comparatives have been restated, reducing the tax charge for 2018 by £143m and 2017 by £123m. Further detail can be found in Note 1.
For the year ended 31 December 2019, profit after tax was £3,181m (2018: £15,949m) and total comprehensive income was £3,181m (2018:
£15,949m). Other comprehensive income of £60m in 2017 related to the gain on available for sale instruments. The Company has 79 members of
staff (2018: 87).
Balance sheet
As at 31 December
Assets
Investment in subsidiaries
Loans and advances to subsidiaries
Financial assets at fair value through the income statement
Derivative financial instruments
Other assets
Total assets
Liabilities
Deposits at amortised cost
Subordinated liabilities
Debt securities in issue
Financial liabilities designated at fair value
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
42
42
42
42
42
28
28
28
2019
£m
2018
£m
59,546
28,850
10,348
58
2
98,804
500
7,656
30,564
3,498
119
42,337
4,331
263
10,865
394
40,614
56,467
98,804
57,374
29,374
6,945
168
115
93,976
576
6,775
32,373
–
72
39,796
4,283
28
9,633
394
39,842
54,180
93,976
The financial statements on pages 246 to 247 and the accompanying note on page 333 were approved by the Board of Directors on 12 February
2020 and signed on its behalf by:
Nigel Higgins
Group Chairman
James E Staley
Group Chief Executive
Tushar Morzaria
Group Finance Director
246 Barclays PLC Annual Report 2019
home.barclays/annualreport
Statement of changes in equity
Balance as at 1 January 2019
Profit after tax and other comprehensive income
Issue of new ordinary shares
Issue of shares under employee share schemes
Issue and exchange of other equity instruments
Vesting of shares under employee share schemes
Dividends paid
Other equity instruments coupons paid
Other reserve movements
Balance as at 31 December 2019
Balance as at 31 December 2017
Effect of changes in accounting policies
Balance as at 1 January 2018
Profit after tax and other comprehensive incomeb
Issue of new ordinary shares
Issue of shares under employee share schemes
Issue and exchange of other equity instruments
Vesting of shares under employee share schemes
Dividends paid
Other equity instruments coupons paidb
Capital reorganisation
Other reserve movements
Balance as at 31 December 2018
Called up
share capital
and share
premium
£m
4,311
Notes
Other equity
instruments
£m
9,633
813
–
–
1,232
–
–
(813)
–
Other
reservesa
£m
394
–
–
–
–
–
–
–
–
Retained
earnings
£m
39,842
2,368
–
20
(396)
(19)
(1,201)
–
–
Total equity
£m
54,180
3,181
182
121
836
(19)
(1,201)
(813)
–
–
182
101
–
–
–
–
–
4,594
10,865
394
40,614
56,467
22,045
8,943
–
22,045
–
88
51
–
–
–
–
(17,873)
–
4,311
–
8,943
752
–
–
692
–
–
(752)
–
(2)
9,633
480
(86)
394
–
–
–
–
–
–
–
–
–
394
7,737
97
7,834
15,197
–
24
(308)
(23)
(768)
–
17,873
13
39,842
39,205
11
39,216
15,949
88
75
384
(23)
(768)
(752)
–
11
54,180
11
11
Notes
a As a result of the adoption of IFRS 9 on 1 January 2018, the available for sale reserve of £86m has been transferred to retained earnings.
b From 2019, due to an IAS 12 update, the tax relief on payments in relation to equity instruments has been recognised in the tax charge of the income statement, whereas it was
previously recorded in retained earnings. Comparatives have been restated, increasing profit after tax by £143m. Further detail can be found in Note 1.
Cash flow statement
For the year ended 31 December
Reconciliation of profit before tax to net cash flows from operating activities:
Profit before tax
Adjustment for non-cash items:
Dividends in specie
Other non-cash items
Changes in operating assets and liabilities
Net cash generated from operating activities
Capital contribution to and investment in subsidiary
Net cash used in investing activities
Issue of shares and other equity instruments
Redemption of 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 other equity instruments
Net cash generated from financing activities
Net increase 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 received/(paid)
2019
£m
2018
£m
2017
£m
3,267
15,870
1,258
–
(582)
87
2,772
(1,187)
(1,187)
3,597
(2,668)
(4,464)
2,588
1,194
(1,019)
(813)
(1,585)
–
–
–
(14,294)
653
55
2,284
(2,680)
(2,680)
1,953
(1,532)
(7,767)
9,174
–
(680)
(752)
396
–
–
–
–
76
102
1,436
(2,801)
(2,801)
2,581
–
(9,707)
6,503
3,019
(392)
(639)
1,365
–
–
–
1,560
214
1,066
(101)
674
(10)
The Parent company’s principal activity is to hold the investment in its wholly-owned subsidiaries, Barclays Bank PLC, Barclays Bank UK PLC and
Barclays Execution Services Limited. Dividends received are treated as operating income.
home.barclays/annualreport
Barclays PLC Annual Report 2019 247
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2019
This section describes the Group’s significant policies and critical accounting estimates that relate to the financial statements and notes as a
whole. If an accounting policy or a critical accounting estimate relates to a particular note, the accounting policy and/or critical accounting
estimate is contained with the relevant note.
1 Significant accounting policies
1. Reporting entity
These financial statements are prepared for Barclays PLC and its subsidiaries (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, separate 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 separate 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 separate financial statements are set out
below, and in the relevant notes to the financial statements. These policies have been consistently applied with the exception of the adoption
of IFRS 16 Leases, IFRIC Interpretation 23 Uncertainty over Income Tax Treatments, the amendments to IAS 12 Income Taxes, the amendments
to IAS 19 Employee Benefits, and the amendments to IFRS 9, IAS 39 and IFRS 7 which were applied from 1 January 2019.
3. Basis of preparation
The consolidated and separate financial statements have been prepared under the historical cost convention modified to include the fair
valuation of investment property, and particular financial instruments, to the extent required or permitted under IFRS as set out in the relevant
accounting policies. They are stated in millions of pounds Sterling (£m), the functional currency of Barclays PLC.
The financial statements have been prepared on a going concern basis, in accordance with the Companies Act 2006 as applicable to
companies using IFRS.
4. Accounting policies
The Group 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
The Group 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 34, and a complete list of all subsidiaries is presented in Note 43.
(ii) Foreign currency translation
The Group applies IAS 21 The Effects of Changes in Foreign Exchange Rates. Transactions in foreign currencies are translated into Sterling at
the rate ruling on the date of the transaction. Foreign currency monetary balances are translated into Sterling at the period end exchange rates.
Exchange gains and losses on such balances are taken to the income statement. Non-monetary foreign currency balances are carried at
historical transaction date exchange rates.
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.
248 Barclays PLC Annual Report 2019
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1 Significant accounting policies continued
Prior to consolidation (or equity accounting) the assets and liabilities of non-Sterling operations are translated at the period end exchange rate
and items of income, expense and other comprehensive income are translated into Sterling at the rate on the date of the transactions.
Exchange differences arising on the translation of foreign operations are included in currency translation reserves within equity. These are
transferred to the income statement when the 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.
(iii) Financial assets and liabilities
The Group applies IFRS 9 Financial Instruments to the recognition, classification and measurement, and derecognition of financial assets
and financial liabilities and the impairment of financial assets. The Group applies the requirements of IAS 39 Financial Instruments: Recognition
and Measurement for hedge accounting purposes.
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 are classified on the basis of two criteria:
i) the business model within which financial assets are managed, and
ii) their contractual cash flow characteristics (whether the cash flows represent ‘solely payments of principal and interest’ (SPPI)).
The Group assesses the business model criteria at a portfolio level. Information that is considered in determining the applicable business model
includes (i) policies and objectives for the relevant portfolio, (ii) how the performance and risks of the portfolio are managed, evaluated and
reported to management, and (iii) the frequency, volume and timing of sales in prior periods, sales expectation for future periods, and the
reasons for such sales.
The contractual cash flow characteristics of financial assets are assessed with reference to whether the cash flows represent SPPI. In assessing
whether contractual cash flows are SPPI compliant, interest is defined as consideration primarily for the time value of money and the credit risk
of the principal outstanding. The time value of money is defined as the element of interest that provides consideration only for the passage of
time and not consideration for other risks or costs associated with holding the financial asset. Terms that could change the contractual cash
flows so that it would not meet the condition for SPPI are considered, including: (i) contingent and leverage features, (ii) non-recourse
arrangements and (iii) features that could modify the time value of money.
Financial assets are measured at amortised cost if they are held within a business model whose objective is to hold financial assets in order
to collect contractual cash flows, and their contractual cash flows represent SPPI.
Financial assets are measured at fair value through other comprehensive income if they are held within a business model whose objective
is achieved by both collecting contractual cash flows and selling financial assets, and their contractual cash flows represent SPPI.
Other financial assets are measured at fair value through profit and loss. There is an option to make an irrevocable election on initial
recognition for non traded equity investments to be measured at fair value through other comprehensive income, in which case dividends are
recognised in profit or loss, but gains or losses are not reclassified to profit or loss upon derecognition, and the impairment requirements
of IFRS 9 do not apply.
The accounting policy for each type of financial asset or liability is included within the relevant note for the item. The Group’s policies for
determining the fair values of the assets and liabilities are set out in Note 17.
Derecognition
The Group derecognises a financial asset, or a portion of a financial asset, from its balance sheet where the contractual rights to cash flows
from the asset have expired, or have been transferred, usually by sale, and with them either substantially all the risks and rewards of the asset
or significant risks and rewards, along with the unconditional ability to sell or pledge the asset.
Financial liabilities are derecognised when the liability has been settled, has expired or has been extinguished. An exchange of an existing
financial liability for a new liability with the same lender on substantially different terms – generally a difference of 10% or more in the present
value of the cash flows or a substantive qualitative amendment – is accounted for as an extinguishment of the original financial liability and the
recognition of a new financial liability.
Transactions in which the 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.
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Barclays PLC Annual Report 2019 249
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1 Significant accounting policies continued
Accounting for reverse repurchase and repurchase agreements including other similar lending and borrowing
Reverse repurchase agreements (and stock borrowing or similar transaction) are a form of secured lending whereby the 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.
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 or mandatorily 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.
(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 adoption of IFRS 16 Leases,
IFRIC Interpretation 23 Uncertainty over Income Tax Treatment, the amendments to IAS 12 Income Taxes, the amendments to IAS 19 Employee
Benefits, and the amendments to IFRS 9, IAS 39 and IFRS 7 which were applied from 1 January 2019.
IFRS 16 – Leases
IFRS 16 Leases, which replaced IAS 17 Leases, does not result in a significant change to lessor accounting; however, for lessee accounting there
is no longer a distinction between operating and finance leases. Instead, the lessee is required to recognise both a right of use (ROU) asset and
lease liability on-balance sheet. There is a recognition exemption permitted for leases with a term of 12 months or less.
The Group applied IFRS 16 on a modified retrospective basis and took advantage of the option not to restate comparative periods. The Group
applied the following transition options available under the modified retrospective approach:
■■ to calculate the right of use asset equal to the lease liability, adjusted for prepaid or accrued payments
■■ to rely on the previous assessment of whether leases are onerous in accordance with IAS 37 immediately before the date of initial
application as an alternative to performing an impairment review. The Group adjusted the carrying amount of the ROU asset at the date
of initial application by the previous carrying amount of its onerous lease provision
■■ to apply the recognition exception for leases with a term not exceeding 12 months
■■ to use hindsight in determining the lease term if the contract contains options to extend or terminate the lease.
Upon adoption of IFRS 16, the Group applied the transition option which permitted the ROU asset to equal the lease liability, adjusted
for prepaid or accrued prepayments. This approach resulted in a lease liability of £1,696m and an ROU asset of £1,644m being recognised
as at 1 January 2019. The difference in the lease liability and the ROU asset was a result of the following adjustments:
■■ an increase in the ROU asset as a result of rental prepayments of £55m, and
■■ a decrease in the ROU asset as a result of onerous lease provisions previously recognised of £64m, £40m of rent free adjustments and £3m
of finance sublease arrangements.
The ROU asset was recorded in property, plant and equipment and the lease liability within other liabilities.
When measuring lease liabilities, the Group discounted lease payments using the incremental borrowing rate at 1 January 2019. The weighted
average applied was 4.57%.
250 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS 1 Significant accounting policies continued
The following shows a reconciliation between the operating lease commitments as at 31 December 2018 and the lease liability recorded
as at 1 January 2019.
Operating lease commitment as at 31 December 2018 as disclosed in the Group consolidated financial statements
Impact of discounting using the Group’s incremental borrowing rate
Recognition exemption for short term leases
Extension and termination options reasonably certain to be exercised
Lease liability recognised as at 1 January 2019
£m
2,345
(793)
(17)
161
1,696
IFRIC Interpretation 23 – Uncertainty over Income Tax Treatment
IFRIC 23 clarifies the application of IAS 12 to accounting for income tax treatments that have yet to be accepted by tax authorities, in scenarios
where it may be unclear how tax law applies to a particular transaction or circumstance, or whether a taxation authority will accept an entity’s
tax treatment. There was no significant effect from the adoption of IFRIC 23 in relation to accounting for uncertain tax positions.
IAS 12 – Income Taxes – Amendments to IAS 12
The IASB amended IAS 12 in order to clarify the accounting treatment of the income tax consequences of dividends. As a result of the
amendment, the tax consequences of all payments on financial instruments that are classified as equity for accounting purposes, where those
payments are considered to be a distribution of profit, will be included in, and will reduce, the income statement tax charge. The amendments
of IAS 12 were applied to the income tax consequences of dividends recognised on or after the beginning of the earliest comparative period.
This resulted in reducing the tax charge and increasing profit after tax for 2019 by £222m, 2018 by £211m and 2017 by £174m. This change
does not impact retained earnings or earnings per share.
IAS 19 – Employee Benefits – Amendments to IAS 19
The IASB issued amendments to the guidance in IAS 19 Employee Benefits, in connection with accounting for plan amendments, curtailments
and settlements. There was no significant effect from the adoption of the amendments to IAS 19.
IFRS 9, IAS 39 and IFRS 7 – Amendments relating to Interest Rate Benchmark Reform
IFRS 9, IAS 39 and IFRS 7 were amended in September 2019. The amendments are effective for periods beginning on or after 1 January 2020
with earlier application permitted. The Group elected to early adopt the amendments with effect from 1 January 2019. The amendments have
been endorsed by the EU.
IFRS 9 allows companies when they first apply IFRS 9, to choose as an accounting policy to continue to apply the hedge accounting
requirements of IAS 39. The Group made the election to continue to apply the IAS 39 hedge accounting requirements, and consequently,
the amendments to IAS 39 have been adopted by the Group.
The objective of the amendments are to provide temporary exceptions from applying specific hedge accounting requirements during the
period of uncertainty resulting from interest rate benchmark reform. Each of the exceptions adopted by the Group are described below.
■■ Highly probable requirement
When determining whether a forecast transaction or cash flow is highly probable, the Group assumes that the interest rate benchmark
on which the hedged cash flows are based is not altered as a result of the reform. This amendment has also been applied when cash flows
are still expected to occur in respect of amounts remaining in the cash flow hedge reserve.
■■ Prospective assessments
When performing prospective assessments, the Group assumes that the interest rate benchmark on which the hedged risk and/or hedging
instrument are based is not altered as a result of the interest rate benchmark reform.
■■ Retrospective assessments
The Group will not discontinue hedge accounting during the period of IBOR-related uncertainty solely because the retrospective
effectiveness falls outside the required 80-125% range.
■■ Hedge of a non-contractually specified benchmark portion of an interest rate
The Group only considers at inception of such a hedging relationship whether the separately identifiable requirement is met.
The amendments to IFRS 7 require certain disclosures to be made in the first period that the amendments to IFRS 9 or IAS 39 are adopted.
Refer to Note 14 where these disclosures have been included.
Future accounting developments
The following accounting standards have been issued by the IASB but are not yet effective:
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Barclays PLC Annual Report 2019 251
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements for the year ended 31 December 2019
1 Significant accounting policies continued
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 reinsurance), regardless of the type of entities that issue
them, as well as to certain guarantees and financial instruments with discretionary participation features. A few scope exceptions will apply.
In June 2019, the IASB published an exposure draft with proposed amendments to IFRS 17. The proposed amendments that are expected to be
relevant to the Group are changes to the scoping of IFRS 17, changes in the effective date of IFRS 17 and changes to IFRS 9 which were
consequential amendments as a result of IFRS 17.
The standard is currently effective from 1 January 2021, although the amendments would change the effective date to 1 January 2022, and the
standard has not yet been endorsed by the EU. The Group is currently assessing the expected impact of adopting this standard.
6. Critical accounting estimates and judgements
The preparation of financial statements in accordance with IFRS requires the use of estimates. It also requires management to exercise
judgement in applying the accounting policies. The key areas involving a higher degree of judgement or complexity, or areas where
assumptions are significant to the consolidated and individual financial statements are highlighted under the relevant note. Critical accounting
estimates and judgements are disclosed in:
■■ Credit impairment charges on page 259
■■ Tax on page 264
■■ Fair value of financial instruments on page 279
■■ Pensions and post-retirement benefits – obligations on page 316
■■ Provisions including conduct and legal, competition and regulatory matters on page 303.
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 pages 139 to 140 and 148 to 175
■■ Market risk on pages 141 and 176 to 177
■■ Treasury and capital risk – liquidity on pages 142 and 178 to 189
■■ Treasury and capital risk – capital on pages 142 and 190 to 199.
These disclosures are covered by the Audit opinion (included on pages 232 to 240) where referenced as audited.
252 Barclays PLC Annual Report 2019
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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, see income
statement commentary within Financial review (unaudited) on page 215.
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.
The Group is a British universal bank and for segmental reporting purposes it defines its two operating divisions as Barclays UK and Barclays
International.
■■ Barclays UK which meets the banking needs of UK based retail customers and small to medium sized enterprises, through offering products
and services. The division includes the UK Personal banking, UK Business banking and the Barclaycard consumer UK businesses.
■■ 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 Private Bank businesses; the Investment Bank; the
international Barclaycard business; and Payments.
The table below also includes Head Office which comprises head office, Barclays Execution Services FTE and legacy businesses.
Analysis of results by business
For the year ended 31 December 2019
Total income
Credit impairment charges
Net operating income/(expenses)
Operating costs
UK bank levy
Litigation and conduct
Total operating expenses
Other net incomea
Profit/(loss) before tax
Total assets (£bn)
Number of employees (full time equivalent)
Average number of employees (full time equivalent)
For the year ended 31 December 2018
Total incomeb
Credit impairment (charges)/releases
Net operating income/(expenses)
Operating costs
UK bank levy
GMP charge
Litigation and conduct
Total operating expenses
Other net income/(expenses)a
Profit/(loss) before tax
Total assets (£bn)
Number of employees (full time equivalent)
Barclays UK
£m
Barclays
International
£m
Head
Office
£m
Group
results
£m
7,353
(712)
6,641
(3,996)
(41)
(1,582)
(5,619)
–
1,022
257.8
21,400
7,383
(826)
6,557
(4,075)
(46)
–
(483)
(4,604)
3
1,956
249.7
22,600
14,675
(1,173)
13,502
(9,163)
(174)
(116)
(9,453)
69
4,118
861.4
11,200
14,026
(658)
13,368
(9,324)
(210)
–
(127)
(9,661)
68
3,775
862.1
12,400
(396)
(27)
(423)
(200)
(11)
(151)
(362)
2
(783)
21.0
48,200
(273)
16
(257)
(228)
(13)
(140)
(1,597)
(1,978)
(2)
(2,237)
21.5
48,500
21,632
(1,912)
19,720
(13,359)
(226)
(1,849)
(15,434)
71
4,357
1,140.2
80,800
82,700
21,136
(1,468)
19,668
(13,627)
(269)
(140)
(2,207)
(16,243)
69
3,494
1,133.3
83,500
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 During 2018, £351m of certain legacy capital instrument funding costs were charged to Head Office, the impact of which would have been materially the same if the charges
had been included in full year 2017.
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2 Segmental reporting continued
Analysis of results by business
For the year ended 31 December 2017
Total income
Credit impairment charges
Net operating income/(expenses)
Operating costs
UK bank levy
Litigation and conduct
Total operating expenses
Other net (expenses)/incomec
Profit/(loss) before tax from continuing operations
Total assets (£bn)
Number of employees (full time equivalent)
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
14,382
(1,506)
12,876
(9,321)
(265)
(269)
(9,855)
254
3,275
856.1
11,500
(159)
(17)
(176)
(277)
(41)
(151)
(469)
(189)
(834)
39.7
45,600
(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
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 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 for 2017. Comparative results have not been restated.
c 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.
Income by geographic regiona
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
2019
£m
2018
£m
2017
£m
11,809
1,754
7,064
59
946
21,632
11,529
1,617
7,058
43
889
21,136
10,919
1,984
7,194
137
842
21,076
2019
£m
2018
£m
2017
£m
11,809
6,939
11,529
6,911
10,919
7,049
Note
a The geographical analysis is now based on the location of office where the transactions are recorded, whereas it was previously based on counterparty location. The new approach
is better aligned to the geographical view of the business following the implementation of structural reform. Prior year comparatives have been restated.
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NOTES TO THE FINANCIAL STATEMENTS 3 Net interest income
Accounting for interest income and expenses
Interest income on loans and advances at amortised cost, and interest expense on financial liabilities held at amortised cost, are calculated
using the effective interest method which allocates interest, and direct and 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.
The Group incurs certain costs to originate credit card balances with the most significant being co-brand partner fees. To the extent these costs
are attributed to customers that continuously carry an outstanding balance (revolvers), they are capitalised and subsequently included within
the calculation of the effective interest rate. They are amortised to interest income over the period of expected repayment of the originated
balance. Costs attributed to customers that settle their outstanding balances each period (transactors) are deferred on the balance sheet as a
cost of obtaining a contract and amortised to fee and commission expense over the life of the customer relationship (refer to Note 4). There are
no other individual estimates involved in the calculation of effective interest rates that are material to the results or financial position.
Cash and balances at central banks
Loans and advances at amortised cost
Financial investments
Fair value through other comprehensive income
Other
Interest income
Deposits at amortised cost
Debt securities in issue
Subordinated liabilities
Other
Interest expense
Net interest income
2019
£m
1,091
12,450
–
1,032
883
15,456
(2,449)
(1,906)
(1,068)
(626)
(6,049)
9,407
2018
£m
1,123
12,073
–
1,029
316
14,541
(2,250)
(1,677)
(1,223)
(329)
(5,479)
9,062
2017
£m
583
12,069
754
–
225
13,631
(1,493)
(915)
(1,223)
(155)
(3,786)
9,845
Interest income presented above represents interest revenue calculated using the effective interest method. Costs to originate credit card balances
of £697m (2018: £596m; 2017: £497m) have been amortised to interest income during the year. Interest income includes £48m (2018: £53m;
2017: £48m) accrued on impaired loans. Other interest expense includes £76m relating to IFRS 16 lease interest expenses.
4 Net fee and commission income
Accounting for net fee and commission income under IFRS 15 effective from 1 January 2018
The Group applies IFRS 15 Revenue from Contracts with Customers. The standard establishes a five-step model governing revenue recognition.
The five-step model requires the Group to (i) identify the contract with the customer, (ii) identify each of the performance obligations included
in the contract, (iii) determine the amount of consideration in the contract, (iv) allocate the consideration to each of the identified performance
obligations and (v) recognise revenue as each performance obligation is satisfied.
The Group recognises fee and commission income charged for services provided by the Group as the services are provided, for example
on completion of the underlying transaction.
Accounting for net fee and commission income under IAS 18 for 2017
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 is disaggregated below by fee types that reflect the nature of the services offered across the Group and operating
segments, in accordance with IFRS 15. It includes a total for fees in scope of IFRS 15. Refer to Note 2 for more detailed information about
operating segments.
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4 Net fee and commission income continued
Fee type
Transactional
Advisory
Brokerage and execution
Underwriting and syndication
Other
Total revenue from contracts with customers
Other non-contract fee income
Fee and commission income
Fee and commission expense
Net fee and commission income
Fee type
Transactional
Advisory
Brokerage and execution
Underwriting and syndication
Other
Total revenue from contracts with customers
Other non-contract fee income
Fee and commission income
Fee and commission expense
Net fee and commission income
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
2019
Barclays UK
£m
Barclays
International
£m
Head
Office
£m
1,074
177
208
–
92
1,551
–
1,551
(365)
1,186
2,809
903
1,131
2,358
242
7,443
116
7,559
(1,990)
5,569
–
–
–
–
12
12
–
12
(7)
5
2018
Barclays UK
£m
Barclays
International
£m
Head
Office
£m
1,102
209
153
–
78
1,542
–
1,542
(360)
1,182
2,614
850
1,073
2,462
207
7,206
118
7,324
(1,707)
5,617
–
–
–
–
27
27
–
27
(17)
10
Total
£m
3,883
1,080
1,339
2,358
346
9,006
116
9,122
(2,362)
6,760
Total
£m
3,716
1,059
1,226
2,462
312
8,775
118
8,893
(2,084)
6,809
2017a
£m
8,622
129
8,751
(1,937)
6,814
Note
a The Group elected the cumulative effect transition method on adoption of IFRS 15 for 1 January 2018, and recognised in retained earnings without restating comparative periods.
The comparative figures for 2017 are reported under IAS 18.
Fee types
Transactional
Transactional fees are service charges on deposit accounts, cash management services and transactional processing fees including interchange
and merchant fee income generated from credit and bank card usage. Transaction and processing fees are recognised at the point in time the
transaction occurs or service is performed. They include banking services such as Automated Teller Machine (ATM) fees, wire transfer fees,
balance transfer fees, overdraft or late fees and foreign exchange fees, among others. Interchange and merchant fees are recognised upon
settlement of the card transaction payment.
Barclays incurs certain card related costs including those related to cardholder reward programmes and various payments made to co-brand
partners. To the extent cardholder reward programmes costs are attributed to customers that settle their outstanding balance each period
(transactors) they are expensed when incurred and presented in fee and commission expense while costs related to customers who continuously
carry an outstanding balance (revolvers) are included in the effective interest rate of the receivable (refer to Note 3). Payments to partners for new
cardholder account originations for transactor accounts are deferred as costs to obtain a contract under IFRS 15 while those costs related to
revolver accounts are included in the effective interest rate of the receivable (refer to Note 3). Those costs deferred under IFRS 15 are capitalised
and amortised over the estimated cardholder relationship. Payments to co-brand partners based on revenue sharing are presented as a reduction
of fee and commission income while payments based on profitability are presented in fee and commission expense.
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NOTES TO THE FINANCIAL STATEMENTS 4 Net fee and commission income continued
Advisory
Advisory fees are generated from wealth management services and investment banking advisory services related to mergers, acquisitions and
financial restructurings. Wealth management advisory fees primarily consists of asset-based fees for advisory accounts of wealth management
clients and are based on the market value of client assets. They are earned over the period the services are provided and are generally recognised
quarterly when the market value of client assets is determined. Investment banking advisory fees are recognised at the point in time when the
services related to the transaction have been completed under the terms of the engagement. Investment banking advisory costs are recognised
as incurred in fee and commission expense if direct and incremental to the advisory services or otherwise recognised in operating expenses.
Brokerage and execution
Brokerage and execution fees are earned for executing client transactions with various exchanges and over the counter markets and assisting
clients in clearing transactions. Brokerage and execution fees are recognised at the point in time the associated service has been completed which
is generally the trade date of the transaction.
Underwriting and syndication
Underwriting and syndication fees are earned for the distribution of client equity or debt securities and the arrangement and administration
of a loan syndication. This includes commitment fees to provide loan financing. Underwriting fees are generally recognised on trade date if there
is no remaining contingency, such as the transaction being conditional on the closing of an acquisition or another transaction. Underwriting costs
are deferred and recognised in fee and commission expense when the associated underwriting fees are recorded. Syndication fees are earned
for arranging and administering a loan syndication; however, the associated fee may be subject to variability until the loan has been syndicated
to other syndicate members or until other contingencies (such as a successful M&A closing) have been resolved and therefore the fee revenue
is deferred until the uncertainty is resolved.
Included in the underwriting and syndication, are commitment fees to provide loan financing includes fees which are not presented as part of the
carrying value of the loan in accordance with IFRS 9, for example as part of the effective interest rate. Loan commitment fees included as IFRS 15
revenues are fees for loan commitments that are not expected to fund, fees received as compensation for unfunded commitments and the
applicable portion of fees received for a revolving loan facility, which for that period, are undrawn. Such commitment fees are recognised over time
through to the contractual maturity of the commitment.
Contract assets and contract liabilities
The Group had no material contract assets or contract liabilities as at 31 December 2019 (2018: nil).
Impairment on fee receivables and contract assets
During 2019, there have been no material impairments recognised in relation to fees receivable and contract assets (2018: nil). Fees in relation
to transactional business can be added to outstanding customer balances. These amounts may be subsequently impaired as part of the overall
loans and advances balance.
Remaining performance obligations
The Group applies the practical expedient of IFRS 15 and does not disclose information about remaining performance obligations that have
original expected durations of one year or less or because the Group has a right to consideration that corresponds directly with the value of the
service provided to the client or customer.
Costs incurred in obtaining or fulfilling a contract
The Group expects that incremental costs of obtaining a contract such as success fee and commission fees paid are recoverable and therefore
capitalised such contract costs in the amount of £159m at 31 December 2019 (2018: £125m).
Capitalised contract costs are amortised based on the transfer of services to which the asset relates which typically ranges over the expected life
of the relationship. In 2019, the amount of amortisation was £30m (2018: £30m) and there was no impairment loss recognised in connection with
the capitalised contract costs (2018: nil).
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5 Net trading income
Accounting for net trading income
In accordance with IFRS 9, trading positions are held at fair value, and the resulting gains and losses are included in the income statement,
together with interest and dividends arising from long and short positions and funding costs relating to trading activities.
Income arises from both the sale and purchase of trading positions, margins which are achieved through market making and customer
business and from changes in fair value caused by movements in interest and exchange rates, equity prices and other market variables.
Gains or losses on non-trading financial instruments designated or mandatorily at fair value with changes in fair value recognised in the income
statement are included in net trading income where the business model is to manage assets and liabilities on a fair value basis which includes
use of derivatives or where an instrument is designated at fair value to eliminate an accounting mismatch and the related instrument’s gain
and losses are reported in trading income.
Net gains from financial instruments held for trading
Net gains from financial instruments designated at fair value
Net gains from financial instruments mandatorily at fair value
Net trading income
6 Net investment income
2019
£m
2,941
256
1,038
4,235
2018
£m
3,292
267
1,007
4,566
2017
£m
2,388
1,112
–
3,500
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 13 and Note 15.
Net gains from financial instruments mandatorily at fair value
Net gains from disposal of debt instruments at fair value through other comprehensive income
Net gains from disposal of financial assets and liabilities measured at amortised costa
Dividend income
Net (losses)/gains on other investments
Net gains from financial instruments designated at fair valueb
Net gains from disposal of available for sale investmentsc
Net investment income
2019
£m
510
502
257
76
(214)
–
–
1,131
2018
£m
226
158
38
91
72
–
–
585
2017
£m
–
–
147
48
30
338
298
861
Notes
a Included within the 2019 balance of £257m are gains of £170m relating to the sale of debt securities as part of the Group’s Treasury operations.
b Following the adoption of IFRS 9 in 2018, gains or losses on financial assets designated at fair value to eliminate or reduce an accounting mismatch are recognised within net trading
income lines.
c Following the adoption of IFRS 9 in 2018, available for sale classification is no longer applicable.
258 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS 7 Credit impairment charges
Accounting for the impairment of financial assets under IFRS 9 effective from 1 January 2018
Impairment
The Group is required to recognise expected credit losses (ECLs) based on unbiased forward-looking information for all financial assets at
amortised cost, lease receivables, debt financial assets at fair value through other comprehensive income, loan commitments and financial
guarantee contracts.
At the reporting date, an allowance (or provision for loan commitments and financial guarantees) is required for the 12 month (Stage 1) ECLs.
If the credit risk has significantly increased since initial recognition (Stage 2), or if the financial instrument is credit impaired (Stage 3), an
allowance (or provision) should be recognised for the lifetime ECLs.
The measurement of ECL is calculated using three main components: (i) probability of default (PD) (ii) loss given default (LGD) and (iii) the
exposure at default (EAD).
The 12 month and lifetime ECLs are calculated by multiplying the respective PD, LGD and the EAD. The 12 month and lifetime PDs represent
the PD occurring over the next 12 months and the remaining maturity of the instrument respectively. The EAD represents the expected balance
at default, taking into account the repayment of principal and interest from the balance sheet date to the default event together with any
expected drawdowns of committed facilities. The LGD represents expected losses on the EAD given the event of default, taking into account,
among other attributes, the mitigating effect of collateral value at the time it is expected to be realised and the time value of money.
Determining a significant increase in credit risk since initial recognition:
The Group assesses when a significant increase in credit risk has occurred based on quantitative and qualitative assessments. The credit risk
of an exposure is considered to have significantly increased when:
i) Quantitative test
The annualised lifetime PD has increased by more than an agreed threshold relative to the equivalent at origination.
PD deterioration thresholds are defined as percentage increases, and are set at an origination score band and segment level to ensure the test
appropriately captures significant increases in credit risk at all risk levels. Generally, thresholds are inversely correlated to the origination PD,
i.e. as the origination PD increases, the threshold value reduces.
The assessment of the point at which a PD increase is deemed ‘significant’, is based upon analysis of the portfolios’ risk profile against
a common set of principles and performance metrics (consistent across both retail and wholesale businesses), incorporating expert credit
judgement where appropriate. Application of quantitative PD floors does not represent the use of the low credit risk exemption as exposures
can separately move into Stage 2 via the qualitative route described below.
Wholesale assets apply a 100% increase in PD and 0.2% PD floor to determine a significant increase in credit risk.
Retail assets apply bespoke relative increase and absolute PD thresholds based on product type and origination PD. Thresholds are subject
to maximums defined by Group policy and typically apply minimum relative thresholds of 50-100% and a maximum relative threshold of 400%.
For existing/historical exposures where origination point scores or data are no longer available or do not represent a comparable estimate
of lifetime PD, a proxy origination score is defined, based upon:
■■ back-population of the approved lifetime PD score either to origination date or, where this is not feasible, as far back as possible (subject
to a data start point no later than 1 January 2015), or
■■ use of available historical account performance data and other customer information, to derive a comparable ‘proxy’ estimation of origination PD.
ii) Qualitative test
This is relevant for accounts that meet the portfolio’s ‘high risk’ criteria and are subject to closer credit monitoring.
High risk customers may not be in arrears but either through an event or an observed behaviour exhibit credit distress. The definition and
assessment of high risk includes as wide a range of information as reasonably available, such as industry and Group-wide customer level data,
including but not limited to bureau scores and high consumer indebtedness index, wherever possible or relevant.
Whilst the high risk populations applied for IFRS 9 impairment purposes are aligned with risk management processes, they are also regularly
reviewed and validated to ensure that they capture any incremental segments where there is evidence of credit deterioration.
iii) Backstop criteria
This is relevant for accounts that are more than 30 calendar days past due. The 30 days past due criteria is a backstop rather than a primary
driver of moving exposures into Stage 2.
The criteria for determining a significant increase in credit risk for assets with bullet repayments follows the same principle as all other assets,
i.e. quantitative, qualitative and backstop tests are all applied.
Exposures will move back to Stage 1 once they no longer meet the criteria for a significant increase in credit risk. This means that, at a
minimum all payments must be up-to-date, the PD deterioration test is no longer met, the account is no longer classified as high risk, and the
customer has evidenced an ability to maintain future payments.
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7 Credit impairment charges continued
Exposures are only removed from Stage 3 and re-assigned to Stage 2 once the original default trigger event no longer applies. Exposures being
removed from Stage 3 must no longer qualify as credit impaired, and:
a) the obligor will also have demonstrated consistently good payment behaviour over a 12-month period, by making all consecutive
contractual payments due and, for forborne exposures, the relevant EBA defined probationary period has also been successfully completed or;
b) (for non-forborne exposures) the performance conditions are defined and approved within an appropriately sanctioned restructure plan,
including 12 months’ payment history have been met.
Management overlays and other exceptions to model outputs are applied only if consistent with the objective of identifying significant
increases in credit risk.
Forward-looking information
The measurement of ECL involves complexity and judgement, including estimation of PD, LGD, a range of unbiased future economic scenarios,
estimation of expected lives (where contractual life is not appropriate), and estimation of EAD and assessing significant increases in credit risk.
Credit losses are the expected cash shortfalls from what is contractually due over the expected life of the financial instrument, discounted at
the original effective interest rate (EIR). ECLs are the unbiased probability-weighted credit losses determined by evaluating a range of possible
outcomes and considering future economic conditions.
The Group uses a five-scenario model to calculate ECL. An external consensus forecast is assembled from key sources, including HM Treasury
(short and medium term forecasts), Bloomberg (based on median of economic forecasts) and the Urban Land Institute (for US House Prices),
which forms the baseline scenario. In addition, two adverse scenarios (Downside 1 and Downside 2) and two favourable scenarios (Upside 1
and Upside 2) are derived, with associated probability weightings. The adverse scenarios are calibrated to a similar severity to internal stress
tests, whilst also considering IFRS 9 specific sensitivities and non-linearity. Downside 2 is benchmarked to the Bank of England’s annual cyclical
scenarios and to the most severe scenario from Moody’s inventory, but is not designed to be the same. The favourable scenarios are calibrated
to be symmetric to the adverse scenarios, subject to a ceiling calibrated to relevant recent favourable benchmark scenarios. The scenarios
include eight economic variables, (GDP, unemployment, House Price Index (HPI) and base rates in both the UK and US markets), and expanded
variables using statistical models based on historical correlations. The upside and downside shocks are designed to evolve over a five-year
stress horizon, with all five scenarios converging to a steady state after approximately eight years.
The methodology for estimating probability weights for each of the scenarios involves a comparison of the distribution of key historical UK and
US macroeconomic variables against the forecast paths of the five scenarios. The methodology works such that the baseline (reflecting current
consensus outlook) has the highest weight and the weights of adverse and favourable scenarios depend on the deviation from the baseline;
the further from the baseline, the smaller the weight. A single set of five scenarios is used across all portfolios and all five weights are
normalised to equate to 100%. The same scenarios and weights that are used in the estimation of expected credit losses are also used for the
Barclays Group internal planning purposes. The impacts across the portfolios are different because of the sensitivities of each of the portfolios
to specific macroeconomic variables, for example, mortgages are highly sensitive to house prices and base rates, credit cards and unsecured
consumer loans are highly sensitive to unemployment.
Definition of default, credit impaired assets, write-offs, and interest income recognition
The definition of default for the purpose of determining ECLs, and for internal credit risk management purposes, has been aligned to the
Regulatory Capital CRR Article 178 definition of default, to maintain a consistent approach with IFRS 9 and associated regulatory guidance.
The Regulatory Capital CRR Article 178 definition of default considers indicators that the debtor is unlikely to pay, includes exposures in
forbearance and is no later than when the exposure is more than 90 days past due or 180 days past due in the case of UK mortgages. When
exposures are identified as credit impaired or purchased or originated as such interest income is calculated on the carrying value net of the
impairment allowance.
An asset is considered credit impaired when one or more events occur that have a detrimental impact on the estimated future cash flows
of the financial asset. This comprises assets defined as defaulted and other individually assessed exposures where imminent default or actual
loss is identified.
Uncollectable loans are written off against the related allowance for loan impairment on completion of the Group’s internal processes and
when all reasonably expected recoverable amounts have been collected. Subsequent recoveries of amounts previously written off are credited
to the income statement. The timing and extent of write-offs may involve some element of subjective judgement. Nevertheless, a write-off will
often be prompted by a specific event, such as the inception of insolvency proceedings or other formal recovery action, which makes it possible
to establish that some or the entire advance is beyond realistic prospect of recovery.
Loan modifications and renegotiations that are not credit-impaired
When modification of a loan agreement occurs as a result of commercial restructuring activity rather than due to the credit risk of the
borrower, an assessment must be performed to determine whether the terms of the new agreement are substantially different from the terms
of the existing agreement. This assessment considers both the change in cash flows arising from the modified terms as well as the change
in overall instrument risk profile.
Where terms are substantially different, the existing loan will be derecognised and a new loan will be recognised at fair value, with any
difference in valuation recognised immediately within the income statement, subject to observability criteria.
Where terms are not substantially different, the loan carrying value will be adjusted to reflect the present value of modified cash flows discounted
at the original EIR, with any resulting gain or loss recognised immediately within the income statement as a modification gain or loss.
260 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS 7 Credit impairment charges continued
Expected life
Lifetime ECLs must be measured over the expected life. This is restricted to the maximum contractual life and takes into account expected
prepayment, extension, call and similar options. The exceptions are certain revolver financial instruments, such as credit cards and bank
overdrafts, that include both a drawn and an undrawn component where the entity’s contractual ability to demand repayment and cancel the
undrawn commitment does not limit the entity’s exposure to credit losses to the contractual notice period. For revolving facilities, expected life
is analytically derived to reflect behavioural life of the asset, i.e. the full period over which the business expects to be exposed to credit risk.
Behavioural life is typically based upon historical analysis of the average time to default, closure or withdrawal of facility. Where data is
insufficient or analysis inconclusive, an additional ‘maturity factor’ may be incorporated to reflect the full estimated life of the exposures, based
upon experienced judgement and/or peer analysis. Potential future modifications of contracts are not taken into account when determining
the expected life or EAD until they occur.
Discounting
ECLs are discounted at the EIR at initial recognition or an approximation thereof and consistent with income recognition. For loan
commitments the EIR is the rate that is expected to apply when the loan is drawn down and a financial asset is recognised. Issued financial
guarantee contracts are discounted at the risk free rate. Lease receivables are discounted at the rate implicit in the lease. For variable/floating
rate financial assets, the spot rate at the reporting date is used and projections of changes in the variable rate over the expected life are not
made to estimate future interest cash flows or for discounting.
Modelling techniques
ECLs are calculated by multiplying three main components, being the PD, LGD and the EAD, discounted at the original EIR. The regulatory Basel
Committee of Banking Supervisors (BCBS) ECL calculations are leveraged for IFRS 9 modelling but adjusted for key differences which include:
■■ BCBS requires 12 month through the economic cycle losses whereas IFRS 9 requires 12 months or lifetime point in time losses based on
conditions at the reporting date and multiple forecasts of the future economic conditions over the expected lives
■■ IFRS 9 models do not include certain conservative BCBS model floors and downturn assessments and require discounting to the reporting
date at the original EIR rather than using the cost of capital to the date of default
■■ management adjustments are made to modelled output to account for situations where known or expected risk factors and information
have not been considered in the modelling process, for example forecast economic scenarios for uncertain political events, and
■■ ECL is measured at the individual financial instrument level, however a collective approach where financial instruments with similar risk
characteristics are grouped together, with apportionment to individual financial instruments, is used where effects can only be seen at
a collective level, for example for forward-looking information.
For the IFRS 9 impairment assessment, the Group’s risk models are used to determine the PD, LGD and EAD. For Stage 2 and 3, the Group
applies lifetime PDs but uses 12 month PDs for Stage 1. The ECL drivers of PD, EAD and LGD are modelled at an account level which considers
vintage, among other credit factors. Also, the assessment of significant increase in credit risk is based on the initial lifetime PD curve, which
accounts for the different credit risk underwritten over time.
Forbearance
A financial asset is subject to forbearance when it is modified due to the credit distress of the borrower. A modification made to the terms of an
asset due to forbearance will typically be assessed as a non-substantial modification that does not result in derecognition of the original loan,
except in circumstances where debt is exchanged for equity.
Both performing and non-performing forbearance assets are classified as Stage 3 except where it is established that the concession granted
has not resulted in diminished financial obligation and that no other regulatory definition of default criteria has been triggered, in which case
the asset is classified as Stage 2. The minimum probationary period for non-performing forbearance is 12 months and for performing
forbearance, 24 months. Hence, a minimum of 36 months is required for non-performing forbearance to move out of a forborne state.
No financial instrument in forbearance can transfer back to Stage 1 until all of the Stage 2 thresholds are no longer met and can only move out
of Stage 3 when no longer credit impaired.
Accounting for the impairment of financial assets under IAS 39 for 2017
Loans and other assets held at amortised cost
In accordance with IAS 39, the 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.
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7 Credit impairment charges continued
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.
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
IFRS 9 impairment involves several important areas of judgement, including estimating forward looking modelled parameters (PD, LGD and
EAD), developing a range of unbiased future economic scenarios, estimating expected lives and assessing significant increases in credit risk,
based on the Group’s experience of managing credit risk. The determination of expected life is most material for Barclays credit card portfolios
which is obtained via behavioural life analysis to materially capture the risk of these facilities. The behavioural life analysis for US Cards has
been updated during the year to include more recent portfolio data, as a consequence the expected life of the US credit card portfolio has fallen
from 10 years to seven years. For UK Cards, the expected life has similarly fallen from 10 years to eight years. These reductions led to
management adjustment releases against impairment of £28m for US Cards and £9m for UK Cards.
Within the retail and small businesses portfolios, which comprise large numbers of small homogenous assets with similar risk characteristics
where credit scoring techniques are generally used, the impairment allowance is calculated using forward-looking modelled parameters which
are typically run at account level. There are many models in use, each tailored to a product, line of business or customer category. Judgement
and knowledge is needed in selecting the statistical methods to use when the models are developed or revised. The impairment allowance
reflected in the financial statements for these portfolios is therefore considered to be reasonable and supportable. The impairment charge
reflected in the income statement for retail portfolios is £1,696m (2018: £1,598m; 2017: £2,095m) of the total impairment charge on loans
and advances.
For individually significant assets in Stage 3, impairment allowances are calculated on an individual basis and all relevant considerations that
have a bearing on the expected future cash flows across a range of economic scenarios are taken into account. These considerations can be
subjective and can include 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. 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 a charge of £208m (2018: release £133m; 2017: release £238m) of the total impairment charge on loans and
advances. Further information on impairment allowances, impairment charges and related credit information is set out within the Risk review
on page 151.
262 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS 7 Credit impairment charges continued
Loans and advances
Provision for undrawn
contractually committed facilities
and guarantees provided
Loans impairment
Cash collateral and settlement
balances
Financial investments
Financial assets at fair value
through other comprehensive
income
Other financial assets measured
at cost
Credit impairment charges
Impairment
charges
£m
1,957
2019
Recoveriesb
£m
(124)
Total
£m
1,833
Impairment
charges
£m
1,785
2018
Recoveriesb
£m
(195)
Total
£m
1,590
Impairment
charges
£m
2,654
2017a
Recoveriesb
£m
(334)
Total
£m
2,320
71
2,028
–
(124)
71
1,904
(125)
1,660
–
(195)
(125)
1,465
13
2,667
–
(334)
13
2,333
1
–
1
–
–
–
1
–
1
(1)
–
4
–
–
–
(1)
–
4
–
3
–
–
–
–
–
3
–
6
2,036
–
(124)
6
1,912
–
1,663
–
(195)
–
1,468
–
2,670
–
(334)
–
2,336
Notes
a The comparatives for 2017 are presented on an IAS 39 basis.
b Cash recoveries of previously written off amounts.
Write-offs subject to enforcement activity
The contractual amount outstanding on financial assets that were written off during the year and that are still subject to enforcement activity
is £1,660m (2018: £1,445m). This is lower than the write-offs presented in the movement in gross exposures and impairment allowance table
due to post write-off recoveries.
Modification of financial assets
Financial assets with a loss allowance measured at an amount equal to lifetime ECL of £1,383m (2018: £851m) were subject to non-substantial
modification during the year, with a resulting loss of £22m (2018: £26m). The gross carrying amount of financial assets for which the loss
allowance has changed to a 12 month ECL during the year amounts to £401m (2018: £114m).
8 Operating expenses
Infrastructure costs
Property and equipment
Depreciation and amortisationa
Lease paymentsa
Impairment of property, equipment and intangible assets
Total infrastructure costs
Administration and general costs
Consultancy, legal and professional fees
Marketing and advertising
UK bank levy
Other administration and general expenses
Total administration and general costs
Staff costs
Provisions for litigation and conduct
Operating expenses
2019
£m
1,409
1,487
41
33
2,970
590
425
226
1,059
2,300
8,315
1,849
15,434
2018
£m
1,360
1,252
329
9
2,950
729
495
269
964
2,457
8,629
2,207
16,243
2017
£m
1,366
1,161
342
80
2,949
1,064
433
365
878
2,740
8,560
1,207
15,456
Note
a Following the adoption of IFRS 16 from 1 January 2019, the depreciation charge associated with right of use assets is reported within the depreciation and amortisation charge
for 2019.
For further details on staff costs including accounting policies, refer to Note 31.
home.barclays/annualreport
Barclays PLC Annual Report 2019 263
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements Performance/return
9 Tax
Accounting for income taxes
The Group applies IAS 12 Income Taxes in accounting for taxes on income. Income tax payable on taxable profits (current tax) is recognised
as an expense in the periods in which the profits arise. Withholding taxes are also treated as income taxes. Income tax recoverable on tax
allowable losses is recognised as a current tax asset only to the extent that it is regarded as recoverable by offsetting against taxable profits
arising in the current or prior periods. Current tax is measured using tax rates and tax laws that have been enacted or substantively enacted
at the balance sheet date.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except in certain circumstances where the
deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that
is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. Deferred tax is
determined using tax rates and legislation enacted or substantively enacted by the balance sheet date which are expected to apply when the
deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets and liabilities are only offset when there is both a legal
right to set-off and an intention to settle on a net basis.
The 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. Effective from 1 January 2019, the Group
changed its accounting policy on the accrual of interest and penalty amounts in respect of uncertain income tax positions and now recognises
such amounts as an expense within profit before tax and will continue to do so in future periods. The prior periods’ tax charges have not been
restated because the accrual for interest and penalties in those periods in respect of uncertain tax positions was not material.
Deferred tax provisions are adjustments made to the carrying value of deferred tax assets in respect of uncertain tax positions. A deferred tax
provision is recognised when it is considered probable that the outcome of a review by a tax authority of an uncertain tax position will result
in a reduction in the carrying value of the deferred tax asset. From recognition of a provision, measurement of the underlying deferred tax asset
is adjusted to take into account the expected impact of resolving the uncertain tax position on the loss or temporary difference giving rise to
the deferred tax asset.
The approach taken to measurement takes account of whether the uncertain tax position is a discrete position that will be reviewed by the tax
authority in isolation from any other position, or one of a number of issues which are expected to be reviewed together concurrently and
resolved simultaneously with a tax authority. The Group’s measurement of provisions is based upon its best estimate of the additional profit
that will become subject to tax. For a discrete position, consideration is given only to the merits of that position. Where a number of issues are
expected to be reviewed and resolved together, the Group will take into account not only the merits of its position in respect of each particular
issue but also the overall level of provision relative to the aggregate of the uncertain tax positions across all the issues that are expected to be
resolved at the same time. In addition, in assessing provision levels, it is assumed that tax authorities will review uncertain tax positions and
that all facts will be fully and transparently disclosed.
Critical accounting estimates and judgements
There are two key areas of judgement that impact the reported tax position. Firstly, the level of provisioning for uncertain tax positions;
and secondly, the recognition and measurement of deferred tax assets.
The Group does not consider there to be a significant risk of a material adjustment to the carrying amount of current and deferred tax
balances, including provisions for uncertain tax positions in the next financial year. The provisions for uncertain tax positions cover a diverse
range of issues and reflect advice from external counsel where relevant. It should be noted that only a proportion of the total uncertain tax
positions will be under audit at any point in time, and could therefore be subject to challenge by a tax authority over the next year.
Deferred tax assets have been recognised based on business profit forecasts. Details on the recognition of deferred tax assets are provided
in this note.
Current tax charge/(credit)
Current yeara
Adjustments in respect of prior years
Deferred tax charge/(credit)
Current year
Adjustments in respect of prior years
Tax charge
2019
£m
1,037
(45)
992
86
(75)
11
1,003
2018
£m
689
(214)
475
442
(6)
436
911
2017
£m
594
55
649
1,507
(90)
1,417
2,066
Note
a From 2019, due to an IAS 12 update, the tax relief on payments in relation to AT1 instruments has been recognised in the tax charge of the income statement, whereas it was
previously recorded in retained earnings. Comparatives have been restated, reducing the tax charge for 2018 by £211m and 2017 by £174m. Further detail can be found in Note 1.
264 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS 9 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 Barclays Group’s profit before tax.
Profit before tax
Tax charge based on the standard UK corporation tax rate of 19%
(2018: 19%; 2017: 19.25%)
Impact of profits/losses earned in territories with different statutory
rates to the UK (weighted average tax rate is 24.2% (2018: 21.9%;
2017: 29.4%))
Recurring items:
Non-creditable taxes including withholding taxes
Non-deductible expenses
Impact of UK bank levy being non-deductible
Banking surcharge and other itemsa
Impact of Barclays Bank PLC's overseas branches being taxed both
locally and in the UK
Tax adjustments in respect of share-based payments
Changes in recognition of deferred tax and effect of unrecognised
tax losses
Adjustments in respect of prior years
AT1 tax credita
Non-taxable gains and income
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
Total tax charge
2019
£m
4,357
2019
%
2018
£m
3,494
2018
%
2017
£m
3,541
2017
%
828
19.0%
664
19.0%
682
19.3%
227
5.2%
100
2.9%
356
10.1%
150
45
43
57
15
(6)
(82)
(120)
(157)
(260)
3.4%
1.0%
1.0%
1.3%
0.3%
(0.1%)
(1.9%)
(2.7%)
(3.6%)
(6.0%)
–
–
–
263
–
–
1,003
–
6.1%
–
–
23.0%
156
81
51
104
16
17
(104)
(220)
(148)
(245)
–
–
93
346
–
911
4.5%
2.3%
1.5%
2.9%
0.5%
0.5%
(3.0%)
(6.3%)
(4.3%)
(7.0%)
191
90
70
77
(61)
5
(71)
(35)
(123)
(178)
5.4%
2.5%
2.0%
2.2%
(1.7%)
0.1%
(2.0%)
(1.0%)
(3.5%)
(5.0%)
–
1,177
33.2%
–
2.7%
9.9%
–
26.1%
(276)
129
72
(39)
2,066
(7.8%)
3.6%
2.0%
(1.1%)
58.3%
Note
a From 2019, due to an IAS 12 update, the tax relief on payments in relation to AT1 instruments has been recognised in the tax charge of the income statement, whereas it was
previously recorded in retained earnings. The tax charge for the current period has been reduced by £222m (relief at the standard UK corporation tax rate is £157m and the relief
at the banking surcharge rate is £65m). Comparatives have been restated, reducing the tax charge for 2018 by £211m and 2017 by £174m (relief at the standard UK corporation
tax rate is £148m (2018) and £123m (2017) and the relief at the banking surcharge rate is £63m (2018) and £51m (2017)). Further detail can be found in Note 1.
Factors driving the effective tax rate
The effective tax rate of 23.0% is higher than the UK corporation tax rate of 19% primarily due to provisions for UK customer redress being
non-deductible, profits earned outside the UK being taxed at local statutory tax rates that are higher than the UK tax rate, non-creditable taxes and
non-deductible expenses including UK bank levy. In addition, the UK profits of banking companies are subject to a surcharge. 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 and tax relief on
payments made under AT1 instruments, as well as adjustments in respect of prior periods.
Effective from 1 January 2019, a change in accounting standards requires the tax consequences of all payments on financial instruments that are
classified as equity for accounting purposes, where those payments are considered to be a distribution of profit, to be included in the income
statement tax charge. Excluding this accounting change which resulted in tax relief on payments in relation to AT1 instruments of £222m (2018:
£211m) being included in the income statement tax charge, the Barclays Group’s effective tax rate would have been 28.1% (2018: 32.1%).
The Barclays 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 Barclays Group operates in. In the UK, legislation to reduce the corporation tax rate to 17% from 1 April 2020 has been enacted. However, the
UK Government has announced its intention to introduce legislation to reverse the planned rate reduction and to maintain the current rate of 19%.
home.barclays/annualreport
Barclays PLC Annual Report 2019 265
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements Performance/return
9 Tax continued
Tax in the consolidated statement of comprehensive income
The tax relating to each component of other comprehensive income can be found on page 242 in the consolidated statement of comprehensive
income which includes within Other a tax credit of £16m (2018: £30m credit) on other items including share-based payments.
Current tax assets and liabilities
Movements on current tax assets and liabilities were as follows:
Assets
Liabilities
As at 1 January
Income statementa
Other comprehensive income and reservesa
Corporate income tax paid
Other movements
Assets
Liabilities
As at 31 December
2019
£m
798
(628)
170
(992)
423
228
270
99
412
(313)
99
2018
£m
482
(586)
(104)
(475)
110
548
91
170
798
(628)
170
Note
a Due to the IAS 12 update impacting AT1 tax credits, the 2018 comparative has been restated to reflect the £211m tax credit in the income statement, whereas it was previously
recorded in retained earnings. Further detail can be found in Note 1.
Deferred tax assets and liabilities
The deferred tax amounts on the balance sheet were as follows:
Intermediate Holding Company (‘IHC Tax Group’)
US Branch Tax Group
UK Tax Group
Other
Deferred tax asset
Deferred tax liability
Net deferred tax
2019
£m
1,037
1,015
818
420
3,290
(23)
3,267
2018
£m
1,454
1,087
861
426
3,828
(51)
3,777
US deferred tax assets in the IHC and US Branch Tax Groups
The deferred tax asset in the IHC Tax Group of £1,037m (2018: £1,454m) includes £54m (2018: £220m) relating to tax losses and the deferred
tax asset in Barclays Bank PLC’s US Branch Tax Group of £1,015m (2018: £1,087m) includes £84m (2018: £167m) relating to tax losses. Under
US tax rules, losses occurring prior to 1 January 2018 can be carried forward and offset against profits for a period of 20 years. The losses first
arose in 2011 in the IHC Tax Group and 2008 in the US Branch Tax Group and therefore, any unused amounts may begin to expire in 2031 and
2028 respectively. The deferred tax assets for the IHC and the US Branch Tax Groups’ tax losses are currently projected to be fully utilised by 2020.
UK Tax Group deferred tax asset
The deferred tax asset in the UK Tax Group of £818m (2018: £861m) includes £268m (2018: nil) relating to tax losses. There is no time limit
on utilisation of UK tax losses and business profit forecasts indicate that these will be fully recovered.
266 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS 9 Tax continued
Other deferred tax assets
The deferred tax asset of £420m (2018: £426m) in other entities within the Group includes £117m (2018: £142m) relating to tax losses.
These deferred tax assets relate to a number of different territories and their recognition is based on profit forecasts or local country law which
indicate that it is probable that the losses and temporary differences will be utilised.
Of the deferred tax asset of £420m (2018: £426m), an amount of £150m (2018: £247m) 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.
Fair value
through
other
compre-
hensive
income
£m
180
(35)
145
–
Fixed asset
timing
differences
£m
1,292
(16)
1,276
51
Cash flow
hedges
£m
39
(10)
29
–
Retirement
benefit
obligations
£m
46
(435)
(389)
(4)
Loan
impairment
allowance
£m
601
–
601
(49)
Other
provisions
£m
112
–
112
23
Share-
based
payments
and
deferred
compensation
£m
359
–
359
(19)
Tax losses
carried
forward
£m
529
–
529
18
–
(20)
1,307
1,338
(31)
1,307
1,266
(28)
1,238
(14)
–
52
1,276
1,292
(16)
1,276
(42)
(2)
101
119
(18)
101
200
(161)
39
(8)
108
6
145
180
(35)
145
(210)
–
(181)
–
(181)
(181)
1
(76)
(75)
7
96
1
29
39
(10)
29
(205)
(4)
(602)
38
(640)
(602)
52
(218)
(166)
(120)
(98)
(5)
(389)
46
(435)
(389)
(40)
(11)
501
501
–
501
735
–
735
(84)
(48)
(2)
601
601
–
601
2
(9)
128
128
–
128
157
–
157
(62)
8
9
112
112
–
112
–
(24)
523
523
–
523
596
–
596
(103)
1
35
529
529
–
529
9
(5)
344
344
–
344
384
–
384
(26)
(13)
14
359
359
–
359
Assets
Liabilities
At 1 January 2019
Income statement
Other comprehensive
income and reserves
Other movements
Assets
Liabilities
At 31 December 2019
Assetsa
Liabilities
At 1 January 2018a
Income statement
Other comprehensive
income and reserves
Other movements
Assets
Liabilities
At 31 December 2018
Note
a Following the adoption of IFRS 9 and IFRS 15 on 1 January 2018, additional deferred tax assets of £627m were recognised.
Other
£m
1,377
(262)
1,115
(31)
72
(10)
1,146
1,458
(312)
1,146
1,362
(230)
1,132
(26)
(7)
16
1,115
1,377
(262)
1,115
Total
£m
4,535
(758)
3,777
(11)
(414)
(85)
3,267
4,449
(1,182)
3,267
4,753
(713)
4,040
(436)
47
126
3,777
4,535
(758)
3,777
Other movements include the impact of changes in foreign exchange rates as well as deferred tax amounts relating to acquisitions and disposals.
The amount of deferred tax liability expected to be settled after more than 12 months is £1,199m (2018: £635m). The amount of deferred tax
assets expected to be recovered after more than 12 months is £3,945m (2018: £3,703m). 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 £213m (2018: £175m), unused tax credits
of £247m (2018: £198m), and gross tax losses of £19,582m (2018: £16,313m). The tax losses include capital losses of £3,980m (2018: £3,225m).
Of these tax losses, £41m (2018: £240m) expire within five years, £239m (2018: £259m) expire within six to 10 years, £5,178m (2018: £948m)
expire within 11 to 20 years and £14,124m (2018: £14,866m) can be carried forward indefinitely. Deferred tax assets have not been recognised
in respect of these items because it is not probable that future taxable profits and gains will be available against which they can be utilised.
Group investments in subsidiaries, branches and associates
Deferred tax is not recognised in respect of the value of the Barclays Group’s investments in subsidiaries, branches and associates where the
Barclays Group is able to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse
in the foreseeable future. The aggregate amount of these temporary differences for which deferred tax liabilities have not been recognised was
£0.7bn (2018: £0.6bn).
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Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements Performance/return
10 Earnings per share
Profit attributable to ordinary equity holders of the parent in respect of continuing operations
Loss attributable to ordinary equity holders of the parent in respect of discontinued operations
Profit/(loss) attributable to ordinary equity holders of the parent in respect of continuing and
discontinued operations
2019
£m
2,461
–
2018a
£m
1,597
–
2017a
£m
587
(2,335)
2,461
1,597
(1,748)
Note
a From 2019, due to an IAS 12 update, the tax relief on payments in relation to AT1 instruments has been recognised in the tax charge of the income statement, whereas it was
previously recorded in retained earnings. Comparatives have been restated, increasing the profit attributable to ordinary equity holders for 2018 by £211m and 2017 by £174m.
Further detail can be found in Note 1.
Basic weighted average number of shares in issue
Number of potential ordinary shares
Diluted weighted average number of shares
2019
million
17,200
282
17,482
2018
million
17,075
308
17,383
2017
million
16,996
288
17,284
Earnings/(loss) per ordinary share
Earnings per ordinary share in respect of continuing operations
Loss per ordinary share in respect of discontinued operation
Basic earnings per share
2019
p
14.3
14.3
–
2018
p
9.4
9.4
–
2017
p
(10.3)
3.5
(13.8)
Diluted earnings per share
2019
p
14.1
14.1
–
2018
p
9.2
9.2
–
2017
p
(10.1)
3.4
(13.5)
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 expected dilutive potential ordinary shares held in respect of
Barclays PLC, totalling 282m (2018: 308m) shares. The total number of share options outstanding, under schemes considered to be potentially
dilutive, was 533m (2018: 544m). These options have strike prices ranging from £1.19 to £2.27.
Of the total number of employee share options and share awards at 31 December 2019, 43m (2018: 43m) were anti-dilutive.
The 125m (2018: 79m) increase in the basic weighted average number of shares are primarily due to shares issued under employee share
schemes and the Scrip Dividend Programme.
11 Dividends on ordinary shares
The Directors have approved a total dividend in respect of 2019 of 9.0p per ordinary share of 25p each. The remaining full year dividend for 2019
of 6.0p per ordinary share will be paid on 3 April 2020 to shareholders on the Share Register on 28 February 2020 following the 3.0p half year
dividend paid on 23 September 2019. On 31 December 2019, there were 17,322m ordinary shares in issue. The financial statements for the
year ended 31 December 2019 do not reflect this dividend, which will be accounted for in shareholders’ equity as an appropriation of retained
profits in the year ending 31 December 2020. The 2019 financial statements include the 2019 half year dividend of £517m (2018: £427m) and
a full year dividend declared in relation to 2018 of £684m (2018: £341m). Dividends are funded out of distributable reserves.
268 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS Assets and liabilities held at fair value
The notes included in this section focus on assets and liabilities the Group holds and recognises at fair value. Fair value refers to the price that
would be received to sell an asset or the price that would be paid to transfer a liability in an arm’s-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 141.
12 Trading portfolio
Accounting for trading portfolio assets and liabilities
In accordance with IFRS 9, all assets and liabilities held for trading purposes are held at fair value with gains and losses in the changes in fair
value taken to the income statement in net trading income (Note 5).
Debt securities and other eligible bills
Equity securities
Traded loans
Commodities
Trading portfolio assets/(liabilities)
Trading portfolio assets
2019
£m
52,739
56,000
5,378
78
114,195
2018
£m
57,283
39,565
7,234
105
104,187
Trading portfolio liabilities
2018
£m
(25,394)
(12,488)
–
–
(37,882)
2019
£m
(23,741)
(13,175)
–
–
(36,916)
13 Financial assets at fair value through the income statement
Accounting for financial assets mandatorily at fair value
Financial assets that are held for trading are recognised at fair value through profit or loss. In addition, financial assets are held at fair value
through profit or loss if they do not contain contractual terms that give rise on specified dates to cash flows that are SPPI, or if the financial
asset is not held in a business model that is either (i) a business model to collect the contractual cash flows or (ii) a business model that is
achieved by both collecting contractual cash flows and selling.
Accounting for financial assets designated at fair value
Financial assets, other than those held for trading, are classified in this category if they are so irrevocably designated at inception and the use
of the designation removes or significantly reduces an accounting mismatch.
Subsequent changes in fair value for these instruments are recognised in the income statement in net investment income, except if reporting it
in trading income reduces an accounting mismatch.
The details on how the fair value amounts are derived for financial assets at fair value are described in Note 17.
Loans and advances
Debt securities
Equity securities
Reverse repurchase agreements and other similar secured lending
Other financial assets
Financial assets at fair value through the income statement
Designated at fair value
2019
£m
4,900
3,995
–
40
–
8,935
2018
£m
5,267
3,855
–
106
–
9,228
Mandatorily at fair value
2018
£m
14,257
667
6,019
118,935
542
140,420
2019
£m
17,792
1,254
7,495
96,847
763
124,151
Total
2019
£m
22,692
5,249
7,495
96,887
763
133,086
2018
£m
19,524
4,522
6,019
119,041
542
149,648
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Assets and liabilities held at fair value
13 Financial assets at fair value through the income statement continued
Credit risk of financial assets designated at fair value and related credit derivatives
The following table shows the maximum exposure to credit risk, the changes in fair value attributable to changes in credit risk, and the cumulative
changes in fair value since initial recognition for loans and advances. The table does not include debt securities and reverse repurchase
agreements and other similar secured lending designated at FV as they have minimal exposure to credit risk. Reverse repurchase agreements are
collateralised and debt securities are primarily relating to high quality sovereigns.
Loans and advances designated at fair value, attributable to credit riska
Note
a The value mitigated by related credit derivatives was nil (2018: nil).
14 Derivative financial instruments
Maximum exposure
as at 31 December
2019
£m
4,900
2018
£m
5,267
Changes in fair value during
the year ended
2019
£m
4
2018
£m
4
Cumulative changes in fair
value from inception
2019
£m
(26)
2018
£m
(35)
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. Derivatives are used to hedge interest rate, credit risk, inflation risk, exchange rate, commodity, and equity exposures and
exposures to certain indices such as house price indices and retail price indices related to non-trading positions.
All derivative instruments are held at fair value through profit or loss, except for derivatives that are in a designated cash flow or net investment
hedge accounting relationship. Derivatives are classified as assets when their fair value is positive or as liabilities when their fair value is
negative. This includes terms included in a contract or financial liability (the host), which, had it been a standalone contract, would have met
the definition of a derivative. If these are separated from the host, i.e. when the economic characteristics of the embedded derivative are not
closely related with those of the host contract and the combined instrument is not measured at fair value through profit or loss, then they are
accounted for in the same way as derivatives. For financial assets, the requirements are whether the financial asset contain contractual terms
that give rise on specified dates to cash flows that are SPPI, and consequently the requirements for accounting for embedded derivatives are
not applicable to financial assets.
Hedge accounting
The Group applies the requirements of IAS 39 Financial Instruments: Recognition and Measurement for hedge accounting purposes. The
Group applies hedge accounting to represent the economic effects of its interest rate, currency and contractually linked inflation risk
management strategies. Where derivatives are held for risk management purposes, and when transactions meet the required criteria for
documentation and hedge effectiveness, the Group applies fair value hedge accounting, cash flow hedge accounting, or hedging of a net
investment in a foreign operation, as appropriate to the risks being hedged.
The Group has elected to early adopt the ‘Amendments to IAS 39 and IFRS 7 Interest Rate Benchmark Reform’ issued in September 2019. In
accordance with the transition provisions, the amendments have been adopted retrospectively to hedging relationships that existed at the start
of the reporting period or were designated thereafter, and to the amount accumulated in the cash flow hedge reserve at that date.
The amendments provide temporary relief from applying specific hedge accounting requirements to hedging relationships directly affected by
IBOR (Interbank Offered Rates) reform. The reliefs have the effect that IBOR reform should not generally cause hedge accounting to terminate.
However, any hedge ineffectiveness continues to be recorded in the income statement. Furthermore, the amendments set out triggers for
when the reliefs will end, which include the uncertainty arising from interest rate benchmark reform no longer being present.
In summary, the reliefs provided by the amendments that apply to the Group are:
■■ When considering the ‘highly probable’ requirement, the Group has assumed that the IBOR interest rates upon which our hedged items are
based do not change as a result of IBOR reform.
■■ In assessing whether the hedge is expected to be highly effective on a forward-looking basis the Group has assumed that the IBOR interest
rates upon which the cash flows of the hedged items and the interest rate swaps that hedge them are based are not altered by IBOR reform.
■■ The Group will not discontinue hedge accounting during the period of IBOR-related uncertainty solely because the retrospective
effectiveness falls outside the required 80–125% range.
■■ The Group has not recycled the cash flow hedge reserve relating to the period after the reforms are expected to take effect.
■■ The Group has assessed whether the hedged IBOR risk component is a separately identifiable risk only when it first designates a hedged
item in a fair value hedge and not on an ongoing basis.
270 Barclays PLC Annual Report 2019
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14 Derivative financial instruments continued
Further amendments are expected for future accounting periods following completion of the second part of the IASB’s two-phased project
which focuses on the impacts of IBOR reform on financial reporting.
Fair value hedge accounting
Changes in fair value of derivatives that qualify and are designated as fair value hedges are recorded in the income statement, together with
changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The fair value changes adjust the carrying value
of the hedged asset or liability held at amortised cost.
If hedge relationships no longer meet the criteria for hedge accounting, hedge accounting is discontinued. For fair value hedges of interest rate
risk, the fair value adjustment to the hedged item is amortised to the income statement over the period to maturity of the previously
designated hedge relationship using the effective interest method. If the hedged item is sold or repaid, the unamortised fair value adjustment is
recognised immediately in the income statement. For items classified as fair value through other comprehensive income, the hedge accounting
adjustment is included in other comprehensive income.
Cash flow hedge accounting
For qualifying cash flow hedges, the fair value gain or loss associated with the effective portion of the cash flow hedge is recognised initially in
other comprehensive income, and then recycled to the income statement in the periods when the hedged item will affect profit or loss. Any
ineffective portion of the gain or loss on the hedging instrument is recognised in the income statement immediately.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss
existing in equity at that time remains in equity and is recognised when the hedged item is ultimately recognised in the income statement.
When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was recognised in equity is immediately
transferred to the income statement.
Hedges of net investments
The 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
2019
2018
Total derivative assets/(liabilities) held for trading
Total derivative assets/(liabilities) held for risk management
Derivative assets/(liabilities)
Notional
contract
amount
£m
42,111,110
181,375
42,292,485
Fair value
Liabilities
£m
Notional
contract
amount
£m
(228,617) 44,193,753
180,202
(229,204) 44,373,955
(587)
Assets
£m
229,063
173
229,236
Fair value
Assets
£m
222,384
154
222,538
Liabilities
£m
(219,578)
(65)
(219,643)
Further information on netting arrangements of derivative financial instruments can be found within Note 18.
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14 Derivative financial instruments continued
The fair values and notional amounts of derivative instruments held for trading and held for risk management are set out in the following table:
Derivatives held for trading and held for risk management
Derivatives held for trading
Foreign exchange derivatives
OTC derivatives
Derivatives cleared by central counterparty
Exchange traded derivatives
Foreign exchange derivatives
Interest rate derivatives
OTC derivatives
Derivatives cleared by central counterparty
Exchange traded derivatives
Interest rate derivatives
Credit derivatives
OTC derivatives
Derivatives cleared by central counterparty
Credit derivatives
Equity and stock index derivatives
OTC derivatives
Exchange traded derivatives
Equity and stock index derivatives
Commodity derivatives
OTC derivatives
Exchange traded derivatives
Commodity derivatives
Derivative assets/(liabilities) held for trading
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
Derivatives held for risk management
Derivatives designated as cash flow hedges
OTC interest rate derivatives
Interest rate derivatives cleared by central counterparty
Derivatives designated as cash flow hedges
Derivatives designated as fair value hedges
OTC interest rate derivatives
Interest rate derivatives cleared by central counterparty
Derivatives designated as fair value hedges
Derivatives designated as hedges of net investments
OTC foreign exchange derivatives
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
2019
2018
Notional
contract
amount
£m
Fair value
Assets
£m
Liabilities
£m
Notional
contract
amount
£m
Fair value
Assets
£m
Liabilities
£m
4,906,647
74,698
18,520
4,999,865
56,480
84
12
56,576
(56,845) 5,193,761
72,526
23,585
(57,021) 5,289,872
(145)
(31)
64,018
163
7
64,188
(63,887)
(233)
(7)
(64,127)
12,627,808
17,428,460
5,041,948
35,098,216
140,207
867
1,251
142,325
(133,401) 9,969,325
(1,093) 16,083,853
(1,265) 11,087,714
(135,759) 37,140,892
123,706
1,056
356
125,118
(119,289)
(1,016)
(323)
(120,628)
399,386
426,130
825,516
5,253
2,962
8,215
(5,399)
(2,687)
(8,086)
386,508
372,567
759,075
232,050
841,994
1,074,044
10,628
10,178
20,806
(15,785)
(10,849)
(26,634)
190,496
692,435
882,931
7,327
106,142
113,469
42,111,110
18,173,218
17,929,288
6,008,604
42,111,110
303
838
1,141
229,063
212,871
3,913
12,279
229,063
(256)
(861)
(1,117)
9,756
111,227
120,983
(228,617) 44,193,753
(211,686) 15,749,846
(3,925) 16,528,946
(13,006) 11,914,961
(228,617) 44,193,753
6,575
4,180
10,755
9,711
11,171
20,882
521
920
1,441
222,384
204,531
5,399
12,454
222,384
(5,239)
(4,280)
(9,519)
(11,830)
(12,066)
(23,896)
(408)
(1,000)
(1,408)
(219,578)
(200,653)
(5,529)
(13,396)
(219,578)
1,195
66,578
67,773
8,379
104,078
112,457
1,145
1,145
181,375
10,719
170,656
181,375
7
–
7
136
–
136
30
30
173
173
–
173
(1)
–
(1)
2,075
73,314
75,389
(586)
–
(586)
–
–
(587)
2,065
99,780
101,845
2,968
2,968
180,202
(587)
7,108
–
(587)
173,094
180,202
11
–
11
143
–
143
–
–
154
154
–
154
(6)
–
(6)
(49)
–
(49)
(10)
(10)
(65)
(65)
–
(65)
272 Barclays PLC Annual Report 2019
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Assets and liabilities held at fair valueNOTES TO THE FINANCIAL STATEMENTS
14 Derivative financial instruments continued
Hedge accounting
Hedge accounting is applied predominantly for the following risks:
■■ interest rate risk – arises due to a mismatch between fixed interest rates and floating interest rates. Interest rate risk also includes exposure
to inflation risk for certain types of investments
■■ currency risk – arises due to assets or liabilities being denominated in different currencies than the functional currency of the relevant entity.
At a consolidated level, currency risk also arises when the functional currency of subsidiaries are different from the parent
■■ contractually linked inflation risk – arises from financial instruments within contractually specified inflation risk. The Group does not hedge
inflation risk that arises from other activities.
In order to hedge these risks, the Group uses the following hedging instruments:
■■ interest rate derivatives to swap interest rate exposures into either fixed or variable rates
■■ currency derivatives to swap foreign currency net investment exposure to local currency
■■ inflation derivatives to swap inflation exposure into either fixed or variable interest rates.
In some cases, certain items which are economically hedged may be ineligible hedged items for the purposes of IAS 39, such as core deposits and
equity. In these instances, a proxy hedging solution can be utilised whereby portfolios of floating rate assets are designated as eligible hedged
items in cash flow hedges.
In some hedging relationships, the Group designates risk components of hedged items as follows:
■■ benchmark interest rate risk as a component of interest rate risk, such as the LIBOR or Risk Free Rate (RFR) component
■■ inflation risk as a contractually specified component of a debt instrument
■■ spot exchange rate risk for foreign currency financial assets or financial liabilities
■■ components of cash flows of hedged items, for example certain interest payments for part of the life of an instrument.
Using the benchmark interest rate risk results in other risks, such as credit risk and liquidity risk, being excluded from the hedge accounting
relationship. LIBOR is considered the predominant interest rate risk and therefore the hedged items change in fair value on a fully proportionate
basis with reference to this risk.
In respect of many of the Group’s hedge accounting relationships, the hedged item and hedging instrument change frequently due to the dynamic
nature of the risk management and hedge accounting strategy. The Group applies hedge accounting to dynamic scenarios, predominantly in
relation to interest rate risk, with a combination of hedged items in order for its financial statements to reflect as closely as possible the economic
risk management undertaken. In some cases, if the hedge accounting objective changes, the relevant hedge accounting relationship is
de-designated and is replaced with a different hedge accounting relationship.
Changes in the GBP value of net investments due to foreign currency movements are captured in the currency translation reserve, resulting in a
movement in CET1 capital. The Group mitigates this by matching the CET1 capital movements to the revaluation of the foreign currency RWA
exposures. Net investment hedges are designated where necessary to reduce the exposure to movement in a particular exchange rate to within
limits mandated by risk. As far as possible, existing external currency liabilities are designated as the hedging instruments.
The hedging instruments share the same risk exposures as the hedged items. Hedge effectiveness is determined with reference to quantitative
tests, predominantly regression testing, but to the extent hedging instruments are exposed to different risks than the hedged items, this could
result in hedge ineffectiveness or hedge accounting failures.
Sources of ineffectiveness include the following:
■■ mismatches between the contractual terms of the hedged item and hedging instrument, including basis differences
■■ changes in credit risk of the hedging instruments
■■ if a hedging relationship becomes over-hedged, for example in hedges of net investments if the net asset value designated at the start of the
period falls below the amount of the hedging instrument
■■ cash flow hedges using external swaps with non-zero fair values
■■ the effects of the forthcoming reforms to IBOR because these might take effect at a different time and have a different impact on hedged items
and hedging instruments.
Across all benchmarks which Barclays is materially exposed to, there is still uncertainty regarding the precise timing and effects of IBOR reform.
There is yet to be full consensus regarding methodologies for converging existing IBORs to their final benchmark rates. As such, Barclays has not
incorporated any change in assumptions for affected benchmarks into its expectations or calculations. Barclays does, however, assume sufficient
liquidity in IBOR linked benchmarks to provide reliable valuation calculations of both hedged items and hedging instruments (notwithstanding
reliefs already applied within the financial reporting).
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Interest Rate Benchmark Reform
Following the financial crisis, the reform and replacement of benchmark interest rates such as IBOR has become a priority for global regulators.
Since the changes are market driven, there is currently some uncertainty around the timing and precise nature of these changes.
The Group’s risk exposure is directly affected by interest rate benchmark reform, across both its cash flow hedge accounting activities; where
IBOR-linked derivatives are designated as a cash flow hedge of IBOR-linked cash flows, and its fair value hedge accounting activities; where
IBOR-linked derivatives are designated as a fair value hedge of fixed interest rate assets and liabilities.
The Group’s risk exposure is predominately to GBP, USD, EUR, JPY and AUD LIBOR with the vast majority concentrated in derivatives within the
Corporate and Investment Bank. Some additional exposure resides on floating rate loans and advances and debt securities held and issued within
the Corporate and Investment Bank. Retail lending and mortgage exposure in Barclays UK is minimal. Approaches to transition will vary product by
product, and counterparty by counterparty. Barclays expected derivative contracts facing central clearing counterparties to follow a market-wide,
standardised approach to reform. Whereas bilateral derivative agreements, loan agreements and other cash securities to largely be negotiated
bilaterally with the counterparty.
There are key differences between IBORs and RFRs. IBORs are ‘term rates’, which means that they are published for a borrowing period (for
example three months), and they are ‘forward-looking’, because they are published at the beginning of a borrowing period, based upon an
estimated inter-bank borrowing cost for the period. RFRs are typically ‘backward-looking’ rates, as they are based upon overnight rates from
actual transactions, and are therefore published at the end of the overnight borrowing period. Furthermore, IBORs include a credit spread over the
RFR. Therefore, to transition existing contracts and agreements to RFR, adjustments for term and credit differences may need to be applied to
RFR-linked rates to enable the two benchmarks to be economically equivalent upon transition. The methodologies for determining these
adjustments are undergoing in-depth consultations by industry working groups, on behalf of the respective global regulators and related market
participants.
Barclays has established a Group-wide LIBOR Transition Programme, with oversight from the Group Finance Director and with cross-business line
and functions-support governance. The Transition Programme follows a risk management approach, based upon recognised ‘change delivery’
control standards, to drive strategic execution, and identify, manage and resolve key risks and issues as they arise. Accountable Executives are in
place within key working groups, with overall Board oversight delegated to the Board Risk Committee and the Group Finance Director. Barclays
performs a prominent stewardship role to drive orderly transition via our representation on official sector and industry working groups across all
major jurisdictions and product classes. The Group is actively engaging with the counterparties to include appropriate fallback provisions in its
floating rate assets and liabilities with maturities after 2021, when most IBORs are expected to cease to exist. We expect that the hedging
instruments will be modified by the amendments to the 2006 ISDA definitions that will include fallback provisions for when the existing IBORs are
permanently discontinued. Additionally, the Group Finance Director is Chair of the UK’s ‘Working Group on Sterling Risk-Free Reference Rates’,
whose mandate is to catalyse a broad-based transition to using SONIA (Sterling Overnight Index Average) as the primary Sterling interest rate
benchmark in bond, loan and derivatives markets. Further, hedge accounting specific impacts of IBOR reform are expected as transition
progresses, with impact on financial reporting becoming clearer following anticipated completion of Phase 2 of the IASB’s IBOR Reform project.
Amount, timing and uncertainty of future cash flows
The following table shows the hedging instruments which are carried on the Group’s balance sheet:
Hedge type
As at 31 December 2019
Fair value
Cash flow
Net investment
As at 31 December 2018
Fair value
Cash flow
Net investment
Risk category
Interest rate risk
Inflation risk
Interest rate risk
Inflation risk
Foreign exchange risk
Interest rate risk
Inflation risk
Interest rate risk
Foreign exchange risk
Derivative
assets
£m
Carrying value
Derivative
liabilities
£m
Loan
liabilities
£m
Nominal
amount
£m
Change in
fair value
used as a
basis to
determine
ineffectiveness
£m
Nominal
amount
directly
impacted by
IBOR reform
£m
110
26
3
4
30
106
37
11
–
(44)
(542)
(1)
–
–
–
–
–
–
(10,051)
104,568
7,889
66,515
1,258
11,196
(1,571)
(82)
739
31
288
55,552
6,101
15,223
–
–
(41)
(8)
(6)
(10)
–
–
–
(12,325)
98,320
3,525
75,389
15,300
135
29
(380)
(745)
n/a
n/a
n/a
n/a
274 Barclays PLC Annual Report 2019
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Assets and liabilities held at fair valueNOTES TO THE FINANCIAL STATEMENTS
14 Derivative financial instruments continued
The following table summarises the significant hedge accounting exposures impacted by the IBOR reform as at 31 December 2019:
Current benchmark rate
GBP London Interbank Offered Rate (LIBOR)
USD LIBOR/Effective Federal Funds Rate (EFFR)
Euro Overnight Index Average (EONIA)
JPY LIBOR
AUD LIBOR
All Other IBORs
Expected convergence to RFR
Reformed Sterling Overnight Index Average (SONIA)
Secured Overnight Financing Rate (SOFR)
Euro Short-Term Rate (€STR)
Tokyo Overnight Average (TONA)
Bank Bill Swap Rate (BBSW)/Overnight Cash Rate (AONIA)
Various Other RFRs
Nominal
amount of
hedged items
directly
impacted by
IBOR reform
£m
14,733
57,941
3,009
1,428
1,183
1,199
Nominal
amount of
hedging
instruments
directly
impacted by
IBOR reform
£m
12,269
57,967
3,009
1,428
1,183
1,020
The Group’s exposure risk management also includes the use of the Euro Interbank Offered Rate (EURIBOR). The calculation methodology of
EURIBOR changed during 2019. In July 2019, the Belgian Financial Services and Markets Authority granted authorisation with respect to EURIBOR
under the European Union Benchmarks Regulation. This allows market participants to continue to use EURIBOR after 1 January 2020 for both
existing and new contracts. The Group expects that EURIBOR will continue to exist as a benchmark rate for the foreseeable future. The Group
does not anticipate changing the hedged risk to a different benchmark. For these reasons, the Group does not consider its fair value or cash flow
hedges of the EURIBOR benchmark interest rate to be directly affected by interest rate benchmark reform at 31 December 2019.
The following table profiles the expected notional values of current hedging instruments in future years:
As at 31 December
Fair value hedges of interest rate risk
Notional amount
Fair value hedges of inflation risk
Notional amount
2020
£m
2021
£m
2022
£m
2023
£m
2024
£m
2025
and later
£m
97,933
79,192
64,625
57,432
44,630
38,488
6,675
5,519
4,560
3,589
3,036
2,025
There are 2,308 (2018: 1,805) interest rate risk fair value hedges with an average fixed rate of 2.13% (2018: 2.79%) across the relationships and
117 (2018: 44) inflation risk fair value hedges with an average rate of 0.7% (2018: 1%) across the relationships.
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:
2019
Forecast receivable cash flows
2018
Forecast receivable cash flows
Total
£m
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
1,696
493
409
324
238
122
110
2,599
685
717
536
346
200
115
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 (2018: 10 years).
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14 Derivative financial instruments continued
Hedged items in fair value hedges
Hedged item statement of financial position classification and risk category
2019
Assets
Loans and advances at amortised cost
– Interest rate risk
– Inflation risk
Financial assets at fair value through other comprehensive income
– Interest rate risk
– Inflation risk
Debt securities classified as amortised cost
– Interest rate risk
– Inflation risk
Liabilities
Debt securities in issue
– Interest rate risk
2018
Assets
Loans and advances at amortised cost
– Interest rate risk
– Inflation risk
Financial assets at fair value through other comprehensive income
– Interest rate risk
– Inflation risk
Liabilities
Debt securities in issue
– Interest rate risk
Note
a Hedge ineffectiveness is recognised in net interest income.
Accumulated fair value
adjustment included in
carrying amount
Of which:
Accumulated
fair value
adjustment
on items no
longer in a
hedge
relationship
£m
Change in
fair value
used as a
basis to
determine
ineffectiveness
£m
Hedge
ineffectiveness
recognised in
the income
statementa
£m
Carrying
amount
£m
Total
£m
8,442
525
32,169
7,811
2,974
2,258
694
325
922
87
(1)
(41)
(643)
–
494
–
–
–
1,030
(2)
2,046
111
(1)
(41)
76
1
(4)
(16)
–
1
(55,589)
(1,574)
(75)
(1,445)
(13)
7,106
512
30,108
2,907
(363)
312
416
(20)
(626)
–
(21)
–
(568)
2
(96)
(50)
53,935
(289)
(256)
549
37
(1)
17
(18)
(34)
For items classified as fair value through other comprehensive income, the hedge accounting adjustment is not included in the carrying amount,
but rather adjusts other comprehensive income.
276 Barclays PLC Annual Report 2019
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Assets and liabilities held at fair valueNOTES TO THE FINANCIAL STATEMENTS
14 Derivative financial instruments continued
Hedged items in cash flow hedges and hedges of net investments in foreign operations
Change in value
of hedged item
used as the
basis for
recognising
ineffectiveness
£m
Balance in
cash flow
hedging
reserve for
continuing
hedges
£m
Balance in
currency
translation
reserve for
continuing
hedges
£m
Balances
remaining in
cash flow
hedging
reserve for
which hedge
accounting
is no longer
applied
£m
Balances
remaining in
currency
translation
reserve for
which hedge
accounting
is no longer
applied
£m
Hedging
gains
or losses
recognised in
other
comprehensive
income
£m
Hedge
ineffectiveness
recognised in
the income
statementa
£m
(696)
(29)
(223)
(26)
–
–
(1,072)
–
215
70
3
288
375
719
–
25
744
–
–
–
–
1,087
(1)
1
1,087
–
–
–
–
(44)
–
(827)
–
–
–
–
1,648
1
(3)
1,646
–
–
–
–
–
–
–
16
240
256
–
–
86
241
327
(706)
(25)
215
70
3
288
334
719
–
25
744
43
2
–
–
–
–
(5)
–
–
(1)
(1)
Description of hedge relationship and hedged risk
2019
Cash flow hedge of interest rate risk
Loans and advances at amortised cost
Debt securities classified as amortised cost
Hedge of net investment in foreign operations
USD foreign operations
EUR foreign operations
Other foreign operations
Total foreign operations
2018
Cash flow hedge of interest rate risk
Loans and advances at amortised cost
Hedge of net investment in foreign operations
USD foreign operations
EUR foreign operations
Other foreign operations
Total foreign operations
Note
a Hedge ineffectiveness is recognised in net interest income.
The effect on the income statement and other comprehensive income of recycling amounts in respect of cash flow hedges and net investment
hedges of foreign operations is set out in the following table:
Description of hedge relationship and hedged risk
Cash flow hedge of interest rate risk
Recycled to interest income
Hedge of net investment in foreign operations
Recycled to other income
2019
2018
Amount recycled
from other
comprehensive
income due to
hedged item
affecting income
statement
£m
Amount recycled
from other
comprehensive
income due to
sale or disposal
of investment
£m
Amount recycled
from other
comprehensive
income due to
hedged item
affecting income
statement
£m
Amount recycled
from other
comprehensive
income due to
sale or disposal
of investment
£m
259
–
18
15
332
–
–
(41)
A detailed reconciliation of the movements of the cash flow hedging reserve and the currency translation reserve is as follows:
2019
2018
Balance on 1 January
Currency translation movements
Hedging gains/(losses) for the year
Amounts reclassified in relation to cash flows affecting profit or loss
Tax
Balance on 31 December
Cash flow
hedging reserve
£m
660
Currency
translation reserve
£m
3,888
(816)
287
(15)
–
3,344
(7)
731
(277)
(105)
1,002
Cash flow
hedging reserve
£m
1,161
(10)
(334)
(332)
175
660
Currency
translation reserve
£m
3,054
1,537
(744)
41
–
3,888
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Barclays PLC Annual Report 2019 277
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements
15 Financial assets at fair value through other comprehensive income
Accounting for financial assets at fair value through other comprehensive income (FVOCI) under IFRS 9 effective from
1 January 2018
Financial assets that are debt instruments held in a business model that is achieved by both collecting contractual cash flows and selling and
that contain contractual terms that give rise on specified dates to cash flows that are SPPI are measured at FVOCI. They are subsequently
remeasured at fair value and changes therein (except for those relating to impairment, interest income and foreign currency exchange gains
and losses) are recognised in other comprehensive income until the assets are sold. Interest (calculated using the effective interest method) is
recognised in the income statement in net interest income (Note 3). Upon disposal, the cumulative gain or loss recognised in other
comprehensive income is included in net investment income.
In determining whether the business model is achieved by both collecting contractual cash flows and selling financial assets, it is determined
that both collecting contractual cash flows and selling financial assets are integral to achieving the objective of the business model. The Group
will consider past sales and expectations about future sales to establish if the business model is achieved.
For equity securities that are not held for trading, the Group may make an irrevocable election on initial recognition to present subsequent
changes in the fair value of the instrument in other comprehensive income (except for dividend income which is recognised in profit or loss).
Gains or losses on the derecognition of these equity securities are not transferred to profit or loss. These assets are also not subject to the
impairment requirements and therefore no amounts are recycled to the income statement. Where the Group has not made the irrevocable
election to present subsequent changes in the fair value of the instrument in other comprehensive income, equity securities are measured at
fair value through profit or loss.
Accounting for financial investments under IAS 39 for 2017
Available for sale financial assets are held at fair value with gains and losses being included in other comprehensive income. The Group uses
this classification for assets that are not derivatives and are not held for trading purposes or otherwise designated at fair value through profit or
loss, or at amortised cost. Dividends and interest (calculated using the effective interest method) are recognised in the income statement in net
interest income or, net investment income. On disposal, the cumulative gain or loss recognised in other comprehensive income is also included
in net investment income.
Held to maturity assets are held at 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.
Debt securities and other eligible bills
Equity securities
Loans and advances
Financial assets at fair value through other comprehensive income
2019
£m
64,103
1,023
624
65,750
2018
£m
51,026
1,122
668
52,816
278 Barclays PLC Annual Report 2019
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Assets and liabilities held at fair valueNOTES TO THE FINANCIAL STATEMENTS 16 Financial liabilities designated at fair value
Accounting for liabilities designated at fair value through profit and loss
In accordance with IFRS 9, financial liabilities may be designated at fair value, with gains and losses taken to the income statement within net
trading income (Note 5) and net investment income (Note 6). Movements in own credit are reported through other comprehensive income,
unless the effects of changes in the liability’s credit risk would create or enlarge an accounting mismatch in P&L. In these scenarios, all gains
and losses on that liability (including the effects of changes in the credit risk of the liability) are presented in P&L. On derecognition of the
financial liability no amount relating to own credit risk are recycled to the income statement. 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 14).
The details on how the fair value amounts are arrived for financial liabilities designated at fair value are described in Note 17.
Debt securities
Deposits
Repurchase agreements and other similar secured borrowing
Other financial liabilities
Financial liabilities designated at fair value
The cumulative own credit net loss recognised is £373m (2018: £121m loss).
17 Fair value of financial instruments
2019
2018
Contractual
amount due
on maturity
£m
56,891
25,725
128,706
694
212,016
Fair value
£m
49,559
25,526
128,547
694
204,326
Contractual
amount due
on maturity
£m
54,159
32,029
138,724
19
224,931
Fair value
£m
46,649
31,682
138,484
19
216,834
Accounting for financial assets and liabilities – fair values
Financial instruments that are held for trading are recognised at fair value through profit or loss. In addition, financial assets are held at fair
value through profit or loss if they do not contain contractual terms that give rise on specified dates to cash flows that are SPPI, or if the
financial asset is not held in a business model that is either (i) a business model to collect the contractual cash flows or (ii) a business model
that is achieved by both collecting contractual cash flows and selling. Subsequent changes in fair value for these instruments are recognised in
the income statement in net investment income, except if reporting it in trading income reduces an accounting mismatch.
All financial instruments are initially recognised at fair value on the date of initial recognition (including transaction costs, other than financial
instruments held at fair value through profit or loss) and depending on the subsequent classification of the financial asset or liability, may
continue to be held at fair value either through profit or loss or other comprehensive income. The fair value of a financial instrument is the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date.
Wherever possible, fair value is determined by reference to a quoted market price for that instrument. For many of the 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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Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements 17 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 288.
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 Barclays 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 at fair value through the
income statement
Derivative financial assets
Financial assets at fair value through other
comprehensive income
Investment property
Total assets
2019
Valuation technique using
Level 3
£m
2,264
Level 2
£m
51,579
Level 1
£m
60,352
Total
£m
114,195
Level 1
£m
51,029
2018
Valuation technique using
Level 3
£m
3,613
Level 2
£m
49,545
Total
£m
104,187
10,445
5,439
114,141
220,642
8,500
3,155
133,086
229,236
8,918
6,813
131,348
210,510
9,382
5,215
149,648
222,538
18,755
–
94,991
46,566
–
432,928
429
13
14,361
65,750
13
542,280
19,764
–
86,524
32,697
–
424,100
355
9
18,574
52,816
9
529,198
Trading portfolio liabilities
Financial liabilities designated at fair value
Derivative financial liabilities
Total liabilities
(20,977)
(82)
(5,305)
(26,364)
(15,939)
(203,882)
(219,910)
(439,731)
–
(362)
(3,989)
(4,351)
(36,916)
(204,326)
(229,204)
(470,446)
(20,654)
(76)
(6,152)
(26,882)
(17,225)
(216,478)
(208,748)
(442,451)
(3)
(280)
(4,743)
(5,026)
(37,882)
(216,834)
(219,643)
(474,359)
280 Barclays PLC Annual Report 2019
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Assets and liabilities held at fair valueNOTES TO THE FINANCIAL STATEMENTS 17 Fair value of financial instruments continued
The following table shows the Barclays Group’s Level 3 assets and liabilities that are held at fair value disaggregated by product type:
Level 3 assets and liabilities held at fair value by product type
Interest rate derivatives
Foreign exchange derivatives
Credit derivatives
Equity derivatives
Commodity derivatives
Corporate debt
Reverse repurchase and repurchase agreements
Non-asset backed loans
Asset backed securities
Equity cash products
Private equity investments
Othera
Total
2019
2018
Assets
£m
605
291
539
1,711
9
521
–
6,811
756
1,228
899
991
14,361
Liabilities
£m
(812)
(298)
(342)
(2,528)
(9)
–
(167)
–
–
–
(19)
(176)
(4,351)
Assets
£m
2,478
192
1,381
1,136
28
456
768
8,304
688
698
1,071
1,374
18,574
Liabilities
£m
(2,456)
(185)
(331)
(1,743)
(28)
–
–
–
–
(3)
(19)
(261)
(5,026)
Note
a Other includes commercial real estate loans, funds and fund-linked products, issued debt, government sponsored debt and investment property.
Valuation techniques and sensitivity analysis
Sensitivity analysis is performed on products with significant unobservable inputs (Level 3) to generate a range of reasonably possible alternative
valuations. The sensitivity methodologies applied take account of the nature of the valuation techniques used, as well as the availability and
reliability of observable proxy and historical data and the impact of using alternative models.
Sensitivities are dynamically calculated on a monthly basis. The calculation is based on range or spread data of a reliable reference source or a
scenario based on relevant market analysis alongside the impact of using alternative models. Sensitivities are calculated without reflecting the
impact of any diversification in the portfolio.
The valuation techniques used, observability and sensitivity analysis for material products within Level 3, are described below.
Interest rate derivatives
Description: 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.
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.
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.
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Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements 17 Fair value of financial instruments continued
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) and asset backed CDS.
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.
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.
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.
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.
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.
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.
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.
282 Barclays PLC Annual Report 2019
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Assets and liabilities held at fair valueNOTES TO THE FINANCIAL STATEMENTS 17 Fair value of financial instruments continued
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.
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.
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.
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 no material transfers between Level 1 and Level 2 (2018: there were no material transfers between Level 1
and Level 2).
Level 3 movement analysis
The following table summarises the movements in the Level 3 balances during the period. The table shows gains and losses and includes amounts
for all financial assets and liabilities that are held at fair value transferred to and from Level 3 during the period. Transfers have been reflected as if
they had taken place at the beginning of the year.
Asset and liability transfers between Level 2 and Level 3 are primarily due to i) an increase or decrease in observable market activity related to an
input or ii) a change in the significance of the unobservable input, with assets and liabilities classified as Level 3 if an unobservable input is
deemed significant.
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Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements 17 Fair value of financial instruments continued
Analysis of movements in Level 3 assets and liabilities
As at
1 January
2019
£m
388
2,263
664
136
162
3,613
Purchases
£m
126
1,844
202
62
–
2,234
Sales
£m
(52)
(2,799)
(166)
(40)
–
(3,057)
Issues
£m
–
–
–
–
–
–
Settlements
£m
(311)
(134)
–
–
(1)
(446)
Total gains and losses
in the period
recognised in the
income statement
Trading
income
£m
1
24
(30)
(31)
(24)
(60)
Other
income
£m
–
–
–
–
–
–
Total gains
or losses
recognised
in OCI
£m
–
–
–
–
–
–
Corporate debt
Non-asset backed loans
Asset backed securities
Equity cash products
Other
Trading portfolio assets
Non-asset backed loans
Equity cash products
Private equity investments
Other
Financial assets at fair value
through the income statement
5,688
559
1,071
2,064
235
66
45
5,719
–
–
(121)
(5,720)
9,382
6,065
(5,841)
Non-asset backed loans
Asset backed securities
Equity cash products
Other
Financial assets at fair value
through other comprehensive
income
Investment property
Trading portfolio liabilities
Financial liabilities designated
at fair value
–
–
2
353
283
116
–
–
–
(30)
(1)
–
355
399
(31)
9
(3)
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(755)
(2)
(28)
(9)
343
3
–
12
(1)
209
55
(15)
(794)
358
248
–
–
–
(135)
(135)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1)
–
(280)
(179)
10
(42)
41
67
(2)
Interest rate derivatives
Foreign exchange derivatives
Credit derivatives
Equity derivatives
Net derivative financial
instrumentsa
22
7
1,050
(607)
(9)
–
(59)
(296)
–
–
3
(35)
472
(364)
(32)
–
–
–
–
–
88
25
(866)
(2)
(92)
(12)
76
(296)
(755)
(324)
–
–
–
–
–
Transfers
In
£m
45
200
16
293
–
554
–
–
41
24
Out
£m
(77)
(424)
(30)
(28)
(15)
(574)
(16)
–
(163)
(804)
As at 31
December
2019
£m
120
974
656
392
122
2,264
5,494
835
900
1,271
65
(983)
8,500
–
–
–
–
–
–
–
–
–
–
(218)
343
86
–
–
(218)
429
–
3
13
–
(27)
50
(362)
(177)
(32)
(9)
(37)
(38)
5
3
454
(206)
(7)
198
(819)
(255)
424
(834)
–
–
–
–
–
60
–
(1)
–
59
–
–
–
–
–
–
–
–
Total
13,548
8,160
(8,951)
(42)
(2,089)
41
245
59
337
(1,298) 10,010
Note
a The derivative financial instruments are represented on a net basis. On a gross basis, derivative financial assets are £3,155m (2018: £5,215m) and derivative financial liabilities are
£3,989m (2018: £4,743m).
284 Barclays PLC Annual Report 2019
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Assets and liabilities held at fair valueNOTES TO THE FINANCIAL STATEMENTS 17 Fair value of financial instruments continued
Analysis of movements in Level 3 assets and liabilities
Corporate debt
Non-asset backed loans
Asset backed securities
Equity cash products
Other
Trading portfolio assets
Non-asset backed loans
Equity cash products
Private equity investments
Other
Financial assets at fair value
through the income statement
Equity cash products
Private equity investments
Other
Financial assets at fair value
through other comprehensive
income
Investment property
Trading portfolio liabilities
Financial liabilities designated
at fair value
Interest rate derivatives
Foreign exchange derivatives
Credit derivatives
Equity derivatives
Net derivative financial
instruments
As at
1 January
2018
£m
871
166
627
68
245
1,977
Purchases
£m
108
5,514
205
18
18
5,863
6,073
398
688
360
74
87
279
6,624
Sales
£m
(88)
(3,480)
(168)
(9)
(55)
(3,800)
–
(1)
(114)
(4,920)
7,519
7,064
(5,035)
36
129
40
205
116
(4)
(480)
(150)
37
1,146
(896)
–
–
–
–
9
–
–
(16)
–
–
(16)
(115)
–
–
1
–
(6)
72
(1)
–
3
(570)
137
67
(568)
Total gains and losses
in the period
recognised in the
income statement
Trading
income
£m
9
–
(21)
(16)
(32)
(60)
Other
income
£m
–
–
–
–
–
–
Total gains
or losses
recognised
in OCI
£m
–
–
–
–
–
–
Issues
£m
–
–
–
–
–
–
Settlements
£m
(23)
–
(2)
–
(20)
(45)
–
–
–
–
–
–
–
–
–
–
–
(508)
–
–
(47)
(555)
–
–
–
–
–
–
49
1
2
29
81
–
–
–
–
–
(3)
–
74
117
18
209
–
–
–
–
(1)
–
(4)
18
33
(10)
–
–
–
–
–
196
(9)
(12)
125
300
(25)
5
(85)
73
(32)
–
–
–
1
1
–
–
–
–
–
–
–
(1)
(1)
–
–
–
–
–
–
–
–
Transfers
In
£m
39
71
58
107
145
420
–
–
125
–
Out
£m
(528)
(8)
(35)
(32)
(139)
(742)
–
–
(26)
–
As at 31
December
2018
£m
388
2,263
664
136
162
3,613
5,688
559
1,071
2,064
125
(26)
9,382
–
–
314
(18)
(129)
–
2
–
353
314
(147)
355
–
–
–
4
9
(3)
(225)
388
(280)
(71)
(13)
7
128
72
(13)
(3)
460
22
7
1,050
(607)
51
516
472
Total
9,470
13,003
(9,534)
(4)
(282)
19
199
(1)
685
(7) 13,548
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Barclays PLC Annual Report 2019 285
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements
17 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 at fair value through the
income statement
Fair value through other comprehensive
income
Investment property
Trading portfolio liabilities
Financial liabilities designated at fair value
Net derivative financial instruments
Total
2019
Income statement
Trading
income
£m
(57)
Other
income
£m
–
Other
compre-
hensive
income
£m
–
346
–
–
–
64
(459)
(106)
246
–
(1)
–
–
–
245
–
60
–
–
–
–
60
2018
Income statement
Trading
income
£m
(60)
Other
income
£m
–
Other
compre-
hensive
income
£m
–
68
–
–
(3)
55
(14)
46
206
–
(1)
–
–
–
205
–
(1)
–
–
–
–
(1)
Total
£m
(57)
592
60
(1)
–
64
(459)
199
Total
£m
(60)
274
(1)
(1)
(3)
55
(14)
250
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)c
Significant
unobservable inputs
2019 Range
Min
Max
2018 Range
Min
Max
Unitsa
Derivative financial
instrumentsb
Interest rate derivatives
Credit derivatives
Equity derivatives
Non-derivative financial
instruments
Non-asset backed loans
Asset backed securities
Private equity investments
Otherd
Discounted cash flows
Comparable pricing
Option model
Discounted cash flows
Comparable pricing
Option model
Discounted cash flow
Discounted cash flows
Comparable pricing
Comparable pricing
EBITDA multiple
Discounted cash flow
Discounted cash flows
Inflation forwards
Credit spread
Price
Inflation volatility
Interest rate volatility
IR – IR correlation
Credit spread
Price
Equity volatility
Equity – equity correlation
Discounted margin
Loan spread
Credit spread
Price
Price
Price
EBITDA multiple
Discount margin
Credit spread
1
41
–
47
8
(30)
72
–
1
(20)
(500)
31
180
–
–
–
5
8
126
3
1,620
37
190
431
100
200
155
200
100
1,100
1,884
1,223
133
123
99
16
10
649
1
6
–
33
10
(26)
142
10
2
(100)
(171)
30
25
–
–
–
7
8
143
2
897
100
174
199
100
209
96
81
100
301
531
800
118
100
102
8
10
575
%
bps
points
bps vol
bps vol
%
bps
points
%
%
bps
bps
bps
points
points
points
Multiple
%
bps
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 basis points equals 1.5%.
b Certain derivative instruments are classified as Level 3 due to a significant unobservable credit spread input into the calculation of the Credit Valuation Adjustment for the
instruments. The range of significant unobservable credit spreads is between 41-1,620bps (2018: 6-897bps).
c A range has not been provided for Net Asset Value as there would be a wide range reflecting the diverse nature of the positions.
d Other includes commercial real estate loans, funds and fund-linked products, issued debt, government sponsored debt and investment property.
286 Barclays PLC Annual Report 2019
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Assets and liabilities held at fair valueNOTES TO THE FINANCIAL STATEMENTS 17 Fair value of financial instruments continued
The following section describes the significant unobservable inputs identified in the table above, and the sensitivity of fair value measurement of
the instruments categorised as Level 3 assets or liabilities to increases in significant unobservable inputs. Where sensitivities are described, the
inverse relationship will also generally apply.
Where reliable interrelationships can be identified between significant unobservable inputs used in fair value measurement, a description of those
interrelationships is included below.
Forwards
A price or rate that is applicable to a financial transaction that will take place in the future.
In general, a significant increase in a forward in isolation will result in a fair value increase for the contracted receiver of the underlying (currency,
bond, commodity, etc.), but the sensitivity is dependent on the specific terms of the instrument.
Credit spread
Credit spreads typically represent the difference in yield between an instrument and a benchmark security or reference rate. Credit spreads reflect
the additional yield that a market participant demands for taking on exposure to the credit risk of an instrument and form part of the yield used in
a discounted cash flow calculation.
In general, a significant increase in credit spread in isolation will result in a movement in a fair value decrease for a cash asset.
For a derivative instrument, a significant increase in credit spread in isolation can result in a fair value increase or decrease depending on the
specific terms of the instrument.
Volatility
Volatility is a measure of the variability or uncertainty in return for a given derivative underlying. It is an estimate of how much a particular
underlying instrument input or index will change in value over time. In general, volatilities are implied from observed option prices. For
unobservable options the implied volatility may reflect additional assumptions about the nature of the underlying risk, and the strike/maturity
profile of a specific contract.
In general a significant increase in volatility in isolation will result in a fair value increase for the holder of a simple option, but the sensitivity is
dependent on the specific terms of the instrument.
There may be interrelationships between unobservable volatilities and other unobservable inputs (e.g. when equity prices fall, implied equity
volatilities generally rise) but these are generally specific to individual markets and may vary over time.
Correlation
Correlation is a measure of the relationship between the movements of two variables. Correlation can be a significant input into valuation of
derivative contracts with more than one underlying instrument. Credit correlation generally refers to the correlation between default processes for
the separate names that make up the reference pool of a CDO structure.
A significant increase in correlation in isolation can result in a fair value increase or decrease depending on the specific terms of the instrument.
Comparable price
Comparable instrument prices are used in valuation by calculating an implied yield (or spread over a liquid benchmark) from the price of a
comparable observable instrument, then adjusting that yield (or spread) to account for relevant differences such as maturity or credit quality.
Alternatively, a price-to-price basis can be assumed between the comparable and unobservable instruments in order to establish a value.
In general, a significant increase in comparable price in isolation will result in an increase in the price of the unobservable instrument. For
derivatives, a change in the comparable price in isolation can result in a fair value increase or decrease depending on the specific terms of the
instrument.
Loan spread
Loan spreads typically represent the difference in yield between an instrument and a benchmark security or reference rate. Loan spreads typically
reflect credit quality, the level of comparable assets such as gilts and other factors, and form part of the yield used in a discounted cash flow
calculation.
The ESHLA portfolio primarily consists of long dated fixed rate loans extended to counterparties in the UK Education, Social Housing and Local
Authority sectors. The loans are categorised as Level 3 in the fair value hierarchy due to their illiquid nature and the significance of unobservable
loan spreads to the valuation. Valuation uncertainty arises from the long dated nature of the portfolio, the lack of secondary market in the loans
and the lack of observable loan spreads. The majority of ESHLA loans are to borrowers in heavily regulated sectors that are considered extremely
low credit risk, and have a history of near zero defaults since inception. While the overall loan spread range is from 31bps to 1,884bps (2018: 30bps
to 531bps), 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.
EBITDA multiple
EBITDA multiple is the ratio of the valuation of the investment to the earnings before interest, taxes, depreciation and amortisation.
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Barclays PLC Annual Report 2019 287
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements 17 Fair value of financial instruments continued
In general, a significant increase in the multiple will result in a fair value increase for an investment.
Sensitivity analysis of valuations using unobservable inputs
Interest rate derivatives
Foreign exchange derivatives
Credit derivatives
Equity derivatives
Commodity derivatives
Corporate debt
Non-asset backed loans
Equity cash products
Private equity investments
Othera
Total
2019
2018
Favourable changes
Income
statement
£m
44
5
73
114
–
11
214
123
205
1
790
Equity
£m
–
–
–
–
–
–
8
–
–
–
8
Unfavourable changes
Income
statement
£m
(127)
(7)
(47)
(119)
–
(16)
(492)
(175)
(235)
(1)
(1,219)
Equity
£m
–
–
–
–
–
–
(8)
–
–
–
(8)
Favourable changes
Income
statement
£m
80
7
126
110
1
10
274
121
230
2
961
Equity
£m
–
–
–
–
–
–
–
–
–
–
–
Unfavourable changes
Income
statement
£m
(162)
(10)
(73)
(112)
(1)
(2)
(458)
(155)
(241)
(2)
(1,216)
Equity
£m
–
–
–
–
–
–
–
–
–
–
–
Note
a Other includes commercial real estate loans, funds and fund-linked products, issued debt, government-sponsored debt and investment property.
The effect of stressing unobservable inputs to a range of reasonably possible alternatives, alongside considering the impact of using alternative
models, would be to increase fair values by up to £798m (2018: £961m) or to decrease fair values by up to £1,227m (2018: £1,216m) with
substantially all the potential effect impacting profit and loss rather than reserves.
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
2019
£m
(429)
(57)
(135)
155
2018
£m
(457)
(47)
(125)
237
Exit price adjustments derived from market bid-offer spreads
The Barclays 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 decreased by £28m to £429m as a result of movements in market bid offer
spreads.
Discounting approaches for derivative instruments
Collateralised
In line with market practice, the methodology for discounting collateralised derivatives takes into account the nature and currency of the collateral
that can be posted within the relevant credit support annex (CSA). The CSA aware discounting approach recognises the ‘cheapest to deliver’
option that reflects the ability of the party posting collateral to change the currency of the collateral.
Uncollateralised
A fair value adjustment of £57m 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 increased by £10m to £57m mainly as a
result of increase in underlying derivative exposures.
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 2019 was to reduce
FFVA by £170m (2018: £141m).
288 Barclays PLC Annual Report 2019
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Assets and liabilities held at fair valueNOTES TO THE FINANCIAL STATEMENTS 17 Fair value of financial instruments continued
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 £36m (2018: £50m) increase in CVA.
Correlation between counterparty credit and underlying derivative risk factors, termed ‘wrong-way,’ or ‘right-way’ risk, is not systematically
incorporated into the CVA calculation but is adjusted where the underlying exposure is directly related to the counterparty.
CVA increased by £10m to £135m, as a result of increase in underlying derivative exposures offset by general tightening in Credit Spreads. DVA
decreased by £82m to £155m, as a result of tightening in Barclays’ credit spreads.
Barclays continues to monitor market practices and activity to ensure the approach to uncollateralised derivative valuation remains appropriate.
Portfolio exemptions
The Barclays 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 Barclays Group measures the fair value of the group of financial assets and liabilities
consistently with how market participants would price the net risk exposure at the measurement date.
Unrecognised gains as a result of the use of valuation models using unobservable inputs
The amount that has yet to be recognised in income that relates to the difference between the transaction price (the fair value at initial
recognition) and the amount that would have arisen had valuation models using unobservable inputs been used on initial recognition, less
amounts subsequently recognised, is £113m (2018: £141m) for financial instruments measured at fair value and £255m (2018: £262m) for
financial instruments carried at amortised cost. There are additions of £41m (2018: £65m), and amortisation and releases of £69m (2018: £33m)
for financial instruments measured at fair value and additions of £7m (2018: £29m) and amortisation and releases of £14m (2018: £20m) for
financial instruments measured at amortised cost.
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 IFRS 9 fair value option includes this third party credit enhancement.
The on-balance sheet value of these brokered certificates of deposit amounted to £3,218m (2018: £4,797m).
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 Barclays Group’s balance sheet:
As at 31 December
Financial assets
Loans and advances
at amortised costa
Reverse repurchase
agreements and other
similar secured lending
Financial liabilities
Deposits at
amortised cost
Repurchase agreements
and other similar secured
borrowing
Debt securities in issue
Subordinated liabilities
2019
2018
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
339,115
337,510
11,145
73,378
250,985
326,406
325,264
4,599
68,955
249,653
3,379
3,379
–
3,379
–
2,308
2,308
–
2,308
–
(415,787)
(415,807)
(327,329)
(78,659)
(9,819)
(394,838)
(394,857)
(348,905)
(40,106)
(5,846)
(14,517)
(76,369)
(18,156)
(14,517)
(78,512)
(18,863)
–
–
–
(14,517)
(76,142)
(18,863)
–
(2,370)
–
(18,578)
(82,286)
(20,559)
(18,578)
(81,687)
(21,049)
–
–
–
(18,578)
(78,315)
(21,049)
–
(3,372)
–
Note
a The fair value hierarchy for finance lease receivables presented within loans and advances at amortised cost, with fair value amounting to £2,002m (2018: £2,057m), is not required
as part of the standard.
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17 Fair value of financial instruments continued
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 19.
Loans and advances at amortised cost
The fair value of loans and advances, for the purpose of this disclosure, is derived from discounting expected cash flows in a way that reflects the
current market price for lending to issuers of similar credit quality. Where market data or credit information on the underlying borrowers is
unavailable, a number of proxy/extrapolation techniques are employed to determine the appropriate discount rates.
Reverse repurchase agreements and other similar secured borrowing
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 1.
Deposits at amortised cost
In many cases, the fair value disclosed approximates carrying value because the instruments are short term in nature or have interest rates that
reprice frequently, such as customer accounts and other deposits and short-term debt securities.
The fair value for deposits with longer-term maturities, mainly time deposits, are estimated using discounted cash flows applying either market
rates or current rates for deposits of similar remaining maturities. Consequently, the fair value discount is minimal.
Repurchase agreements and other similar secured borrowing
The fair value of repurchase agreements approximates carrying amounts as these balances are generally short dated.
Debt securities in issue
Fair values of other debt securities in issue are based on quoted prices where available, or where the instruments are short dated, carrying amount
approximates fair value.
Subordinated liabilities
Fair values for dated and undated convertible and non-convertible loan capital are based on quoted market rates for the issuer concerned or
issuers with similar terms and conditions.
18 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 ‘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.
290 Barclays PLC Annual Report 2019
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Assets and liabilities held at fair valueNOTES TO THE FINANCIAL STATEMENTS 18 Offsetting financial assets and financial liabilities continued
Amounts subject to enforceable netting arrangements
Effects of offsetting on-balance sheet
Related amounts not offset
Gross
amounts
£m
Amounts
offseta
£m
Net amounts
reported on
the balance
sheet
£m
Financial
instruments
£m
Financial
collateralb
£m
Net
amount
£m
Amounts not
subject to
enforceable
netting
arrange-
mentsc
£m
Balance
sheet
totald
£m
260,206
(32,546)
227,660
(175,998)
(38,922)
12,740
1,576
229,236
374,274
634,480
(255,269)
(276,021)
(308,567)
31,180
98,253
325,913
(224,089)
–
(175,998)
175,998
(98,253)
(137,175)
38,632
–
12,740
(9,459)
2,013
3,589
(5,115)
100,266
329,502
(229,204)
(406,081)
(661,350)
276,021
307,201
(130,060)
(354,149)
–
175,998
130,058
168,690
(2)
(9,461)
(13,004)
(18,119)
(143,064)
(372,268)
239,180
(18,687)
220,493
(172,001)
(36,904)
11,588
2,045
222,538
354,409
593,589
(233,543)
(235,772)
(254,459)
18,229
118,637
339,130
(215,314)
–
(172,001)
172,001
(118,195)
(155,099)
32,959
442
12,030
(10,354)
2,712
4,757
(4,329)
121,349
343,887
(219,643)
(375,976)
(609,519)
235,772
254,001
(140,204)
(355,518)
–
172,001
140,165
173,124
(39)
(10,393)
(16,858)
(21,187)
(157,062)
(376,705)
As at 31 December 2019
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 2018
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
Notes
a Amounts offset for Derivative financial assets additionally includes cash collateral netted of £4,099m (2018: £2,187m). Amounts offset for Derivative financial liabilities additionally
includes cash collateral netted of £5,465m (2018: £2,645m). Settlements assets and liabilities have been offset amounting to £14,079m (2018: £23,095m).
b Financial collateral of £38,922m (2018: £36,904m) was received in respect of derivative assets, including £33,411m (2018: £31,402m) of cash collateral and £5,511m (2018:
£5,502m) of non-cash collateral. Financial collateral of £38,632m (2018: £32,959m) was placed in respect of derivative liabilities, including £35,712m (2018: £29,842m) of cash
collateral and £2,920m (2018: £3,117m) of non-cash collateral. The collateral amounts are limited to net balance sheet exposure so as to not include overcollateralisation.
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 Reverse repurchase agreements and other similar secured lending of £100,266m (2018: £121,349m) is split by fair value £96,887m (2018: £119,041m) and amortised cost £3,379m
(2018: £2,308m). Repurchase agreements and other similar secured borrowing of £143,064m (2018: £157,062m) is split by fair value £128,547m (2018: £138,484m) and amortised
cost £14,517m (2018: £18,578m).
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 139.
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Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements Assets at amortised cost
and other investments
The notes included in this section focus on the Group’s loans and advances and deposits at amortised cost, leases, property, plant and
equipment and goodwill and intangible assets. Details regarding the Group’s liquidity and capital position can be found on pages 178 to 197.
19 Loans and advances and deposits at amortised cost
Accounting for loans and advances and deposits held at amortised cost under IFRS 9 effective from 1 January 2018
Loans and advances to customers and banks, customer accounts, debt securities and most financial liabilities, are held at amortised cost. That
is, the initial fair value (which is normally the amount advanced or borrowed) is adjusted for repayments and the amortisation of coupon, fees
and expenses to represent the effective interest rate of the asset or liability. Balances deferred on-balance sheet as effective interest rate
adjustments are amortised to interest income over the life of the financial instrument to which they relate.
Financial assets that are held in a business model to collect the contractual cash flows and that contain contractual terms that give rise on
specified dates to cash flows that are SPPI, are measured at amortised cost. The carrying value of these financial assets at initial recognition
includes any directly attributable transaction costs. Refer to Note 1 for details on ‘solely payments of principal and interest’.
In determining whether the business model is a ‘hold to collect’ model, the objective of the business model must be to hold the financial asset
to collect contractual cash flows rather than holding the financial asset for trading or short-term profit taking purposes. While the objective of
the business model must be to hold the financial asset to collect contractual cash flows this does not mean the Group is required to hold the
financial assets until maturity. When determining if the business model objective is to collect contractual cash flows the Group will consider
past sales and expectations about future sales.
Accounting for loans and advances and deposits held at amortised cost under IAS 39 for 2017
Loans and advances to customers and banks, customer accounts, debt securities and most financial liabilities, are held at amortised cost.
That is, the initial fair value (which is normally the amount advanced or borrowed) is adjusted for repayments and the amortisation of coupon,
fees and expenses to represent the effective interest rate of the asset or liability. Balances deferred on-balance sheet as effective interest rate
adjustments are amortised to interest income over the life of the financial instrument to which they relate.
Loans and advances and deposits at amortised cost
As at 31 December
Loans and advances at amortised cost to banks
Loans and advances at amortised cost to customers
Debt securities at amortised cost
Total loans and advances at amortised cost
Deposits at amortised cost from banks
Deposits at amortised cost from customers
Total deposits at amortised cost
2019
£m
9,624
311,739
17,752
339,115
15,402
400,385
415,787
2018
£m
10,575
310,097
5,734
326,406
14,166
380,672
394,838
292 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS 20 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 enhancement of the asset.
Depreciation is provided on the depreciable amount of items of property, plant and equipment on a straight-line basis over their estimated
useful economic lives. Depreciation rates, methods and the residual values underlying the calculation of depreciation of items of property, plant
and equipment are kept under review to take account of any change in circumstances. The 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%
Costs of adaptation and installed equipment are depreciated over the shorter of the life of the lease or the depreciation rates noted in the
table above.
Investment property
The 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.
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and other investments
20 Property, plant and equipment continued
Cost
As at 31 December 2018
Effects of changes in accounting policies (see Note 1)
As at 1 January 2019
Additions
Disposals
Exchange and other movements
As at 31 December 2019
Accumulated depreciation and impairment
As at 31 December 2018
Effects of changes in accounting policies (see Note 1)
As at 1 January 2019
Depreciation charge
Impairment
Disposals
Exchange and other movements
As at 31 December 2019
Net book value
Cost
As at 1 January 2018
Additions
Disposals
Change in fair value of investment properties
Exchange and other movements
As at 31 December 2018
Accumulated depreciation and impairment
As at 1 January 2018
Depreciation charge
Impairment
Disposals
Exchange and other movements
As at 31 December 2018
Net book value
Investment
property
£m
Property
£m
Equipment
£m
Leased assets
£m
Right of use
assetsa
£m
9
–
9
5
–
(1)
13
–
–
–
–
–
–
–
–
13
116
9
(115)
(3)
2
9
–
–
–
–
–
–
9
3,684
–
3,684
377
(73)
(50)
3,938
(1,792)
–
(1,792)
(178)
(11)
56
24
(1,901)
2,037
3,493
217
(83)
–
57
3,684
(1,668)
(166)
(3)
73
(28)
(1,792)
1,892
2,956
–
2,956
337
(251)
(65)
2,977
(2,322)
–
(2,322)
(229)
(1)
205
41
(2,306)
671
2,748
262
(99)
–
45
2,956
(2,117)
(252)
–
79
(32)
(2,322)
634
9
–
9
–
–
–
9
(9)
–
(9)
–
–
–
–
(9)
–
9
–
–
–
–
9
(9)
–
–
–
–
(9)
–
–
1,748
1,748
95
(10)
(7)
1,826
–
(104)
(104)
(226)
(2)
–
–
(332)
1,494
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£m
6,658
1,748
8,406
814
(334)
(123)
8,763
(4,123)
(104)
(4,227)
(633)
(14)
261
65
(4,548)
4,215
6,366
488
(297)
(3)
104
6,658
(3,794)
(418)
(3)
152
(60)
(4,123)
2,535
Note
a Right of use (ROU) asset balances relate to property leases under IFRS 16, which Barclays adopted on 1 January 2019. Refer to Note 21 for further details.
Property rentals of £22m (2018: £19m) have been included in other income.
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 17 for
further details.
294 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS 21 Leases
Accounting for leases under IFRS 16 effective from 1 January 2019
IFRS 16 applies to all leases with the exception of licences of intellectual property, rights held by licencing 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 includes an accounting policy choice for a lessee to elect not to apply IFRS 16
to remaining assets within the scope of IAS 38 Intangible Assets which the Group has decided to apply.
When the Group is the lessee, it is required to recognise both:
■■ a lease liability, measured at the present value of remaining cash flows on the lease, and
■■ a right of use (ROU) asset, measured at the amount of the initial measurement of the lease liability, plus any lease payments made prior to
commencement date, initial direct costs, and estimated costs of restoring the underlying asset to the condition required by the lease, less
any lease incentives received.
Subsequently the lease liability will increase for the accrual of interest, resulting in a constant rate of return throughout the life of the lease, and
reduce when payments are made. The right of use asset will amortise to the income statement over the life of the lease. The lease liability is
remeasured when there is a change in one of the following:
■■ future lease payments arising from a change in an index or rate
■■ the Group’s estimate of the amount expected to be payable under a residual value guarantee, or
■■ the Group’s assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the ROU asset, or is recorded in the
income statement if the carrying amount of the ROU asset has been reduced to nil.
On the balance sheet, the ROU assets are included within property, plant and equipment and the lease liabilities are included within other
liabilities.
The Group applies the recognition exemption in IFRS 16 for leases with a term not exceeding 12 months. For these leases the lease payments
are recognised as an expense on a straight-line basis over the lease term unless another systematic basis is more appropriate.
When the Group is the lessor, the lease must be classified as either a finance lease or an operating lease. A finance lease is a lease which
confers substantially all the risks and rewards of the leased assets on the lessee. An operating lease is a lease where substantially all of the risks
and rewards of the leased asset remain with the lessor.
When the lease is deemed a finance lease, the leased asset is not held on the balance sheet; instead a finance lease receivable is recognised
representing the minimum lease payments receivable under the terms of the lease, discounted at the rate of interest implicit in the lease.
When the lease is deemed an operating lease, the lease income is recognised on a straight-line basis over the period of the lease unless another
systematic basis is more appropriate. The Group holds the leased assets on-balance sheet within property, plant and equipment.
Accounting for finance leases under IAS 17 for 2018 and 2017
Under IAS 17, a finance lease is a lease which confers substantially all the risks and rewards of the leased assets on the lessee. Where the 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.
Accounting for operating leases under IAS 17 for 2018 and 2017
An operating lease under IAS 17 is a lease where substantially all of the risks and rewards of the leased assets remain with the lessor. Where the
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.
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and other investments
21 Leases continued
As a Lessor
Finance lease receivables are included within loans and advances at amortised cost. The Group specialises in the provision of leasing and other
asset finance facilities across a broad range of asset types to business and individual customers.
The following table sets out a maturity analysis of lease receivables, showing the lease payments to be received after the reporting date.
Gross
investment
in finance
lease
receivables
£m
1,403
909
593
354
123
115
3,497
2019
2018
Present
value of
minimum
lease
payments
receivable
£m
1,288
833
544
326
115
98
3,204
Unguaranteed
residual
values
£m
77
53
45
43
19
22
259
Gross
investment
in finance
lease
receivables
£m
1,333
827
599
401
185
381
3,726
Future
finance
income
£m
(115)
(76)
(49)
(28)
(8)
(17)
(293)
Present
value of
minimum
lease
payments
receivable
£m
1,223
758
550
363
170
337
3,401
Unguaranteed
residual
values
£m
86
53
55
20
20
22
256
Future
finance
income
£m
(110)
(69)
(49)
(38)
(15)
(44)
(325)
Not more than one year
One to two years
Two to three years
Three to four years
Four to five years
Over five years
Total
The Group does not have any material operating leases as a lessor.
The impairment allowance for finance lease receivables amounted to £55m (2018: £87m).
Finance lease income
Finance lease income is included within interest income. The following table shows amounts recognised in the income statement during the year.
Finance income from net investment in lease
Profit on sales
2019
£m
141
6
As a Lessee
The Group leases various offices, branches and other premises under non-cancellable lease arrangements to meet its operational business
requirements. In some instances, Barclays will sublease property to third parties when it is no longer needed to meet business requirements.
Currently, Barclays does not have any material subleasing arrangements.
ROU asset balances relate to property leases only. Refer to Note 20 for a breakdown of the carrying amount of ROU assets.
The total expenses recognised during the year for short term leases were £14m. The portfolio of short term leases to which Barclays is exposed at
the end of the year is not dissimilar to the expenses recognised in the year.
Lease liabilities
As at 31 December 2018
Effect of changes in accounting policies (see Note 1)
As at 1 January 2019
Interest expense
New leases
Disposals
Cash payments
Exchange and other movements
As at 31 December 2019 (see Note 23)
2019
£m
–
1,696
1,696
76
94
(19)
(289)
5
1,563
296 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS 21 Leases continued
The below table sets out a maturity analysis of undiscounted lease liabilities, showing the lease payments to be paid after the reporting date.
Undiscounted lease liabilities maturity analysis
Not more than one year
One to two years
Two to three years
Three to four years
Four to five years
Five to ten years
Greater than ten years
Total undiscounted lease liabilities as at 31 December 2019
2019
£m
296
252
208
186
165
565
310
1,982
In addition to the cash flows identified above, Barclays is exposed to:
■■ variable lease payments: This variability will typically arise from either inflation index instruments or market based pricing adjustments.
Currently, Barclays has 939 leases out of the total 1,467 leases which have variable lease payment terms based on market based pricing
adjustments. Of the gross cash flows identified above, £1,526m is attributable to leases with some degree of variability predominately linked
to market based pricing adjustments
■■ extension and termination options: The table above represents Barclays best estimate of future cash out flows for leases, including
assumptions regarding the exercising of contractual extension and termination options. The above gross cash flows have been reduced by
£474m for leases where Barclays is highly expected to exercise an early termination option. However, there is no significant impact where
Barclays is expected to exercise an extension option.
The Group currently does not have any significant sale and lease back transactions. The Group does not have any restrictions or covenants
imposed by the lessor on its property leases which restrict its businesses.
Operating lease commitments under IAS 17 in 2018
In 2018, operating lease rentals of £329m were included in administration and general expenses.
The prior year comparative table for 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
22 Goodwill and intangible assets
2018
Property
£m
302
786
1,257
2,345
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 the cash generating unit (CGU) including goodwill with the present value of the pre-tax cash flows,
discounted at a rate of interest that reflects the inherent risks, of the CGU to which the goodwill relates, or the CGU’s fair value if this is higher.
Intangible assets
Intangible assets other than goodwill are accounted for in accordance with IAS 38 Intangible Assets.
Intangible assets are initially recognised when they are separable or arise from contractual or other legal rights, the cost can be measured
reliably and, in the case of intangible assets not acquired in a business combination, where it is probable that future economic benefits
attributable to the assets will flow from their use.
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:
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and other investments
22 Goodwill and intangible assets continued
Annual rates in calculating amortisation
Goodwill
Internally generated softwarea
Other software
Customer lists
Licences and other
Amortisation rate
Not amortised
12 months to 6 years
12 months to 6 years
12 months to 25 years
12 months to 25 years
Note
a Exceptions to the above rate relate to useful lives of certain core banking platforms that are assessed individually and, if appropriate, amortised over longer periods ranging from
10 to 15 years.
Intangible assets are reviewed for impairment when there are indications that impairment may have occurred.
Intangible assets
Internally
generated
software
£m
Goodwill
£m
Other
software
£m
Customer
lists
£m
Licences
and other
£m
Total
£m
2019
Cost
As at 1 January 2019
Additions and disposals
Exchange and other movements
As at 31 December 2019
Accumulated amortisation and impairment
As at 1 January 2019
Disposals
Amortisation charge
Impairment charge
Exchange and other movements
As at 31 December 2019
Net book value
2018
Cost
As at 1 January 2018
Additions and disposals
Exchange and other movements
As at 31 December 2018
Accumulated amortisation and impairment
As at 1 January 2018
Disposals
Amortisation charge
Impairment charge
Exchange and other movements
As at 31 December 2018
Net book value
4,768
–
(8)
4,760
(861)
–
–
–
–
(861)
3,899
4,759
–
9
4,768
(860)
–
–
–
(1)
(861)
3,907
5,835
857
(49)
6,643
(2,362)
67
(716)
(17)
39
(2,989)
3,654
5,501
280
54
5,835
(2,195)
530
(669)
(6)
(22)
(2,362)
3,473
389
120
(4)
505
(254)
25
(52)
(2)
4
(279)
226
427
(34)
(4)
389
(313)
101
(50)
–
8
(254)
135
1,630
(124)
(41)
1,465
(1,359)
124
(49)
–
34
(1,250)
215
1,547
–
83
1,630
(1,209)
–
(81)
–
(69)
(1,359)
271
Goodwill
Goodwill is allocated to business operations according to business segments as follows:
Barclays UK
Barclays International
Head Office
Total net book value of goodwill
558
(39)
(30)
489
(371)
37
(37)
–
7
(364)
125
519
12
27
558
(327)
13
(34)
–
(23)
(371)
187
13,180
814
(132)
13,862
(5,207)
253
(854)
(19)
84
(5,743)
8,119
12,753
258
169
13,180
(4,904)
644
(834)
(6)
(107)
(5,207)
7,973
2019
£m
3,526
329
44
3,899
2018
£m
3,526
334
47
3,907
298 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS
22 Goodwill and intangible assets continued
Goodwill
Testing goodwill for impairment involves a significant amount of judgement. This includes the identification of independent CGUs and the
allocation of goodwill to these units based on which units are expected to benefit from the acquisition. Cash flow projections take into account
changes in the market in which a business operates including the level of growth, competitive activity, and the impacts of regulatory change. The
estimation of pre-tax cash flows is sensitive to the periods for which detailed forecasts are available and to assumptions regarding long-term
sustainable cash flows.
Goodwill within Personal Banking was £2,718m (2018: £2,718m), of which £2,501m (2018: £2,501m) was attributable to Woolwich, and within
Business Banking was £629m (2018: £629m), fully attributable to Woolwich. The carrying value of the CGUs have been determined by using net
asset values. The recoverable amounts of the CGUs, calculated as value in use, have been determined using cash flow predictions based on
financial budgets approved by management, covering a five-year period, with a terminal growth rate of 1.5% (2018: 0.0% to 3.5%) applied
thereafter. The forecasted cash flows have been discounted using a pre-tax rate range of 11.0% to 13.3% (2018: 11.1% to 13.7%). Based on these
assumptions, the total recoverable amount exceeded the carrying amount including goodwill by £4,551m (2018: £7,762m). A one percentage
point change in the discount rate or terminal growth rate would increase or decrease the recoverable amount by £1,458m (2018: £1,501m) and
£968m (2018: £980m) respectively. A reduction in the forecasted cash flows of 15% per annum (2018: 10%) would reduce the recoverable
amount by £2,534m (2018: £1,828m). Other goodwill of £552m (2018: £560m) was allocated to multiple CGUs which are not considered
individually significant.
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.
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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.
23 Other liabilities
Accruals and deferred incomea
Other creditors
Items in the course of collection due to other banks
Obligations under finance lease
Lease liabilitiesb (refer to Note 21)
Other liabilities
2019
£m
3,472
3,257
213
–
1,563
8,505
2018
£m
3,877
3,540
277
22
–
7,716
Notes
a Upon adoption of IFRS 16 on 1 January 2019, £40m of rent free adjustments which were previously recorded within accruals and deferred income were transferred to right of use
asset impairment allowance. Please see Note 1 for further detail.
b Lease liabilities represents the minimum lease payments under the lease, discounted at the rate of interest implicit in the lease.
24 Provisions
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 26 for more detail of legal, competition and regulatory matters.
As at 31 December 2018
Effects of changes in accounting policiesb
As at 1 January 2019
Additions
Amounts utilised
Unused amounts reversed
Exchange and other movements
As at 31 December 2019
Onerous
contracts
£m
139
(64)
75
29
(48)
(14)
–
42
Redundancy
and
restructuring
£m
169
–
169
178
(137)
(58)
(9)
143
Undrawn
contractually
committed
facilities and
guaranteesa
£m
271
–
271
391
–
(334)
(6)
322
Customer redress
Payment
Protection
Insurance
£m
888
–
888
1,425
(1,158)
–
–
1,155
Other
customer
redress
£m
444
–
444
219
(211)
(38)
6
420
Legal,
competition
and
regulatory
matters
£m
414
–
414
287
(303)
(17)
(5)
376
Sundry
provisions
£m
327
–
327
121
(86)
(38)
(18)
306
Total
£m
2,652
(64)
2,588
2,650
(1,943)
(499)
(32)
2,764
Notes
a Undrawn contractually committed facilities and guarantees provisions are accounted for under IFRS 9.
b Upon adoption of IFRS 16 on 1 January 2019, £64m of onerous lease provisions were transferred to right of use asset impairment allowance. Please see page 250 in Note 1 for
further detail.
300 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS 24 Provisions continued
Provisions expected to be recovered or settled within no more than 12 months after 31 December 2019 were £2,457m (2018: £2,144m).
Onerous contracts
Onerous contract provisions comprise an estimate of the costs involved with fulfilling the terms and conditions of contracts net of any expected
benefits to be received.
Redundancy and restructuring
These provisions comprise the estimated cost of restructuring, including redundancy costs where an obligation exists. Additions made during the
year relate to formal restructuring plans and have either been utilised, or reversed, where total costs are now expected to be lower than the
original provision amount.
Undrawn contractually committed facilities and guarantees
Impairment allowance under IFRS 9 considers both the drawn and the undrawn counterparty exposure. For retail portfolios, the total impairment
allowance is allocated to the drawn exposure to the extent that the allowance does not exceed the exposure as ECL is not reported separately. Any
excess is reported on the liability side of the balance sheet as a provision. For wholesale portfolios, the impairment allowance on the undrawn
exposure is reported on the liability side of the balance sheet as a provision. Provisions are made if it is probable that a facility will be drawn and
the resulting asset is expected to have a realisable value that is less than the amount advanced.
Customer redress
Customer redress provisions comprise the estimated cost of making redress payments to customers, clients and counterparties for losses or
damages associated with inappropriate judgement in the execution of Barclays Group’s business activities. Provisions for other customer redress
include smaller provisions across the retail and corporate businesses which are expected to be utilised in the next 12-24 months.
Legal, competition and regulatory matters
The Barclays 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, refer to Note 26.
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 (PPI) redress
As at 31 December 2019, Barclays had recognised cumulative provisions totalling £11bn (December 2018: £9.6bn), against the cost of PPI redress
and associated processing costs, of which £1.4bn was recognised in Q3 2019. Utilisation of the cumulative provisions to date is £9.8bn (December
2018: £8.7bn), leaving a residual provision of £1.2bn (December 2018: £0.9bn). This represents Barclays best estimate as at 31 December 2019
based on the information available.
The current provision reflects the estimated cost of PPI redress attributable to claims and information requests from customers, Claims
Management Companies and the Official Receiver in relation to bankrupt individuals, prior to the Financial Conduct Authority (FCA) complaint
deadline of 29 August 2019.
Q3 2019 saw an exceptional level of claims, enquiries and information requests received in advance of the complaint deadline of 29 August 2019.
Of the greater than two million items outstanding at Q3 2019, materially all have now been processed into Barclays’ systems, 52% of which has
been resolved including invalid items.
The residual provision has been calculated by applying a number of assumptions to the population of claims and information requests. Based on
resolution of complaints during Q4 2019, the observed outcomes support the aggregate provision amount.
The following table outlines the key assumptions used in the provision calculation as at 31 December 2019, excluding enquiries from the Official
Receiver, and a sensitivity analysis illustrating the impact on the provision, if assumptions prove too high or too low.
Assumptions
■■ Validity of claims and information requests received (%) – the proportion of claims and information requests received prior to the FCA
complaint deadline that are expected to be valid when all processing stages are completed.
■■ Average uphold rate per claim (%) – the expected average uphold rate applied to valid claims where PPI policy/policies exist.
■■ Average claim redress – the expected average payment to customers for upheld valid claims based on the type and age of the policy/
policies (£).
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liabilities and legal proceedings
24 Provisions continued
Validity assumptions
Claims receiveda
Information requests receivedb
Average uphold rate per claimc
Average uphold rate per valid claimd
Historically
observed
valid
20%-40%
5%-11%
88%
£2,231
Current
assumption
valid
25%e
7%e
86%f
£2,314
Sensitivity
volume
+/– 1%
valid rate
3k
32k
–
–
Sensitivity
£m
1% = £8m
1% = £76m
1% = £8m
£100 = £31m
Notes
a Total valid claims received, excluding those for which no PPI policy exists, information requests received, enquiries from the Official Receiver in relation to bankrupt individuals and
responses to proactive mailing. The sensitivity analysis has been calculated to show the impact of a 1% increase or decrease in the volume of unresolved valid claims would have on
the provision level, inclusive of operational processing costs.
b Total valid information requests received, excluding those for which no PPI policy exists, enquiries from the Official Receiver in relation to bankrupt individuals and responses to
proactive mailing. The sensitivity analysis has been calculated to show the impact a 1% increase or decrease in the volume of valid information requests would have on the provision
level, inclusive of operational processing costs.
c Average uphold rate per claim, excluding those for which no PPI policy exists, enquiries from the Official Receiver in relation to bankrupt individuals and responses to proactive
mailing. 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.
d Average redress stated on a per policy basis for valid claims received by Barclays excluding enquiries from the Official Receiver in relation to bankrupt individuals and responses to
proactive mailing. 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.
e Based on recently observed data, August to December 2019.
f Based on annual observed rate to September 2019. No material change observed to December 2019.
These assumptions remain subjective due to the uncertainty associated with the outstanding population of claims and information requests yet to
be resolved. It is possible that the eventual cumulative provision may differ from the current estimate.
The estimate related to enquiries received from the Official Receiver is subject to additional uncertainty and sensitivity as the legal position; uphold
rates and average claim redress may differ from those experienced more generally, given the particular circumstances of this population. The
range of uncertainty is not material in the context of the total provision.
25 Contingent liabilities and commitments
Accounting for contingent liabilities
Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events, and present obligations where
the transfer of economic resources is uncertain or cannot be reliably measured. Contingent liabilities are not recognised on the balance sheet
but are disclosed unless the likelihood of an outflow of economic resources is remote.
The following table summarises the nominal principal amount of contingent liabilities and commitments which are not recorded on-balance sheet:
Guarantees and letters of credit pledged as collateral security
Performance guarantees, acceptances and endorsements
Total contingent liabilities
Of which: Financial guarantees carried at fair value
Documentary credits and other short-term trade related transactions
Standby facilities, credit lines and other commitments
Total commitments
Of which: Loan commitments carried at fair value
Provisions held against contingent liabilities and commitments equal £322m (2018: £271m).
Further details on contingent liabilities relating to legal and competition and regulatory matters can be found in Note 26.
2019
£m
17,606
6,921
24,527
43
2018
£m
15,805
4,498
20,303
4
1,291
333,164
334,455
17,679
1,741
322,482
324,223
11,723
302 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS 26 Legal, competition and regulatory matters
Members of the Group face legal, competition and regulatory challenges, many of which are beyond our control. The extent of the impact of these
matters cannot always be predicted but may materially impact our operations, financial results, condition and prospects. Matters arising from a set
of similar circumstances can give rise to either a contingent liability or a provision, or both, depending on the relevant facts and circumstances.
The recognition of provisions in relation to such matters involves critical accounting estimates and judgements in accordance with the relevant
accounting policies as described in Note 24, Provisions. We have not disclosed an estimate of the potential financial impact or effect on the Group
of contingent liabilities where it is not currently practicable to do so. Various matters detailed in this note seek damages of an unspecified amount.
While certain matters specify the damages claimed, such claimed amounts do not necessarily reflect the Group’s potential financial exposure in
respect of those matters.
Matters are ordered under headings corresponding to the financial statements in which they are disclosed.
1. Barclays PLC and Barclays Bank PLC
Investigations into certain advisory services agreements and other matters and civil action
FCA proceedings
In 2008, Barclays Bank PLC and Qatar Holdings LLC entered into two advisory service agreements (the Agreements). The Financial Conduct
Authority (FCA), is conducting an investigation into whether the Agreements may have related to Barclays PLC’s capital raisings in June and
November 2008 (the Capital Raisings) and therefore should have been disclosed in the announcements or public documents relating to the
Capital Raisings. In 2013, the FCA issued warning notices (the Notices) finding that Barclays PLC and Barclays Bank PLC acted recklessly and in
breach of certain disclosure-related listing rules, and that Barclays PLC was also in breach of Listing Principle 3. The financial penalty provided in
the Notices is £50m. Barclays PLC and Barclays Bank PLC continue to contest the findings. The FCA action has been stayed due to the UK Serious
Fraud Office (SFO) proceedings pending against certain former Barclays executives. All charges brought by the SFO against Barclays PLC and
Barclays Bank PLC in relation to the Agreements were dismissed in 2018.
Civil action
PCP Capital Partners LLP and PCP International Finance Limited (PCP) are seeking damages of approximately £1.6bn from Barclays Bank PLC for
fraudulent misrepresentation and deceit, arising from alleged statements made by Barclays Bank PLC to PCP in relation to the terms on which
securities were to be issued to potential investors, allegedly including PCP, in the November 2008 capital raising. Barclays Bank PLC is defending
the claim and trial is scheduled to commence in June 2020.
Investigation into historic hiring practices
In 2019, Barclays PLC reached a settlement of $6.4m with the US Securities and Exchanges Commission (SEC) in relation to certain of its hiring
practices in Asia, resolving this matter.
Investigations into LIBOR and other benchmarks and related civil actions
Regulators and law enforcement agencies, including certain competition authorities, from a number of governments have been conducting
investigations relating to Barclays Bank PLC’s involvement in allegedly manipulating certain financial benchmarks, such as LIBOR. The SFO has
closed its investigation with no action to be taken against the Group. Various individuals and corporates in a range of jurisdictions have threatened
or brought civil actions against the Group and other banks in relation to the alleged manipulation of LIBOR and/or other benchmarks. Certain
actions remain pending.
USD LIBOR civil actions
The majority of the USD LIBOR cases, which have been filed in various US jurisdictions, have been consolidated for pre-trial purposes in the US
District Court in the Southern District of New York (SDNY). The complaints are substantially similar and allege, among other things, that Barclays
PLC, Barclays Bank PLC, Barclays Capital Inc. (BCI) and other financial institutions individually and collectively violated provisions of the US
Sherman Antitrust Act (Antitrust Act), the US Commodity Exchange Act (CEA), the US Racketeer Influenced and Corrupt Organizations Act
(RICO), the Securities Exchange Act of 1934 and various state laws by manipulating USD LIBOR rates.
Putative class actions and individual actions seek 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 and additional punitive damages against all defendants, including Barclays Bank PLC.
Some of the lawsuits also seek trebling of damages under the Antitrust Act and RICO. Barclays has previously settled certain claims. Two of the
class action settlements where Barclays has paid $20m and $7.1m, respectively, remain subject to final court approval and/or the right of class
members to opt out of the settlement to file their own claims.
Sterling LIBOR civil actions
In 2016, two putative class actions filed in the SDNY against Barclays Bank PLC, BCI and other Sterling LIBOR panel banks alleging, among other
things, that the defendants manipulated the Sterling LIBOR rate in violation of the Antitrust Act, CEA and RICO, were consolidated. The
defendants’ motion to dismiss the claims was granted in December 2018. The plaintiffs have appealed the dismissal.
Japanese Yen LIBOR civil actions
In 2012, a putative class action was filed in the SDNY against Barclays Bank PLC and other Japanese Yen LIBOR panel banks by a lead plaintiff
involved in exchange-traded derivatives and members of the Japanese Bankers Association’s Euroyen Tokyo Interbank Offered Rate (Euroyen
TIBOR) panel. The complaint alleges, among other things, manipulation of the Euroyen TIBOR and Yen LIBOR rates and breaches of the CEA and
the Antitrust Act. In 2014, the court dismissed the plaintiff ’s antitrust claims in full, but the plaintiff ’s CEA claims remain pending.
In 2015, a second putative class action, making similar allegations to the above class action, was filed in the SDNY against Barclays PLC, Barclays
Bank PLC and BCI. In 2017, this action was dismissed in full and the plaintiffs have appealed the dismissal.
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liabilities and legal proceedings
26 Legal, competition and regulatory matters continued
SIBOR/SOR civil action
In 2016, a putative class action was filed in the SDNY against Barclays PLC, Barclays Bank PLC, BCI and other defendants, alleging manipulation of
the Singapore Interbank Offered Rate (SIBOR) and Singapore Swap Offer Rate (SOR). In October 2018, the court dismissed all claims against
Barclays PLC, Barclays Bank PLC and BCI. The plaintiffs have appealed the dismissal.
ICE LIBOR civil actions
In 2019, several putative class actions have been filed in the SDNY against Barclays PLC, Barclays Bank PLC, BCI, other financial institution
defendants and Intercontinental Exchange Inc. and certain of its affiliates (ICE), asserting antitrust claims that defendants manipulated USD LIBOR
through defendants’ submissions to ICE. These actions have been consolidated. The defendants have filed a motion to dismiss.
Non-US benchmarks civil actions
Legal proceedings (which include the claims referred to below in ‘Local authority civil actions concerning LIBOR’) have been brought or threatened
against Barclays Bank PLC (and, in certain cases, Barclays Bank UK PLC) in the UK in connection with alleged manipulation of LIBOR, EURIBOR and
other benchmarks. Proceedings have also been brought in a number of other jurisdictions in Europe and Israel. Additional proceedings in other
jurisdictions may be brought in the future.
Foreign Exchange investigations and related civil actions
In 2015, the Group reached settlements totalling approximately $2.38bn with various US federal and state authorities and the FCA in relation to
investigations into certain sales and trading practices in the Foreign Exchange market. Under the related plea agreement with the US Department
of Justice (DoJ), which received final court approval in January 2017, the Group agreed to a term of probation of three years. The Group also
continues to provide relevant information to certain authorities.
The European Commission is one of a number of authorities still conducting an investigation into certain trading practices in Foreign Exchange
markets. The European Commission announced two settlements in May 2019 and the Group paid penalties totalling approximately €210m. In June
2019, the Swiss Competition Commission announced two settlements and the Group paid penalties totalling approximately CHF 27m. The
financial impact of the ongoing matters is not expected to be material to the Group’s operating results, cash flows or financial position.
A number of individuals and corporates in a range of jurisdictions have also threatened or brought civil actions against the Group and other banks
in relation to alleged manipulation of Foreign Exchange markets, and may do so in the future. Certain actions remain pending.
FX opt out civil action
In 2018, Barclays Bank PLC and BCI settled a consolidated action filed in the SDNY, alleging manipulation of Foreign Exchange markets
(Consolidated FX Action), for a total amount of $384m. Also in 2018, a group of plaintiffs who opted out of the Consolidated FX Action filed a
complaint in the SDNY against Barclays PLC, Barclays Bank PLC, BCI and other defendants.
Retail basis civil action
In 2015, a putative class action was filed against several international banks, including Barclays PLC and BCI, on behalf of a proposed class of
individuals who exchanged currencies on a retail basis at bank branches (Retail Basis Claims). The SDNY has ruled that the Retail Basis Claims are
not covered by the settlement agreement in the Consolidated FX Action. The Court subsequently dismissed all Retail Basis Claims against the
Group and all other defendants. The plaintiffs have filed an amended complaint.
State law FX civil action
In 2017, the SDNY dismissed consolidated putative class actions brought under federal and various state laws on behalf of proposed classes of (i)
stockholders of Exchange Traded Funds and others who purportedly were indirect investors in FX instruments, and (ii) investors who traded FX
instruments through FX dealers or brokers not alleged to have manipulated Foreign Exchange Rates. The plaintiffs’ amended complaint as to their
state law claims is pending.
Non-US FX civil actions
In addition to the actions described above, legal proceedings have been brought or are threatened against Barclays PLC, Barclays Bank PLC, BCI
and Barclays Execution Services Limited (BX) in connection with alleged manipulation of Foreign Exchange in the UK, a number of other
jurisdictions in Europe, Israel and Australia and additional proceedings may be brought in the future.
Metals investigations and related civil actions
Barclays Bank PLC previously provided information to the DoJ, the US Commodity Futures Trading Commission and other authorities in
connection with investigations into metals and metals-based financial instruments.
A number of US civil complaints, each on behalf of a proposed class of plaintiffs, have been consolidated and transferred to the SDNY. The
complaints allege that Barclays Bank PLC and other members of The London Gold Market Fixing Ltd. manipulated the prices of gold and gold
derivative contracts in violation of US antitrust and other federal laws. This consolidated putative class action remains pending. A separate US civil
complaint by a proposed class of plaintiffs against a number of banks, including Barclays Bank PLC, BCI and BX (formerly, Barclays Capital Services
Limited), alleging manipulation of the price of silver in violation of the CEA, the Antitrust Act and state antitrust and consumer protection laws,
has been dismissed as against the Barclays entities. The plaintiffs have the option to seek the court’s permission to appeal.
Civil actions have also been filed in Canadian courts against Barclays PLC, Barclays Bank PLC, Barclays Capital Canada Inc. and BCI on behalf of
proposed classes of plaintiffs alleging manipulation of gold and silver prices.
304 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS 26 Legal, competition and regulatory matters continued
US residential mortgage related civil actions
There are various pending civil actions relating to US Residential Mortgage-Backed Securities (RMBS), including four actions arising from
unresolved repurchase requests submitted by Trustees for certain RMBS, alleging breaches of various loan-level representations and warranties
(R&Ws) made by Barclays Bank PLC and/or a subsidiary acquired in 2007 (the Acquired Subsidiary). The unresolved repurchase requests received
as at 31 December 2019 had an original unpaid principal balance of approximately $2.1bn. The Trustees have also alleged that the relevant R&Ws
may have been breached with respect to a greater (but unspecified) amount of loans than previously stated in the unresolved repurchase requests.
These repurchase actions are ongoing. In one repurchase action, the New York Court of Appeals held that claims related to certain R&Ws are
time-barred. Barclays Bank PLC has reached a settlement to resolve two of the repurchase actions, which is subject to final court approval. The
financial impact of the settlement is not expected to be material to the Group’s operating results, cash flows or financial position. The remaining
two repurchase actions are pending.
Government and agency securities civil actions and related matters
Certain governmental authorities are conducting investigations into activities relating to the trading of certain government and agency securities
in various markets. The Group provided information in cooperation with such investigations. Civil actions have also been filed on the basis of
similar allegations, as described below.
Treasury auction securities civil actions
Consolidated putative class action complaints filed in the US Federal Court against Barclays Bank PLC, BCI and other financial institutions under
the Antitrust Act and state common law allege that the defendants (i) conspired to manipulate the US Treasury securities market and/or (ii)
conspired to prevent the creation of certain platforms by boycotting or threatening to boycott such trading platforms. The defendants have filed a
motion to dismiss.
In addition, certain plaintiffs have filed a related, direct action against BCI and certain other financial institutions, alleging that defendants
conspired to fix and manipulate the US Treasury securities market in violation of the Antitrust Act, the CEA and state common law.
Supranational, Sovereign and Agency bonds civil actions
Civil antitrust actions have been filed in the SDNY and Federal Court of Canada in Toronto against Barclays Bank PLC, BCI, BX (formerly, Barclays
Services Limited), Barclays Capital Securities Limited and, with respect to the civil action filed in Canada only, Barclays Capital Canada, Inc. and
other financial institutions alleging that the defendants conspired to fix prices and restrain competition in the market for US dollar-denominated
Supranational, Sovereign and Agency bonds.
In one of the actions filed in the SDNY, the court granted the defendants’ motion to dismiss the plaintiffs’ complaint with respect to Barclays Bank
PLC and certain Group entities. Defendants have filed a motion to dismiss those plaintiffs’ remaining claims against BCI. The remaining action filed
in the SDNY is stayed.
Variable Rate Demand Obligations civil actions
Civil actions have been filed against Barclays Bank PLC and BCI and other financial institutions alleging the defendants conspired or colluded to
artificially inflate interest rates set for Variable Rate Demand Obligations (VRDOs). VRDOs are municipal bonds with interest rates that reset on a
periodic basis, most commonly weekly. Two actions in state court have been filed by private plaintiffs on behalf of the states of Illinois and
California. Two putative class action complaints, which have been consolidated, have been filed in the SDNY.
Government bond civil actions
In a putative class action filed in the SDNY in 2019, plaintiffs alleged that BCI and certain other bond dealers conspired to fix the prices of US
government sponsored entity bonds in violation of US antitrust law. BCI has agreed a settlement of $87m, subject to court approval. In 2019, the
Louisiana Attorney General and the City of Baton Rouge each filed a complaint against Barclays Bank PLC and other financial institutions making
similar allegations as the class action plaintiffs.
In 2018, a separate putative class action against various financial institutions including Barclays PLC, Barclays Bank PLC, BCI, Barclays Bank Mexico,
S.A., and certain other subsidiaries of the Group was consolidated in the SDNY. The plaintiffs asserted antitrust and state law claims arising out of
an alleged conspiracy to fix the prices of Mexican Government bonds. Barclays PLC has settled the claim, subject to court approval. The financial
impact of the settlement is not material to the Group’s operating results, cash flows or financial position.
BDC Finance L.L.C.
In 2008, BDC Finance L.L.C. (BDC) filed a complaint in the NY Supreme Court, demanding damages of $298m, alleging that Barclays Bank PLC had
breached a contract in connection with a portfolio of total return swaps governed by an ISDA Master Agreement (collectively, the Agreement).
Following a trial on certain liability issues, the court ruled in December 2018 that Barclays Bank PLC was not a defaulting party, which was affirmed
on appeal.
In 2011, BDC’s investment advisor, BDCM Fund Adviser, L.L.C. and its parent company, Black Diamond Capital Holdings, L.L.C. also sued Barclays
Bank PLC and BCI in Connecticut State Court for unspecified damages allegedly resulting from Barclays Bank PLC’s conduct relating to the
Agreement, asserting claims for violation of the Connecticut Unfair Trade Practices Act and tortious interference with business and prospective
business relations. This case is currently stayed.
Civil actions in respect of the US Anti-Terrorism Act
There are a number of civil actions, on behalf of more than 4,000 plaintiffs, filed in US federal courts in the US District Court in the Eastern District
of New York (EDNY) and SDNY against Barclays Bank PLC and a number of other banks. The complaints generally allege that Barclays Bank PLC
and those banks engaged in a conspiracy to facilitate US dollar-denominated transactions for the Government of Iran and various Iranian banks,
which in turn funded acts of terrorism that injured or killed plaintiffs or plaintiffs’ family members. The plaintiffs seek to recover damages for pain,
suffering and mental anguish under the provisions of the US Anti-Terrorism Act, which allow for the trebling of any proven damages.
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Barclays PLC Annual Report 2019 305
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements Accruals, provisions, contingent
liabilities and legal proceedings
26 Legal, competition and regulatory matters continued
The court granted the defendants’ motion to dismiss one action in the EDNY, and plaintiffs have filed a notice of appeal. The defendants have
moved to dismiss two other EDNY actions. The court also granted the defendants’ motion to dismiss another action in the SDNY, but the plaintiffs
have moved to file an amended complaint. The remaining actions are stayed pending decisions in these cases.
Interest rate swap and credit default swap US civil actions
Barclays PLC, Barclays Bank PLC and BCI, together with other financial institutions that act as market makers for interest rate swaps (IRS) are
named as defendants in several antitrust class actions which were consolidated in the SDNY in 2016. The complaints allege the defendants
conspired to prevent the development of exchanges for IRS and demand unspecified money damages.
In 2018, trueEX LLC filed an antitrust class action in the SDNY against a number of financial institutions including Barclays PLC, Barclays Bank PLC
and BCI based on similar allegations with respect to trueEX LLC’s development of an IRS platform. In 2017, Tera Group Inc. filed a separate civil
antitrust action in the SDNY claiming that certain conduct alleged in the IRS cases also caused the plaintiff to suffer harm with respect to the
Credit Default Swaps market. In November 2018 and July 2019, respectively, the court dismissed certain claims in both cases for unjust enrichment
and tortious interference but denied motions to dismiss the federal and state antitrust claims, which remain pending.
Portuguese Competition Authority investigation
The Portuguese Competition Authority found that a subsidiary of Barclays Bank PLC and other banks violated competition law by exchanging
information about retail credit products relating to mortgages, consumer lending and lending to small and medium enterprises. The Group
applied for immunity and received no fine.
2. Barclays PLC, Barclays Bank PLC and Barclays Bank UK PLC
Investigation into collections and recoveries relating to unsecured lending
Since February 2018, the FCA has been investigating whether the Group implemented effective systems and controls with respect to collections and
recoveries and whether it paid due consideration to the interests of customers in default and arrears. The FCA investigation is at an advanced stage.
HM Revenue & Customs (HMRC) assessments concerning UK Value Added Tax
In 2018, HMRC issued notices that have the effect of removing certain overseas subsidiaries that have operations in the UK from Barclays’ UK VAT
Group, in which Group supplies between members are generally free from VAT. The notices have retrospective effect and correspond to
assessments of £181m (inclusive of interest), of which Barclays would expect to attribute an amount of approximately £128m to Barclays Bank UK
PLC and £53m to Barclays Bank PLC. HMRC’s decision has been appealed to the First Tier Tribunal (Tax Chamber).
Local authority civil actions concerning LIBOR
Following settlement by Barclays Bank PLC of various governmental investigations concerning certain benchmark interest rate submissions
referred to above in ‘Investigations into LIBOR and other benchmarks and related civil actions’, in the UK, certain local authorities have brought
claims against Barclays Bank PLC (and, in certain cases, Barclays Bank UK PLC) asserting that they entered into loans in reliance on
misrepresentations made by Barclays Bank PLC in respect of its conduct in relation to LIBOR. Barclays has applied to strike out the claims.
General
The Group is engaged in various other legal, competition and regulatory matters in the UK, the US and a number of other overseas jurisdictions.
It is subject to legal proceedings brought by and against the Group which arise in the ordinary course of business from time to time, including
(but not limited to) disputes in relation to contracts, securities, debt collection, consumer credit, fraud, trusts, client assets, competition, data
management and protection, money laundering, financial crime, employment, environmental and other statutory and common law issues.
The 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, Barclays PLC does not expect the ultimate resolution of any of these other matters to have a material adverse effect on the
Group’s financial position. However, in light of the uncertainties involved in such matters and the matters specifically described in this note, there
can be no assurance that the outcome of a particular matter or matters (including formerly active matters or those matters arising after the date
of this note) will not be material to Barclays PLC’s results, operations or cash flow for a particular period, depending on, among other things, the
amount of the loss resulting from the matter(s) and the amount of profit otherwise reported for the reporting period.
306 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS Capital instruments,
equity and reserves
The notes included in this section focus on the Group’s loan capital and shareholders’ equity including issued share capital, retained earnings,
other equity balances and interests of minority shareholders in our subsidiary entities (non-controlling interests). For more information on
capital management and how the Group maintains sufficient capital to meet our regulatory requirements refer to page 142.
27 Subordinated liabilities
Accounting for subordinated liabilities
Subordinated liabilities are measured at amortised cost using the effective interest method under IFRS 9.
As at 1 January
Issuances
Redemptions
Other
As at 31 December
2019
£m
20,559
1,352
(3,248)
(507)
18,156
2018
£m
23,826
221
(3,246)
(242)
20,559
Issuances of £1,352m comprises $1,500m 5.088% Fixed-to-Floating Rate Subordinated Notes (£1,194m) and £158m USD Floating Rate Notes.
Redemptions of £3,248m comprises £3,000m 14% Step-up Callable Perpetual Reserve Capital Instruments, £33m 6.3688% Step-up Callable
Perpetual Reserve Capital Instruments, £158m USD Floating Rate Notes, £43m EUR Floating Rate Notes and £14m JPY Floating Rate Loans.
Subordinated liabilities include accrued interest and comprise undated and dated subordinated liabilities as follows:
Undated subordinated liabilities
Dated subordinated liabilities
Total subordinated liabilities
None of the Group’s subordinated liabilities are 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)
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
Junior Undated Floating Rate Notes (USD 38m)
Total undated subordinated liabilities
2019
£m
303
17,853
18,156
2018
£m
3,522
17,037
20,559
2019
£m
16
203
–
–
53
29
303
2018
£m
16
199
34
3,189
51
30
3,522
Initial call date
2032
2032
2019
2019
2036
Any interest payment date
Undated subordinated liabilities
Undated subordinated liabilities are issued by Barclays Bank PLC and its subsidiaries for the development and expansion of the business and to
strengthen the capital bases. The principal terms of the undated subordinated liabilities are described below:
Subordination
All undated subordinated liabilities rank behind the claims against the bank of depositors and other unsecured unsubordinated creditors and
holders of dated subordinated liabilities in the following order: Junior Undated Floating Rate Notes; followed by TONs and RCIs ranking pari passu
with each other.
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Barclays PLC Annual Report 2019 307
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equity and reserves
27 Subordinated liabilities continued
Interest
The Junior Undated Notes are floating rate notes where rates are fixed periodically in advance based on the related interbank rate.
Payment of interest
No payment of principal or any interest may be made in relation to the TONs and RCIs unless Barclays Bank PLC satisfies a specified solvency test.
Barclays Bank PLC may elect to defer any payment of interest on the RCIs. Any such deferred payment of interest must be paid on the earlier of: (i)
the date of redemption of the RCIs, and (ii) the coupon payment date falling on or nearest to the tenth anniversary of the date of deferral of such
payment. While such deferral is continuing, neither Barclays Bank PLC nor Barclays PLC may (i) declare or pay a dividend, subject to certain
exceptions, on any of its ordinary shares or preference shares and (ii) certain restrictions on the redemption, purchase or reduction of their
respective share capital and certain other securities also apply.
Barclays Bank PLC may elect to defer any payment of interest on the TONs if it determines that it is, or such payment would result in it being, in
non-compliance with capital adequacy requirements and policies of the PRA. Any such deferred payment of interest will only be payable on a
redemption of the TONs. Until such time as Barclays Bank PLC next makes a payment of interest on the TONs, neither Barclays Bank PLC nor
Barclays PLC may (i) declare or pay a dividend, subject to certain exceptions, on any of their respective ordinary shares or preference shares, or
make payments of interest in respect of Barclays Bank PLC’s Reserve Capital Instruments and (ii) certain restrictions on the redemption, purchase
or reduction of their respective share capital and certain other securities also apply.
Repayment
All undated subordinated liabilities are repayable at the option of Barclays Bank PLC, generally in whole, at the initial call date and on any
subsequent coupon or interest payment date. In addition, each issue of undated subordinated liabilities is repayable, at the option of Barclays Bank
PLC in whole for certain tax reasons, either at any time, or on an interest payment date. There are no events of default except non-payment of
principal or mandatory interest. Any repayments require the prior approval of the PRA.
Other
All issues of undated subordinated liabilities are non-convertible.
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)
5.088% Fixed-to-Floating Rate Subordinated Callable Notes (USD 1,500m)
Barclays Bank PLC issued
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)
External issuances by other subsidiaries
Total dated subordinated liabilities
Initial
call date
Maturity
date
2019
£m
2018
£m
2020
2023
2025
2027
2029
2025
2028
2024
2030
2026
2028
2030
2019
2020
2021
2021
2021
2021
2021
2022
2022
2022
2023
2026
2027
2032
2040
2021-2024
1,072
1,309
995
116
1,561
1,578
1,152
–
832
1,375
239
85
2,157
1,123
43
957
2,284
42
350
105
62
58
358
17,853
1,130
1,367
982
116
1,509
1,523
–
45
851
1,474
256
89
2,194
1,143
45
1,032
2,272
45
351
107
61
61
384
17,037
308 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS 27 Subordinated liabilities continued
Dated subordinated liabilities
Dated subordinated liabilities are issued by Barclays PLC, Barclays Bank PLC and respective subsidiaries for the development and expansion of their
business and to strengthen their respective capital bases. The principal terms of the dated subordinated liabilities are described below:
Subordination
Dated subordinated liabilities issued by Barclays PLC ranks behind the claims against Barclays PLC of unsecured unsubordinated creditors but
before the claims of the holders of its equity.
All dated subordinated liabilities externally issued by Barclays Bank PLC rank behind the claims against the bank of depositors and other unsecured
unsubordinated creditors but before the claims of the undated subordinated liabilities and the holders of its equity. The dated subordinated
liabilities externally issued by other subsidiaries are similarly subordinated as the external subordinated liabilities issued by Barclays Bank PLC.
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 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. Interest on the 5.088% Fixed-to-
Floating Rate Subordinated Callable Notes are fixed until the call date. After the call date, in the event that they are not redeemed, the interest rate
will reset periodically in advance based on USD London interbank rates.
Repayment
Those subordinated liabilities with a call date are repayable at the option of the issuer, on conditions governing the respective debt obligations,
some in whole or in part, and some only in whole. The remaining dated subordinated liabilities outstanding at 31 December 2019 are redeemable
only on maturity, subject in particular cases to provisions allowing an early redemption in the event of certain changes in tax law, or to certain
changes in legislation or regulations.
Any repayments prior to maturity require, in the case of Barclays PLC and Barclays Bank PLC, the prior approval of the PRA, or in the case of the
overseas issues, the approval of the local regulator for that jurisdiction and of the PRA in certain circumstances.
There are no committed facilities in existence at the balance sheet date which permit the refinancing of debt beyond the date of maturity.
Other
The 7.625% Contingent Capital Notes will be automatically transferred from investors to Barclays PLC (or another entity within the Group) for nil
consideration in the event the Barclays PLC consolidated CRD IV CET1 ratio (FSA October 2012 transitional statement) falls below 7%.
28 Ordinary shares, share premium and other equity
Called up share capital, allotted and fully paid
As at 1 January 2019
Issued to staff under share incentive plans
Issuances relating to Scrip Dividend Programme
AT1 securities issuance
AT1 securities redemption
Other movements
As at 31 December 2019
As at 1 January 2018
Issued to staff under share incentive plans
Issuances relating to Scrip Dividend Programme
AT1 securities issuance
AT1 securities redemption
Capital reorganisation
Other movements
As at 31 December 2018
Number of
shares
m
17,133
76
113
–
–
–
17,322
17,060
30
43
–
–
–
–
17,133
Ordinary
share
capital
£m
4,283
19
29
–
–
–
4,331
4,265
7
11
–
–
–
–
4,283
Ordinary
share
premium
£m
28
82
153
–
–
–
263
17,780
44
77
–
–
(17,873)
–
28
Total share
capital and
share
premium
£m
4,311
101
182
–
–
–
4,594
Other
equity
instruments
£m
9,632
–
–
3,500
(2,262)
1
10,871
22,045
51
88
–
–
(17,873)
–
4,311
8,941
–
–
1,925
(1,233)
–
(1)
9,632
Called up share capital
Called up share capital comprises 17,322m (2018: 17,133m) ordinary shares of 25p each.
Share repurchase
At the 2019 AGM on 2 May 2019, Barclays PLC was authorised to repurchase up to an aggregate of 1,714m of its ordinary shares of 25p. The
authorisation is effective until the AGM in 2020 or the close of business on 30 June 2020, whichever is the earlier. No share repurchases were made
during either 2019 or 2018.
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Barclays PLC Annual Report 2019 309
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements Capital instruments,
equity and reserves
28 Ordinary shares, share premium and other equity continued
Capital reorganisation
On 11 September 2018, the High Court of Justice in England and Wales confirmed the cancellation of the share premium account of Barclays PLC,
with the balance of £17,873m credited to retained earnings.
Other equity instruments
Other equity instruments of £10,871m (2018: £9,632m) include AT1 securities issued by Barclays PLC. The AT1 securities are perpetual securities
with no fixed maturity and are structured to qualify as AT1 instruments under prevailing capital rules applicable as at the relevant issue date.
In 2019, there were three issuances of AT1 instruments, in the form of Fixed Rate Resetting Perpetual Subordinated Contingent Convertible
Securities (2018: one issuance), totalling £3,500m (2018: £1,925m). There were also three redemptions in 2019 (2018: one redemption), totalling
£2,262m (2018: £1,233m).
AT1 equity instruments
AT1 equity instruments – Barclays PLC
7.0% Perpetual Subordinated Contingent Convertible Securities
6.625% Perpetual Subordinated Contingent Convertible Securities (USD 1,211m)
6.5% Perpetual Subordinated Contingent Convertible Securities (EUR 1,077m)
8.0% Perpetual Subordinated Contingent Convertible Securities (EUR 1,000m)
7.875% Perpetual Subordinated Contingent Convertible Securities
7.875% Perpetual Subordinated Contingent Convertible Securities (USD 1,500m)
7.25% Perpetual Subordinated Contingent Convertible Securities
7.75% Perpetual Subordinated Contingent Convertible Securities (USD 2,500m)
5.875% Perpetual Subordinated Contingent Convertible Securities
8% Perpetual Subordinated Contingent Convertible Securities (USD 2,000m)
7.125% Perpetual Subordinated Contingent Convertible Securities
6.375% Perpetual Subordinated Contingent Convertible Securities
Total AT1 equity instruments
The principal terms of the AT1 securities are described below:
Initial call date
2019
£m
2018
£m
2019
2019
2019
2020
2022
2022
2023
2023
2024
2024
2025
2025
–
–
–
830
995
1,131
1,245
1,925
1,244
1,509
996
996
10,871
695
711
856
830
995
1,131
1,245
1,925
1,244
–
–
–
9,632
■■ 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 redeemable, at the option of Barclays PLC, in whole but not in part at the initial call date, or on any fifth
anniversary after the initial call date. In addition, the AT1 securities are redeemable, at the option of Barclays PLC, in whole in the event of
certain changes in the tax or regulatory treatment of the securities. Any redemptions 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 Group
fall below 7%.
310 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS 29 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.
Fair value through other comprehensive income reserve
The fair value through other comprehensive income reserve represents the changes in the fair value of fair value through other comprehensive
income investments since initial recognition.
Cash flow hedging reserve
The cash flow hedging reserve represents the cumulative gains and losses on effective cash flow hedging instruments that will be recycled to
profit or loss when the hedged transactions affect profit or loss.
Own credit reserve
The own credit reserve reflects the cumulative own credit gains and losses on financial liabilities at fair value. Amounts in the own credit reserve
are not recycled to profit or loss in future periods.
Other reserves and 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 32.
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
Fair value through other comprehensive income reserve
Cash flow hedging reserve
Own credit reserve
Other reserves and treasury shares
Total
30 Non-controlling interests
Barclays Bank PLC issued:
– Preference shares
– Upper Tier 2 instruments
Other non-controlling interests
Total
2019
£m
3,344
(187)
1,002
(373)
974
4,760
2018
£m
3,888
(258)
660
(121)
984
5,153
Profit attributable to
non-controlling interest
Equity attributable to
non-controlling interest
Dividends paid to
non-controlling interest
2019
£m
41
39
–
80
2018a
£m
204
30
–
234
2019
£m
529
691
11
1,231
2018
£m
529
691
3
1,223
2019
£m
41
39
–
80
2018a
£m
204
30
–
234
Note
a From 2019, due to an IAS 12 update, the tax relief on payments in relation to Upper Tier 2 instruments has been recognised in the tax charge of the income statement, whereas it
was previously recorded directly in equity. Comparatives have been restated, increasing profit attributable to non-controlling interest and dividends paid to non-controlling interest by
£8m. Further detail can be found in Note 1.
Barclays Bank PLC and protective rights of non-controlling interests
Barclays PLC holds 100% of the voting rights of Barclays Bank PLC. As at 31 December 2019, Barclays Bank PLC has in issue preference shares and
Upper Tier 2 instruments. These are non-controlling interests to the Group.
A fixed coupon rate is attached to all Upper Tier 2 instruments until the initial call date, with the exception of the 9% Bonds, which are fixed for the
life of the issue and the Series 1, Series 2 and Series 3 Undated Notes, which are floating rate at rates fixed periodically in advance based on market
rates.
After the initial call date, in the event they are not redeemed, coupon payments in relation to the 7.125%, 6.125% Undated Notes, and the 9.25%
Bonds are fixed periodically in advance for five-year periods based on market rates. Coupon payments for all other Upper Tier 2 instruments are at
rates fixed periodically in advance based on market rates.
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Barclays PLC Annual Report 2019 311
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equity and reserves
30 Non-controlling interests continued
The payment of preference share dividends and Upper Tier 2 coupons 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, or in certain cases, any class of
preference shares, in the preceding six-month period. Barclays Bank PLC is not obliged to make a payment of interest on its 9.25% Perpetual
Subordinated Bonds if, in the immediately preceding 12-month interest period, a dividend has not been paid on any class of its share capital.
Coupons not paid becomes payable in each case if such a dividend is subsequently paid or in certain other circumstances. No dividend or coupon
payments may be made unless Barclays Bank PLC satisfies a specified solvency test. Under the terms of these instruments, Barclays PLC may not
pay dividends on ordinary shares until a dividend or coupon 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.
Preference share redemptions are typically at the discretion of Barclays Bank PLC. Upper Tier 2 instruments are repayable, at the option of Barclays
Bank PLC generally in whole at the initial call date and on any subsequent coupon payment date or, in the case of the 7.125%, 6.125% Undated
Notes and the 9.25% Perpetual Bonds, on any fifth anniversary after the initial call date. In addition, each issue of Upper Tier 2 instruments is
repayable, at the option of Barclays Bank PLC, in whole for certain tax reasons, either at any time, or on an interest payment date. There are no
events of default except non-payment of principal or mandatory interest. Any repayments or redemptions require the prior approval of the PRA,
and in respect of the preference shares, any such redemption will be subject to the Companies Act 2006 and the Articles of Barclays Bank PLC.
Instrument
Preference Shares:
6.278% non-cumulative callable preference shares
4.75% non-cumulative callable preference shares
Total Barclays Bank PLC Preference Shares
Upper Tier 2 Instruments:
Undated Floating Rate Primary Capital Notes Series 1
Undated Floating Rate Primary Capital Notes Series 2
5.03% Undated Reverse Dual Currency Subordinated Loan (JPY 8bn)
5.0% Reverse Dual Currency Undated Subordinated Loan (JPY 12bn)
Undated Floating Rate Primary Capital Notes Series 3 (£145m)
9% Permanent Interest Bearing Capital Bonds (£100m)
7.125% Undated Subordinated Notes (£525m)
6.125% Undated Subordinated Notes (£550m)
9.25% Perpetual Subordinated Bonds (ex Woolwich) (£150m)
Total Upper Tier 2 Instruments
2019
£m
318
211
529
93
179
39
53
20
40
158
34
75
691
2018
£m
318
211
529
93
179
39
53
20
40
158
34
75
691
312 Barclays PLC Annual Report 2019
home.barclays/annualreport
NOTES TO THE FINANCIAL STATEMENTS Employee benefits
The notes included in this section focus on the costs and commitments associated with employing our staff.
31 Staff costs
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 32 and Note 33
respectively.
Incentive awards granted:
Current year bonus
Deferred bonus
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
Other differences between incentive awards granted and income statement charge
Income statement charge for performance costs
Other income statement charges:
Salaries
Social security costs
Post-retirement benefitsa
Other compensation costs
Total compensation costsb
Other resourcing costs:
Outsourcing
Redundancy and restructuring
Temporary staff costs
Other
Total other resourcing costs
Total staff costs
Group compensation costs as % of total incomec
Group staff costs as % of total incomec
2019
£m
1,008
429
53
1,490
(293)
308
(48)
1,457
4,332
573
501
480
7,343
433
132
256
151
972
2018
£m
1,067
515
67
1,649
(359)
299
(33)
1,556
4,200
558
619
413
7,346
594
133
386
170
1,283
2017
£m
990
442
74
1,506
(302)
457
29
1,690
3,982
580
493
378
7,123
1,094
80
354
(91)
1,437
8,315
8,629
8,560
33.9%
38.4%
34.1%
40.2%
33.8%
40.6%
Notes
a Post-retirement benefits charge includes £270m (2018: £236m; 2017: £230m) in respect of defined contribution schemes and £231m (2018: £383m; 2017: £263m) in respect of
defined benefit schemes.
b £439m (2018: £296m; 2017: £312m) of Group compensation was capitalised as internally generated software.
c 2018 comparative excludes a GMP charge of £140m.
home.barclays/annualreport
Barclays PLC Annual Report 2019 313
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements Employee benefits
32 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
2019
£m
6
266
206
478
3
481
2018
£m
45
217
187
449
1
450
2017
£m
153
166
186
505
3
508
Share Value Plan (SVP)
The SVP was introduced in March 2010. SVP awards have been granted to participants in the form of a conditional right to receive Barclays PLC
shares or provisional allocations of Barclays PLC shares which vest or are considered for release over a period of three, five or seven years.
Participants do not pay to receive an award or to receive a release of shares. For awards granted before December 2017, the grantor may also make
a dividend equivalent payment to participants on release of a SVP award. SVP awards are also made to eligible employees for recruitment
purposes. All awards are subject to potential forfeiture in certain leaver scenarios.
Deferred Share Value Plan (DSVP)
The DSVP was introduced in February 2017. The terms of the DSVP are materially the same as the terms of the SVP as described above, save that
Executive Directors are not eligible to participate in the DSVP and the DSVP operates over market purchase shares only.
Other schemes
In addition to the SVP and DSVP, the Barclays Group operates a number of other schemes settled in Barclays PLC Shares including Sharesave (both
UK and Ireland), Sharepurchase (both UK and overseas), and the Barclays Group Long Term Incentive Plan. A delivery of upfront shares to
‘Material Risk Takers’ can be made as a Share Incentive Award (Holding Period).
314 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS 32 Share-based payments continued
Share option and award plans
The weighted average fair value per award granted, weighted average share price at the date of exercise/release of shares during the year,
weighted average contractual remaining life and number of options and awards outstanding (including those exercisable) at the balance sheet
date were as follows:
2019
2018
Weighted
average fair
value per
award
granted
in year
£
1.45
1.43
0.40-1.60
Weighted
average
share price
at exercise/
release
during year
£
1.59
1.60
1.57-1.70
Weighted
average
remaining
contractual
life
years
1
1
0-3
Number of
options/
awards
outstanding
(000s)
5,619
325,872
232,259
Weighted
average fair
value per
award
granted
in year
£
1.90
1.94
0.36-2.11
Weighted
average
share price
at exercise/
release
during year
£
2.11
2.10
1.82-2.11
Weighted
average
remaining
contractual
life
years
<1
1
0-3
Number of
options/
awards
outstanding
(000s)
67,898
206,571
217,952
SVPa,b
DSVPa,b
Othersa
Notes
a Options/award granted over Barclays PLC shares.
b Weighted average exercise price is not applicable for SVP and DSVP awards as these are not share option schemes.
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:
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:
SVPa,b
DSVPa,b
Othersa,c
Number (000s)
Number (000s)
Number (000s)
Weighted average
ex. price (£)
2019
2018
2019
2018
2019
2018
2019
67,898
2,317
(62,970)
(1,626)
–
5,619
–
191,610
1,425
(119,688)
(5,449)
–
67,898
–
206,571
217,075
(82,354)
(15,420)
–
325,872
–
125,399
135,964
(43,402)
(11,390)
–
206,571
–
217,952
215,694
(151,827)
(42,331)
(7,229)
232,259
32,376
210,160
114,335
(78,771)
(25,494)
(2,278)
217,952
23,556
1.41
1.19
1.21
1.51
2.08
1.29
1.32
2018
1.41
1.51
1.50
1.54
1.80
1.41
1.96
Notes
a Options/award granted over Barclays PLC shares.
b Weighted average exercise price is not applicable for SVP and DSVP awards as these are not share option schemes.
c The number of awards within Others at the end of the year principally relates to Sharesave (number of awards exercisable at end of year was 15,148,343). The weighted average
exercise price relates to Sharesave.
Awards and options granted under the Group’s share plans may be satisfied using new issue shares, treasury shares and market purchase shares.
Awards granted under the DSVP may be satisfied using market purchase shares only.
There were no significant modifications to the share-based payments arrangements in 2019 and 2018.
As at 31 December 2019, the total liability arising from cash-settled share-based payments transactions was £3m (2018: £2m).
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 2019 was 13.1m (2018: 11.4m). 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 £1.80 (2018:
£1.51) was £24m (2018: £17m). For accounting of treasury shares, see Note 29.
home.barclays/annualreport
Barclays PLC Annual Report 2019 315
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements Employee benefits
33 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.
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 Barclays Group’s main scheme, representing 97% of the Barclays Group’s total retirement benefit obligations. Barclays Bank PLC is
the principal employer of the UKRF. The UKRF was closed to new entrants on 1 October 2012, and comprises 10 sections, the two most significant
of which are:
■■ Afterwork, which comprises a contributory cash balance defined benefit element, and a voluntary defined contribution element. The cash
balance element is accrued each year and revalued until Normal Retirement Age in line with the increase in Retail Price Index (RPI) (up to a
maximum of 5% p.a.). An increase of up to 2% a year may also be added at Barclays’ discretion. The costs of ill-health retirements and death in
service benefits for Afterwork members are borne by the UKRF. The main risks that Barclays runs in relation to Afterwork are limited although
additional contributions are required if pre-retirement investment returns are 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)
The BPSP is a defined contribution scheme providing benefits for all new UK hires from 1 October 2012, BPSP is not subject to the same
investment return, inflation or life expectancy risks for Barclays that 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 Barclays 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, deferred and
pensioner members who apply for the role.
The BPSP is a Group Personal Pension arrangement which operates as a collection of personal pension plans. Each personal pension plan is a
direct contract between the employee and the BPSP provider (Legal & General Assurance Society Limited), and is regulated by the FCA.
Similar principles of pension governance apply to the Barclays Group’s other pension schemes, depending on local legislation.
316 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS 33 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 Barclays
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
Balance sheet reconciliation
Benefit obligation at beginning of the year
Current service cost
Interest costs on scheme liabilities
Past service cost
Remeasurement (loss)/gain – 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 end of the year
Net surplus
Retirement benefit assets
Retirement benefit liabilities
Net retirement benefit assets
2019
£m
231
(48)
–
2
185
2018
£m
243
(24)
134
5
358
2017
£m
265
(12)
(3)
–
250
2019
2018
Of which
relates to
UKRF
£m
(27,301)
(210)
(718)
–
(2,964)
214
266
(1)
1,410
–
(29,304)
29,036
774
731
2,230
1
(1,410)
–
31,362
2,058
2,058
–
2,058
Total
£m
(28,269)
(231)
(747)
–
(3,087)
223
277
(5)
1,459
47
(30,333)
29,722
795
755
2,312
5
(1,459)
(37)
32,093
1,760
2,108
(348)
1,760
Total
£m
(30,268)
(243)
(705)
(134)
1,129
(241)
(75)
(4)
2,205
67
(28,269)
30,922
729
754
(400)
4
(2,205)
(82)
29,722
1,453
1,768
(315)
1,453
Of which
relates to
UKRF
£m
(29,160)
(226)
(677)
(140)
1,075
(245)
(94)
(1)
2,167
–
(27,301)
30,112
709
741
(360)
1
(2,167)
–
29,036
1,735
1,735
–
1,735
Included within the benefit obligation was £759m (2018: £757m) relating to overseas pensions and £202m (2018: £204m) relating to other
post-employment benefits.
As at 31 December 2019, the UKRF’s scheme assets were in surplus versus IAS 19 obligations by £2,058m (2018: £1,735m). The movement for the
UKRF was driven by higher than assumed asset returns, payment of deficit reduction contributions, updated mortality assumptions, and lower
than expected inflation, partially offset by a decrease in the discount rate.
The weighted average duration of the benefit payments reflected in the defined benefit obligation for the UKRF is 17 years. The UKRF expected
benefits are projected to be paid out for in excess of 50 years, although 25% of the total benefits are expected to be paid in the next 10 years; 30%
in years 11 to 20 and 25% in years 20 to 30. The remainder of the benefits are expected to be paid beyond 30 years.
Of the £1,410m (2018: £2,167m) UKRF benefits paid out, £580m (2018: £1,420m) related to transfers out of the fund.
Where a scheme’s assets exceed its obligation, an asset is recognised to the extent that it does not exceed the present value of future contribution
holidays or refunds of contributions (the asset ceiling). In the case of the UKRF the asset ceiling is not applied as, in certain specified
circumstances such as wind-up, the Group expects to be able to recover any surplus. Similarly, a liability in respect of future minimum funding
requirements is not recognised. The Trustee does not have a substantive right to augment benefits, nor do they have the right to wind up the plan
except in the dissolution of the Group or termination of contributions by the Group. The application of the asset ceiling to other plans and
recognition of additional liabilities in respect of future minimum funding requirements are considered on an individual plan basis.
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Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements Employee benefits
33 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)
2019
% p.a.
1.92
3.02
2018
% p.a.
2.71
3.25
The UKRF discount rate assumption for 2019 was based on a variant of the standard Willis Towers Watson RATE Link model. This variant includes
all bonds rated AA by at least one of the four major ratings agencies, and assumes that forward rates after year 30 are flat. The RPI inflation
assumption for 2019 was set by reference to the Bank of England’s implied inflation curve, assuming the forward rates remain flat after 30 years.
The inflation assumption incorporates a deduction of 20 basis points as an 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 for a switch to holding forward
rates rather spot rates flat after year 30.
The UKRF’s post-retirement mortality assumptions are based on a best estimate assumption derived from an analysis in 2019 of the UKRF’s own
post-retirement mortality experience, and taking account of recent evidence from published mortality surveys. An allowance has been made for
future mortality improvements based on the 2018 core projection model published by the Continuous Mortality Investigation Bureau subject to a
long-term trend of 1.5% per annum in future improvements. The methodology used is consistent with the prior year end, except that the 2017
core projection model was used at 2018, and a long-trend of 1.25% per annum was applied. The table below shows how the assumed life
expectancy at 60, for members of the UKRF, has varied over the past three 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
2019
2018
2017
27.1
29.3
28.9
31.1
27.7
29.4
29.2
31.0
27.8
29.4
29.3
31.0
The assumption for future transfers out has been removed, to reflect lower volumes experienced in 2019 and immaterial volumes expected going
forwards. The previous assumption was that 5% of the benefit obligation in respect of deferred members will transfer out during 2020, 2.5% in
2021, tapering down to 0% from 2022 onwards.
Sensitivity analysis on actuarial assumptions
The sensitivity analysis has been calculated by valuing the UKRF liabilities using the amended assumptions shown in the table below and keeping
the remaining assumptions the same as disclosed in the table above, except in the case of the inflation sensitivity where other assumptions that
depend on assumed inflation have also been amended correspondingly. The difference between the recalculated liability figure and that stated in
the balance sheet reconciliation table above is the figure shown. The selection of these movements to illustrate the sensitivity of the defined
benefit obligation to key assumptions 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
2019
(Decrease)/
Increase in
UKRF
defined
benefit
obligation
£bn
2018
(Decrease)/
Increase in
UKRF
defined
benefit
obligation
£bn
(2.3)
(1.2)
1.2
2.6
1.5
0.8
(0.7)
(1.4)
1.0
(1.0)
(2.1)
(1.1)
1.1
2.4
1.3
0.7
(0.6)
(1.3)
0.9
(0.9)
318 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS 33 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.
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 2019
Equities
Private equities
Bonds – fixed government
Bonds – index-linked government
Bonds – corporate and other
Property
Infrastructure
Cash and liquid assets
Fair value of scheme assets
As at 31 December 2018
Equities
Private equities
Bonds – fixed government
Bonds – index-linked government
Bonds – corporate and other
Property
Infrastructure
Cash and liquid assets
Fair value of scheme assets
Total
Of which relates to UKRF
% of total
fair value of
scheme
assets
%
7.3
6.5
10.7
34.4
28.8
5.1
4.9
2.3
100.0
11.3
6.7
11.2
36.8
21.4
5.8
4.0
2.8
100.0
Value
£m
2,349
2,083
3,447
11,036
9,234
1,644
1,558
742
32,093
3,349
1,995
3,320
10,945
6,371
1,712
1,196
834
29,722
% of total
fair value of
scheme
assets
%
6.9
6.6
10.1
35.2
28.8
5.2
5.0
2.2
100.0
11.1
6.9
10.5
37.7
21.3
5.9
4.1
2.5
100.0
Value
£m
2,174
2,083
3,175
11,027
9,042
1,633
1,558
670
31,362
3,211
1,995
3,062
10,936
6,197
1,702
1,196
737
29,036
Included within the fair value of scheme assets were nil (2018: nil) relating to shares in Barclays PLC and nil (2018: nil) relating to bonds issued by
Barclays PLC. The UKRF also invests in pooled investment vehicles which may hold shares or debt issued by Barclays PLC.
The UKRF assets above do not include the Senior Notes asset referred to in the section below on Triennial Valuation, as these are non-transferable
instruments and not recognised under IAS19.
Approximately 44% of the UKRF assets are invested in liability-driven investment strategies; primarily UK gilts as well as interest rate and inflation
swaps. These are used to better match the assets to its liabilities. The swaps are used to reduce the scheme’s inflation and duration risks against
its liabilities.
Triennial valuation
The latest triennial actuarial valuation of the UKRF with an effective date of 30 September 2019 has been completed. This valuation showed a
funding deficit of £2.3bn and a funding level of 94%, compared to a £4.0bn funding deficit in the 30 September 2018 update, and a £7.9bn
funding deficit in the previous triennial valuation (effective date 30 September 2016). The decrease in funding deficit over the year to
30 September 2019 was mainly driven by the payment of deficit reduction contributions and changes to mortality assumptions.
The Bank and UKRF Trustee have agreed a revised statement of funding principles, schedule of contributions, and recovery plan to seek to
eliminate the funding deficit.
The main differences between the funding and accounting assumptions are a different approach to setting the discount rate and a more
conservative longevity assumption for funding.
The deficit reduction contributions agreed with the UKRF Trustee as part of the 30 September 2019 triennial valuation recovery plan are shown
alongside the deficit reduction contributions agreed in 2017 for the prior 30 September 2016 triennial valuation.
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Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements Employee benefits
33 Pensions and post-retirement benefits continued
Year
Cash paid:
2019 – paid in two instalments of £250m in April and September
2019 – paid in December
Future commitments:
2020
2021
2022
2023
2024 to 2026
Deficit
reduction
contributions
under the
30 September 2016
valuation
£m
Deficit
reduction
contributions
under the
30 September 2019
valuation
£m
500
–
500
1,000
1,000
1,000
1,000 each year
–
500
500
700
294
286
–
As part of the triennial actuarial valuation, Barclays Bank PLC agreed to pay a £500m contribution on 11 December 2019 and at the same time the
UKRF subscribed for non-transferable listed senior fixed rate notes for £500m, backed by UK gilts (the Senior Notes). The Senior Notes were issued
by Heron Issuer Limited (Heron), an entity that is consolidated within the Barclays Group under IFRS 10. The Senior Notes entitle the UKRF to
semi-annual coupon payments for five years, and full repayment of the subscription in cash at maturity in 2024. Heron acquired the gilts from
BBPLC for cash of £600m to support these payments. BBPLC also subscribed for Junior notes issued by Heron for £100m. The contribution forms
part of the recovery plan agreed as part of the 2019 valuation of the UKRF. No liability is recognised under IAS19 for the obligation to make deficit
reduction contributions or to repay the Senior Notes, as settlement in 2024 gives rise to both a reduction in cash and a corresponding increase in
net defined benefit assets.
The deficit reduction contributions are in addition to the regular contributions to meet the Barclays Group’s share of the cost of benefits accruing
over each year. The next funding valuation of the UKRF is due to be completed in 2023 with an effective date of 30 September 2022.
Other support measures agreed which remain in place
Collateral – The UKRF Trustee and Barclays Bank PLC have entered into an arrangement whereby a collateral pool has been put in place to provide
security for the UKRF funding deficit as it increases or decreases over time. The collateral pool is currently made up of government securities, and
agreement was made with the Trustee to cover 100% of the funding deficit with an overall cap of £9bn. The arrangement provides the UKRF
Trustee with dedicated access to the pool of assets in the event of Barclays Bank PLC not paying a deficit reduction contribution to the UKRF or in
the event of Barclays Bank PLC’s insolvency. These assets are included within Note 38 Assets pledged, collateral received and assets transferred.
Support from Barclays PLC – In the event of Barclays Bank PLC not paying a deficit reduction contribution payment required by a specified
pre-payment date, Barclays PLC has entered into an arrangement whereby it will be required to use, in first priority, dividends received from
Barclays Bank UK PLC (if any) to invest the proceeds in Barclays Bank PLC (up to the maximum amount of the deficit reduction contribution
unpaid by Barclays Bank PLC). The proceeds of the investment will be used to discharge Barclays Bank PLC’s unpaid deficit reduction contribution.
Participation – As permitted under the Financial Services and Markets Act 2000 (Banking Reform) (Pensions) Regulations 2015, Barclays Bank UK
PLC is a participating employer in the UKRF and will remain so during a transitional phase until September 2025 as set out in a deed of
participation. Barclays Bank UK PLC will make contributions for the future service of its employees who are currently Afterwork members and, in
the event of Barclays Bank PLC’s insolvency during this period provision has been made to require Barclays Bank UK PLC to become the principal
employer of the UKRF. Barclays Bank PLC’s Section 75 debt would be triggered by the insolvency (the debt would be calculated after allowing for
the payment to the UKRF of the collateral above).
Defined benefit contributions paid with respect to the UKRF were as follows:
Contributions paid
2019
2018
2017
£m
1,231
741
1,124
There were nil (2018: nil; 2017: £153m) Section 75 contributions included within the Barclays Group’s contributions paid as no participating
employers left the UKRF scheme in 2019.
The Barclays Group’s expected contribution to the UKRF in respect of defined benefits in 2020 is £743m (2019: £725m). In addition, the expected
contributions to UK defined contribution schemes in 2020 is £33m (2019: £34m) to the UKRF and £185m (2019: £168m) to the BPSP.
320 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS Scope of consolidation
The notes included in this section present 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.
34 Principal subsidiaries
The Group applies IFRS 10 Consolidated Financial Statements. The consolidated financial statements combine the financial statements of the
Group 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.
Principal place of business
or incorporation
United Kingdom
United Kingdom
Ireland
Company name
Barclays Bank PLC
Barclays Bank UK PLC
Barclays Bank Ireland PLC
Barclays Execution Services Limited United Kingdom
Barclays Capital Inc.
Barclays Capital Securities Limited United Kingdom
Barclays Securities Japan Limited
Barclays US LLC
Barclays Bank Delaware
Japan
United States
United States
United States
Non-
controlling
interests –
proportion
of ownership
interests
%
3
–
–
–
–
–
–
–
–
Non-
controlling
interests –
proportion
of voting
interests
%
–
–
–
–
–
–
–
–
–
Percentage
of voting
rights held
%
100
100
100
100
100
100
100
100
100
Nature of business
Banking, holding company
Banking, holding company
Banking, holding company
Service company
Securities dealing
Securities dealing
Securities dealing
Holding company
Credit card issuer
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 30 for more information.
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 will 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
–
Retained
profit for
the year
£m
–
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 35.
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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 £1,474bn (2018: £1,418bn) and £1,388bn
(2018: £1,337bn) 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 issue certain equity-accounted and debt-accounted financial instruments and non-equity
instruments such as Tier 1 and Tier 2 capital instruments and other forms of subordinated liabilities. Refer to Note 27 and Note 28 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 applicable PRA or local regulatory requirements pertaining to liquidity. Some of the
regulated subsidiaries include Barclays Bank PLC and Barclays Capital Securities Limited (which are regulated on a combined basis under a
Domestic Liquidity Sub-Group (DoLSub) arrangement), Barclays Bank UK PLC, Barclays Bank Ireland PLC, Barclays Capital Inc. and Barclays Bank
Delaware. See pages 180 to 189 for further details of liquidity requirements, including those of the Group’s 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, as well as to
provide security to the UK Retirement Fund. Once encumbered, the assets are not available for transfer around the Group. The assets typically
affected are disclosed in Note 38.
Other restrictions
The Group is required to maintain balances with central banks and other regulatory authorities, and these amounted to £4,893m (2018: £4,717m).
35 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 37 for further detail.
Commercial paper (CP) and medium-term note conduits
The Group provided £8.3bn (2018: £11.7bn) in undrawn contractual backstop liquidity facilities to CP conduits.
Fund management entities
In previous periods, the Group had contractually guaranteed the performance of certain cash investments in a number of managed investment
funds which resulted in their consolidation. As at 31 December 2019, the notional value of the guarantees were nil (2018: nil) as the European
Wealth Funds associated with these guarantees were either closed or ownership has been transferred outside the Group and they are no longer
consolidated.
Employee benefit and other trusts
The Group provides capital contributions to employee benefit trusts to enable them to meet obligations to employees in relation to share-based
remuneration arrangements. During 2019, the Group provided undrawn liquidity facilities of £2.5bn (2018: £2.6bn) to certain trusts.
322 Barclays PLC Annual Report 2019
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Scope of consolidationNOTES TO THE FINANCIAL STATEMENTS 35 Structured entities continued
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
Secured
financing
£m
Short-term
traded
interests
£m
Traded
derivatives
£m
Other
interests
£m
Total
£m
As at 31 December 2019
Assets
Trading portfolio assets
Financial assets at fair value through the income statement
Derivative financial instruments
Financial assets at fair value through other comprehensive income
Loans and advances at amortised cost
Reverse repurchase agreements at amortised cost
Other assets
Total assets
Liabilities
Derivative financial instruments
As at 31 December 2018
Assets
Trading portfolio assets
Financial assets at fair value through the income statement
Derivative financial instruments
Financial assets at fair value through other comprehensive income
Loans and advances at amortised cost
Other assets
Total assets
Liabilities
Derivative financial instruments
9,585 –
–
–
32,859 –
–
–
–
–
–
9,585
–
–
–
77
–
32,936
76
2,659
2,369 –
391
19,061
–
28
22,215
–
–
–
–
2,369
9,661
35,518
2,369
391
19,061
77
28
67,105
–
–
3,171
2,437
5,608
–
32,359
–
–
–
–
32,359
12,206
–
–
–
–
–
12,206
–
–
5,236
–
–
–
5,236
–
2,598
–
–
17,341
33
19,972
12,206
34,957
5,236
–
17,341
33
69,773
–
–
6,438
2,586
9,024
Secured financing arrangements, short-term traded interests and traded derivatives are typically managed under market risk management policies
described on page 141 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 financial assets at fair value through the income statement to align to the balance sheet presentation.
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 2019, £8,903m (2018: £8,436m) of the Group’s £9,585m (2018: £12,206m) short-term traded interests were comprised of
debt securities issued by asset securitisation vehicles.
Traded derivatives
The Group enters into a variety of derivative contracts with structured entities which reference market risk variables such as interest rates, foreign
exchange rates and credit indices 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 14. 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.
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Barclays PLC Annual Report 2019 323
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements 35 Structured entities continued
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
£314,170m (2018: £246,774m).
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 2019
Trading portfolio assets
Financial assets at fair value through the income statement
– Debt securities
– Loans and advances
– Equity securities
Financial assets at fair value through other comprehensive income
Loans and advances at amortised cost
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 2018
Trading portfolio assets
Financial assets at fair value through the income statement
– Debt securities
– Loans and advances
Financial assets at fair value through other comprehensive income
Loans and advances at amortised cost
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
–
–
–
–
–
–
–
159
–
–
5,930
17
5,947
8,649
14,596
78,716
8,132
4
8,295
3,751
12,046
145,181
–
444
–
–
6,100
9
6,553
11,671
18,224
73,109
–
–
–
–
9,140
3
9,143
4,327
13,470
196,865
–
–
–
–
–
–
7
7
–
7
9,180
–
–
–
–
–
21
21
–
21
9,341
Others
£m
76
80
2,417
3
391
4,999
–
7,966
1,621
9,587
24,919
Total
£m
76
80
2,576
3
391
19,061
28
22,215
14,021
36,236
257,996
–
–
114
2,040
–
2,101
–
4,255
431
4,686
28,163
558
2,040
–
17,341
33
19,972
16,429
36,401
307,478
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 overcollateralisation, 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 overcollateralisation, seller guarantees, or
other credit enhancements provided to the conduit.
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 £7m (2018: £67m) against such facilities.
324 Barclays PLC Annual Report 2019
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Scope of consolidationNOTES TO THE FINANCIAL STATEMENTS 35 Structured entities continued
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. The Group has no other risk exposure to the trusts.
Other
This includes fair value loans with structured entities where the market risk is materially hedged with corresponding derivative contracts, interests
in debt securities issued by securitisation vehicles and drawn and undrawn loan facilities to these entities.
Assets transferred to sponsored unconsolidated structured entities
Assets transferred to sponsored unconsolidated structured entities were £471m (2018: £516m).
36 Investments in associates and joint ventures
Accounting for associates and joint ventures
The Group 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 the Group.
Equity accounted
Held at fair value through profit or loss
Total
Associates
£m
457
–
457
2019
Joint ventures
£m
264
516
780
Total
£m
721
516
1,237
Associates
£m
481
–
481
2018
Joint ventures
£m
281
509
790
Total
£m
762
509
1,271
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 2019, with the exception of certain undertakings for which
the amounts are based on accounts made up to dates not earlier than three months before the balance sheet date.
Profit from continuing operations
Other comprehensive income/(expense)
Total comprehensive income from continuing operations
Associates
2019
£m
49
–
49
2018
£m
173
28
201
Joint ventures
2019
£m
86
3
89
2018
£m
54
32
86
Unrecognised shares of the losses of individually immaterial associates and joint ventures were nil (2018: nil).
The Barclays commitments and contingencies to its associates and joint ventures comprised unutilised credit facilities provided to customers of
£1,726m (2018: £1,715m). In addition, the Group has made commitments to finance or otherwise provide resources to its joint ventures and
associates of £403m (2018: £318m).
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37 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 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 at amortised cost
Credit cards, unsecured and
other retail lending
2019
2018
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
3,516
3,678
(2,918)
(2,922)
4,242
4,334
(4,234)
(4,218)
Balances included within loans and advances at amortised cost represent securitisations where substantially all the risks and rewards of the asset
have been retained by 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 38.
326 Barclays PLC Annual Report 2019
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Scope of consolidationNOTES TO THE FINANCIAL STATEMENTS 37 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 with commercial mortgage
backed securities. Continuing involvement largely arises from providing financing into these structures in the form of retained notes, which do not
bear first losses.
The table below shows the potential financial implications of such continuing involvement:
Type of transfer
2019
Commercial mortgage backed securities
2018
Commercial mortgage backed securities
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
189
135
188
135
189
135
1
2
4
3
Note
a Assets which represent the Group’s continuing involvement in derecognised assets are recorded in Loans and advances at amortised cost.
38 Assets pledged, collateral received and assets transferred
Assets are pledged or transferred as collateral to secure liabilities under repurchase agreements, securitisations and stock lending agreements or
as security deposits relating to derivatives. Assets transferred are non-cash assets transferred to a third party that do not qualify for derecognition
from the Group balance sheet, for example because Barclays retains substantially all the exposure to those assets under an agreement to
repurchase them in the future for a fixed price.
Assets pledged or transferred as collateral include all assets categorised as encumbered in the disclosure on pages 221 to 222 of the Barclays PLC
Pillar 3 Report 2019 (unaudited), other than those held in commercial paper conduits. In these transactions, the Group will be required to step in
to provide financing itself under a liquidity facility if the vehicle cannot access the commercial paper market.
Where non-cash assets are pledged or transferred as collateral for cash received, the asset continues to be recognised in full, and a related liability
is also recognised on the balance sheet. Liabilities are shown on a net basis in accordance with IAS 32. Where non-cash assets are pledged or
transferred as collateral in an exchange for non-cash assets, the transferred asset continues to be recognised in full, and there is no associated
liability as the non-cash collateral received is not recognised on the balance sheet. The Group is unable to use, sell or pledge the transferred assets
for the duration of the transaction and remains exposed to interest rate risk and credit risk on these pledged assets. Unless stated, the
counterparty’s recourse is not limited to the transferred assets.
The following table summarises the nature and carrying amount of the assets pledged as security against these liabilities:
Cash collateral and settlements
Loans and advances at amortised cost
Trading portfolio assets
Financial assets at fair value through the income statement
Financial assets at fair value through other comprehensive income
Assets pledged
2019
£m
64,400
39,354
65,532
10,104
9,278
188,668
2018
£m
55,532
42,683
63,143
7,450
10,354
179,162
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Barclays PLC Annual Report 2019 327
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements 38 Assets pledged, collateral received and assets transferred continued
The following table summarises the transferred financial assets and the associated liabilities:
At 31 December 2019
Derivatives
Repurchase agreements
Securities lending arrangements
Other
At 31 December 2018
Derivatives
Repurchase agreements
Securities lending arrangements
Other
Transferred
assets
£m
Associated
liabilities
£m
68,609
52,840
49,106
18,113
188,668
(68,609)
(35,708)
–
(12,005)
(116,322)
58,338
57,606
42,092
21,126
179,162
(58,338)
(40,717)
–
(14,094)
(113,149)
Included within other are agreements where a counterparty’s recourse is limited to the transferred assets. The relationship between the
transferred assets and the associated liabilities is that holders of notes may only look to cash flows from the securitised assets for payments of
principal and interest due to them under the terms of their notes.
2019
Recourse to transferred assets only
2018
Recourse to transferred assets only
Carrying value
Transferred
assets
£m
Associated
liabilities
£m
Transferred
assets
£m
Fair value
Associated
liabilities
£m
Net position
£m
3,516
(2,918)
3,678
(2,922)
4,242
(4,234)
4,334
(4,218)
756
116
The Group has an additional £12bn (2018: £10bn) of loans and advances within its asset backed funding programmes that can readily be used to
raise additional secured funding and are available to support future issuances.
Total assets pledged includes a collateral pool put in place to provide security for the UKRF funding deficit. Refer to Note 33 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 or transferred to others was as follows:
Fair value of securities accepted as collateral
Of which fair value of securities re-pledged/transferred to others
2019
£m
656,598
554,988
2018
£m
598,348
528,957
Additional disclosure has been included in collateral and other credit enhancements (see page 149).
Assets pledged as collateral include all assets categorised as encumbered in the disclosure on pages 221 to 222 of the Barclays PLC Pillar 3 Report
2019 (unaudited).
328 Barclays PLC Annual Report 2019
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Scope of consolidationNOTES 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 and Key Management Personnel.
39 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.
Subsidiaries
Transactions between Barclays PLC and its subsidiaries meet the definition of related party transactions. Where these are eliminated on
consolidation, they are not disclosed in the Group’s financial statements. Transactions between Barclays PLC and its subsidiaries are fully disclosed
in Barclays PLC’s financial statements. A list of the Group’s principal subsidiaries is shown in Note 34.
Associates, joint ventures and other entities
The Group provides banking services to its associates, joint ventures and the Group pension funds (principally the UK Retirement Fund), providing
loans, overdrafts, interest and non-interest bearing deposits and current accounts to these entities as well as other services. Group companies also
provide investment management and custodian services to the Group pension schemes. 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 36.
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 2019
Total income
Credit impairment charges
Operating expenses
Total assets
Total liabilities
For the year ended and as at 31 December 2018
Total income
Credit impairment charges
Operating expenses
Total assets
Total liabilities
Associates
£m
Joint
ventures
£m
Pension
funds
£m
–
–
(46)
–
–
–
–
(27)
12
85
12
–
–
1,303
–
7
–
(7)
1,288
2
5
–
–
3
75
4
–
–
3
139
An entity that is consolidated within the Group under IFRS 10 has issued Senior Notes to the UKRF with a nominal value of £500m. This is not
included within the table above. Refer to Note 33 for further details. Total liabilities includes derivatives transacted on behalf of the pensions funds
of £6m (2018: £3m).
Key Management Personnel
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 and Officers of Barclays PLC, certain direct reports of the Group Chief Executive
and the heads of major business units and functions.
The Group provides banking services to Key Management Personnel and persons connected to them. Transactions during the year and the
balances outstanding were as follows:
Loans outstanding
As at 1 January
Loans issued during the yeara
Loan repayments during the yearb
As at 31 December
Notes
a Includes loans issued to existing Key Management Personnel and new or existing loans issued to newly appointed Key Management Personnel.
b Includes loan repayments by existing Key Management Personnel and loans to former Key Management Personnel.
2019
£m
7.2
4.8
(4.8)
7.2
2018
£m
4.8
4.2
(1.8)
7.2
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Barclays PLC Annual Report 2019 329
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements Other disclosure matters
39 Related party transactions and Directors’ remuneration continued
No allowances for impairment were recognised in respect of loans to Key Management Personnel (or any connected person).
Deposits outstanding
As at 1 January
Deposits received during the yeara
Deposits repaid during the yearb
As at 31 December
2019
£m
6.9
36.0
(30.8)
12.1
2018
£m
6.9
24.8
(24.8)
6.9
Notes
a Includes deposits received from existing Key Management Personnel and new or existing deposits received from newly appointed Key Management Personnel.
b Includes deposits repaid by existing Key Management Personnel and deposits of former Key Management Personnel.
Total commitments outstanding
Total commitments outstanding 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 2019 were £0.8m (2018: £0.9m).
All loans to Key Management Personnel (and persons connected to them) were made in the ordinary course of business; were made on
substantially the same terms, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other
persons; and did not involve more than a normal risk of collectability or present other unfavourable features.
Remuneration of Key Management Personnel
Total remuneration awarded to Key Management Personnel below represents the awards made to individuals that have been approved by the
Board Remuneration Committee as part of the latest remuneration decisions, and is consistent with the approach adopted for disclosures set out
on pages 85 to 123. Costs recognised in the income statement reflect the accounting charge for the year included within operating expenses. The
difference between the values awarded and the recognised income statement charge principally relates to the recognition of deferred costs for
prior year awards. Figures are provided for the period that individuals met the definition of Key Management Personnel.
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
2019
£m
38.5
0.1
8.7
13.4
7.4
68.1
(7.4)
(0.6)
2.2
62.3
Disclosure required by the Companies Act 2006
The following information regarding the Barclays PLC Board of Directors is presented in accordance with the Companies Act 2006:
Aggregate emolumentsa
Amounts paid under LTIPsb
2019
£m
8.5
0.8
9.3
2018
£m
33.0
–
7.6
16.2
7.5
64.3
(7.5)
2.8
0.7
60.3
2018
£m
9.0
0.9
9.9
Notes
a The aggregate emoluments include amounts paid for the 2019 year. In addition, deferred share awards for 2019 with a total value at grant of £2m (2018: £1m) will be made to James
E Staley and Tushar Morzaria which will only vest subject to meeting certain conditions.
b The figure above for ‘Amounts paid under LTIPs’ in 2019 relates to an LTIP award that was released to Tushar Morzaria in 2019. Dividend shares released on the award are excluded.
The LTIP figure in the single total figure table for Executive Directors’ 2019 remuneration in the Directors’ Remuneration report relates to the award that is scheduled to be released
in 2020 in respect of the 2017-2019 LTIP cycle.
There were no pension contributions paid to defined contribution schemes on behalf of Directors (2018: nil). There were no notional pension
contributions to defined contribution schemes.
As at 31 December 2019, there were no Directors accruing benefits under a defined benefit scheme (2018: nil).
330 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS 39 Related party transactions and Directors’ remuneration continued
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 25 persons) at
31 December 2019 amounted to 22,789,126 (2018: 18,884,023) ordinary shares of 25p each (0.13% of the ordinary share capital outstanding).
As at 31 December 2019, Executive Directors and Officers of Barclays PLC (involving 15 persons) held options to purchase a total of 40,428
(2018: 6,000) Barclays PLC ordinary shares of 25p each at a price of 125p 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 2019 to persons who
served as Directors during the year was £0.3m (2018: £0.4m). The total value of guarantees entered into on behalf of Directors during 2019 was
nil (2018: nil).
40 Auditor’s remuneration
Auditor’s remuneration is included within consultancy, legal and professional fees in administration and general expenses and comprises:
Audit of the Barclays Group’s annual accounts
Other services:
Audit of the Company’s subsidiariesa
Other audit related feesb
Other services
Total Auditor’s remuneration
2019
£m
10
35
9
2
56
2018
£m
8
32
9
2
51
2017
£m
11
27
8
2
48
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 in respect of the consolidated financial
statements of the Company.
b Comprises services in relation to statutory and regulatory filings. These include audit services for the review of the interim financial information under the Listing Rules of the
UK listing authority.
The figures shown in the above table relate to fees paid to KPMG as principal auditor, of which the fees paid in relation to discontinued operations
were nil (2018: nil, 2017: £4m).
home.barclays/annualreport
Barclays PLC Annual Report 2019 331
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements Other disclosure matters
41 Discontinued operations and assets included in disposal groups classified as held
for sale and associated liabilities
Accounting for non-current assets held for sale and associated liabilities
The Group applies IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.
Non-current assets (or disposal groups) are classified as held for sale when their carrying amount is to be recovered principally through a sale
transaction rather than continuing use. In order to be classified as held for sale, the asset must be available for immediate sale in its present
condition subject only to terms that are usual and customary and the sale must be highly probable. Non-current assets (or disposal groups)
held for sale are measured at the lower of carrying amount and fair value less cost to sell.
A component of the Group that has either been disposed of or is classified as held for sale is presented as a discontinued operation if it
represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of the separate
major line or geographical area of operations, or if it is a subsidiary acquired exclusively with a view to resale.
Discontinued operation
Following the reduction of the Group’s interest in BAGL in 2017, the Group’s remaining holding of 14.9%, as at 31 December 2019, is reported as a
financial asset at fair value through other comprehensive income in the Head Office segment, with the Group’s share of Absa Group Limited’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’s 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.
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
Other income
Total income
Credit impairment charges
Net operating income
Staff costs
Administration and general expensesa
Operating expenses
Share of post-tax results of associates and joint ventures
Loss before tax
Taxation
Loss after taxb
Attributable to:
Equity holders of the parent
Non-controlling interests
Loss after taxb
2019
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2018
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2017
£m
1,024
522
149
30
61
1,786
(177)
1,609
(586)
(1,634)
(2,220)
5
(606)
(154)
(760)
(900)
140
(760)
Notes
a Includes impairment of £1,090m in 2017.
b Total loss in respect of the discontinued operation in 2017 was £2,195m, which included the £60m loss on sale and £1,375m loss on recycling of other comprehensive loss
on reserves.
332 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS 42 Barclays PLC (the Parent company)
Total income
Dividends received from subsidiaries
Dividends received from subsidiaries of £1,560m (2018: £15,360m, 2017: £674m) largely relates to dividends received from Barclays Bank UK PLC
£1,050m, Barclays Execution Services Limited £250m and Barclays Bank PLC £233m. The dividends received in 2018 included both a dividend in
specie, representing the transfer of the holding in Barclays Bank UK PLC from Barclays Bank PLC to Barclays PLC, and ordinary dividends from
subsidiaries.
Other income
Other income of £1,760m (2018: £923m, 2017: £690m) includes £813m (2018: £752m, 2017: £639m) of income received from gross coupon
payments on Barclays Bank PLC and Barclays Bank UK PLC issued AT1 securities and £947m of fair value and foreign exchange gains on other
positions with subsidiaries. This includes a fair value net loss of £81m for own credit movements on financial liabilities designated at fair value.
Total assets and liabilities
Investment in subsidiaries
The investment in subsidiaries of £59,546m (2018: £57,374m) predominantly relates to investments in Barclays Bank PLC and Barclays Bank UK
PLC, as well as holdings of their AT1 securities of £10,843m (2018: £9,666m). The increase of £2,172m during the year was predominantly driven
by capital contributions into Barclays Bank PLC totalling £995m and additional AT1 holdings of $2,000m, £1,000m and £1,000m, partially offset by
the redemption of AT1 holdings with principal amounts totalling $1,211m, €1,077m and £698m.
At the end of each reporting period an impairment review is undertaken in respect of investment in subsidiaries. Impairment is required where the
investment exceeds the recoverable amount. The recoverable amount is calculated using a value in use (VIU) methodology to arrive at the present
value of future cash flows expected to be derived from the investment. The VIU calculation uses forecast attributable profit, based on financial
budgets approved by management, covering a five-year period, as an approximation of future cash flows. A terminal growth rate of 1.5% has been
applied to arrive at cash flows thereafter, which is based on long-term expected growth rates published by the International Monetary Fund. The
forecasted cash flows have been discounted at a pre-tax rate of 13.7%. The calculation showed a VIU higher than the carrying value of
investments in ordinary shares and no impairment was recognised as a result of the impairment review.
Financial assets and liabilities designated at fair value
Financial liabilities designated at fair value of £3,498m (2018: nil) comprises $2,750m Fixed-to-Floating Rate Senior Notes, £600m Fixed Rate
Senior Notes, AUD940m Fixed and Floating Rate Senior Notes and ¥20,000m Fixed-to-Floating Rate Bonds. The proceeds raised through these
transactions were used to invest in subsidiaries of Barclays PLC and are included within the financial assets designated at fair value through the
income statement balance of £10,348m (2018: £6,945m). The effect of changes in the liabilities’ fair value, including those due to credit risk, is
expected to offset the changes in the fair value of the related financial asset in the income statement. The cumulative own credit net loss on
financial liabilities designated at fair value is £81m (2018: nil). The difference between the financial liabilities’ carrying amount and the contractual
amount on maturity is £174m (2018: nil).
Subordinated liabilities and Debt Securities in issue
During the year, Barclays PLC issued $1,500m of Fixed-to-Floating Rate Subordinated Notes, which are included within the subordinated liabilities
balance of £7,656m (2018: £6,775m). Debt Securities in issue of £30,564m (2018: £32,373m) have reduced in the year due to the maturity of
positions with subsidiaries partially offset by an issuance of a new Senior Fixed Rate Note of €750m.
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. Barclays PLC may invest capital and funding into Barclays Bank PLC, Barclays Bank UK PLC and other Group subsidiaries such as the
Barclays Execution Services Limited and the US Intermediate Holding Company (IHC).
Total equity
Called up share capital and share premium
Called up share capital and share premium of Barclays PLC is £4,594m (2018: £4,311m). The increase in the year is primarily due to shares issued
under employee share schemes and the Scrip Dividend Programme.
Other equity instruments
Other equity instruments of £10,865m (2018: £9,633m) comprises AT1 securities issued by Barclays PLC. AT1 securities are perpetual
subordinated contingent convertible securities structured to qualify as AT1 instruments under prevailing capital rules applicable as at the relevant
issue date. There have been three issuances during the year with principal amounts totalling $2,000m, £1,000m and £1,000m, and redemptions
with principal amounts $1,211m, €1,077m and £698m. For further details, please refer to Note 28.
home.barclays/annualreport
Barclays PLC Annual Report 2019 333
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements Other disclosure matters
43 Related undertakings
The Barclays 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 2019.
The entities are grouped by the countries
in which they are incorporated. The profits
earned by the activities of these entities are
in some cases taxed in countries other than
the country of incorporation. Barclays’ 2019
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 Barclays Group subsidiaries.
Notes
V
A
B
C
D
E
F
G
H
I
Directly held by Barclays PLC
Partnership Interest
Membership Interest
Trust Interest
Guarantor
Preference Shares
A Preference Shares
B Preference Shares
Ordinary/Common Shares in addition to other
shares
A Ordinary Shares
J
B Ordinary Shares
K
C Ordinary Shares
L
M F Ordinary Shares
W Ordinary Shares
N
First Preference Shares, Second Preference Shares
O
Registered Address not in country of incorporation
P
Core Shares, Insurance (Classified) Shares
Q
B, C, D, E (94.36%), F (94.36%), G (94.36%),
R
H (94.36%), I (94.36%), J (95.23%) and K Class
Shares
A Unit Shares, B Unit Shares
Non-Redeemable Ordinary Shares
C Preference Shares, D Preference Shares
S
T
U
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 Ordinary 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
Not Consolidated (see Note 35 Structured entities)
USD Linked Ordinary Shares
Redeemable Class B Shares
Capital Contribution Shares
Z
AA
BB
CC
DD Nominal Shares
Class A Redeemable Preference Shares
EE
FF
Class B Redeemable Preference Shares
GG A Shares – Tranche I, Premium – Tranche I,
C Shares – Tranche II, Premium – Tranche II
HH Class A Unit Shares
Wholly owned subsidiaries
Note
Wholly owned subsidiaries
Note
Wholly owned subsidiaries
Note
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 (Barley) Limited
Barclays Aldersgate Investments Limited
Barclays Asset Management Limited
Barclays Bank PLC
Barclays Bank UK PLC
Barclays Capital Asia Holdings Limited
Barclays Capital Finance Limited
Barclays Capital Japan Securities Holdings
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 Direct Investing Nominees Limited
Barclays Directors Limited
Barclays Equity Holdings Limited
Barclays Execution Services Limited
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
Barclays Industrial Investments Limited
J, K
A, F, I
A
F, I
B
A
Barclays Insurance Services Company Limited
Barclays Investment Management Limited
Barclays Investment Solutions Limited
Barclays Leasing (No.9) Limited
Barclays Long Island Limited
Barclays Marlist Limited
Barclays Mercantile Business Finance Limited
Barclays Nominees (George Yard) Limited
Barclays Pension Funds Trustees Limited
Barclays Principal Investments Limited
Barclays Private Bank
Barclays SAMS Limited
Barclays Security Trustee Limited
Barclays Services (Japan) Limited
Barclays Shea Limited
Barclays Singapore Global Shareplans Nominee
Limited
Barclays Term Funding Limited Liability
Partnership
Barclays UK Investments Limited
Barclays Unquoted Investments Limited
Barclays Unquoted Property Investments
Limited
Barclays Wealth Nominees Limited
Barclayshare Nominees Limited
Barcosec Limited
Barsec Nominees Limited
BB Client Nominees Limited
BMBF (No.24) Limited
BMI (No.9) Limited
BNRI ENG 2013 Limited Partnership
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
Cornwall Homes Loans Limited
CP Flower Guaranteeco (UK) Limited
CPIA England 2009 Limited Partnership
CPIA England No.2 Limited Partnership
DMW Realty Limited
Dorset Home Loans Limited
Durlacher Nominees Limited
Eagle Financial and Leasing Services (UK)
Limited
Equity Value Investments No.1 Limited
Equity Value Investments No.2 Limited
Finpart Nominees Limited
FIRSTPLUS Financial Group Limited
Foltus Investments Limited
Global Dynasty Natural Resource Private
Equity Limited Partnership
Globe Nominees Limited
Hawkins Funding Limited
Heraldglen Limited
J.V. Estates Limited
Isle of Wight Home Loans Limited
Kirsche Investments Limited
Long Island Assets Limited
Maloney Investments Limited
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
A, J, K
A
B
B
B
B
B
B
B
I, J, K
E
B
B
B
I, O
B
I, X
B
334 Barclays PLC Annual Report 2019
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NOTES TO THE FINANCIAL STATEMENTS
43 Related undertakings continued
Wholly owned subsidiaries
Note
Wholly owned subsidiaries
Note
Wholly owned subsidiaries
Note
Relative Value Investments UK Limited Liability
Partnership
Relative Value Trading Limited
Roder Investments No. 1 Limited
Roder Investments No. 2 Limited
RVT CLO Investments LLP
Solution Personal Finance Limited
Surety Trust Limited
Sustainable Impact Capital 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
Wedd Jefferson (Nominees) Limited
Westferry Investments Limited
Woolwich Homes Limited
Woolwich Qualifying Employee Share
Ownership Trustee Limited
Zeban Nominees Limited
– Hill House, 1 Little New Street,
London, EC4A 3TR
Barclays Nominees (Branches) Limited
(In Liquidation)
Barclays Nominees (K.W.S.) Limited
(In Liquidation) (Dissolved on 22 January 2020)
Gerrard Management Services Limited
(In Liquidation)
Lombard Street Nominees Limited
(In Liquidation)
Ruthenium Investments Limited (In Liquidation)
Woolwich Plan Managers Limited
(In Liquidation)
Woolwich Surveying Services Limited
(In Liquidation)
– 1 More London Place, London SE1 2AF
CP Propco 1 Limited (In Liquidation)
CP Propco 2 Limited (In Liquidation)
CP Topco Limited (In Liquidation)
– 5 The North Colonnade, London E14 4BB
Leonis Investments LLP
– 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
– 9, allée Scheffer, L-2520, Luxembourg
Barclays Claudas Investments Partnership
Barclays Pelleas Investments Limited
Partnership
Blossom Finance General Partnership
Argentina
– 855 Leandro N.Alem Avenue, 8th Floor,
Buenos Aires
Compañía Sudamerica S.A.
– Marval, O’Farrell & Mairal, Av. Leandro N.
Alem 882, Buenos Aires, C1001AAQ
Compañia Regional del Sur S.A.
Brazil
– Av. Brigadeiro Faria Lima, No. 4.440,
12th Floor, Bairro Itaim Bibi, Sao Paulo, CEP,
04538-132
Barclays Brasil Assessoria Financeira Ltda.
BNC Brazil Consultoria Empresarial Ltda
B
I, Y
I, Y
B
Canada
– 333 Bay Street, Suite 4910,
Toronto ON M5H 2R2
Barclays Capital Canada Inc.
– Stikeman Elliot LLP, 199 Bay Street, 5300
Commerce Court West, Toronto ON M5L 1B9
Barclays Corporation Limited
– 5 The North Colonnade London, E14 4BB
CPIA Canada Holdings
Cayman Islands
– Maples Corporate Services Limited, PO Box
309, Ugland House, George Town,
Grand Cayman, KY1-1104
Alymere Investments Limited
Analytical Trade UK Limited
Barclays Capital (Cayman) Limited
Barclays Securities Financing Limited
Braven Investments No.1 Limited
Calthorpe Investments Limited
Capton Investments Limited
Claudas Investments Limited
Claudas Investments Two Limited
CPIA Investments No.1 Limited
CPIA Investments No.2 Limited
Gallen Investments Limited
Hurley Investments No.1 Limited
JV Assets Limited
Mintaka Investments No. 4 Limited
OGP Leasing Limited
Palomino Limited
Pelleas Investments Limited
Pippin Island Investments Limited
Razzoli Investments Limited
RVH Limited
Wessex Investments Limited
– Walkers Corporate Limited, Cayman
Corporate Centre, 27 Hospital Road, George
Town, KY1- 9008
Long Island Holding B Limited
China
– Room 213, Building 1, No. 1000 Chenhui
Road, Zhangjiang Hi-Tech Park, Shanghai
Barclays Technology Centre (Shanghai)
Company Limited (In Liquidation)
Germany
– TaunusTurm, Taunustor 1, 60310, Frankfurt
Barclays Capital Effekten GmbH
– Stuttgarter Straße 55-57, 73033 Göppingen
Holding Stuttgarter Straße GmbH
J, K
B
B
B
J
B, P
B, P
B, P
B, P
G, H, I
F, I
I,EE,FF
V
F, I
L
Z
F, I
F, I
Guernsey
– P.O. Box 33, Dorey Court, Admiral Park,
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 (In Liquidation)
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
– 5th to 12th Floor, Building G2, Gera
Commerzone SEZ, Survey No.65, Kharadi,
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) Private
Limited
Ireland
– One Molesworth Street, Dublin 2, D02RF29
Barclaycard International Payments Limited
Barclays Bank Ireland Public Limited Company
Barclays Europe Client Nominees Designated
Activity Company
Barclays Europe Firm Nominees Designated
Activity Company
Barclays Europe Nominees Designated Activity
Company
– 25-28 North Wall Quay, Dublin 1, D01H104
Erimon Home Loans Ireland Limited
Isle of Man
– P O Box 9, Victoria Street, Douglas,
IM99 1AJ
Barclays Nominees (Manx) Limited
Barclays Private Clients International Limited
Japan
– 10-1, Roppongi 6-chome, Minato-ku, Tokyo
Barclays Funds and Advisory Japan Limited
Barclays Securities Japan Limited
Barclays Wealth Services Limited
Q
F, I
J, K
home.barclays/annualreport
Barclays PLC Annual Report 2019 335
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements
Other disclosure matters
Note
J, K
G, H, I, U
C
C
C
C
C
B
B
C
C
CC
F, I
C
C
D
B
B
J
BB
C
J, K
C
43 Related undertakings continued
Wholly owned subsidiaries
Note
Wholly owned subsidiaries
Note
Wholly owned subsidiaries
J, K
S
I, DD
J, K
J, K
T
T
T
I, AA
B
Jersey
– 2nd Floor, Gaspé House, 66-72 Esplanade,
St. Helier, JE1 1GH
CP Newco 1 Limited (In Liquidation)
CP Newco2 Limited (In Liquidation)
CP Newco3 Limited (In Liquidation)
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 (In Liquidation)
– 13 Library Place, St Helier, JE4 8NE
Barclays Nominees (Jersey) Limited
Barclaytrust Channel Islands Limited
– Estera Trust (Jersey) Limited,
13-14 Esplanade, St Helier, JE1 1EE
MK Opportunities GP Ltd
Korea, Republic of
– A-1705 Yeouido Park Center, 28-3
Yeouido-dong, Yeongdeungpo-gu, Seoul
Barclays Korea GP Limited
Luxembourg
– 9, allée Scheffer, L-2520
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 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 S.à r.l.
Barclays Equity Index Investments S.à r.l.
Barclays International Luxembourg Dollar
Holdings 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 Global Funding S.à r.l.
Barclays Luxembourg Holdings S.à r.l.
Barclays Luxembourg Holdings SSC
Barclays Pelleas Investments S.à r.l.
– 68-70 Boulevard de la Petrusse, L-2320
Adler Toy Holding Sarl
Mauritius
– C/O Rogers Capital Corporate Services
Limited, 3rd Floor, Rogers House, No.5
President John Kennedy Street, Port Louis
Barclays Capital Mauritius Limited
Barclays Capital Securities Mauritius Limited
– Fifth Floor, Ebene Esplanade, 24 Cybercity,
Ebene
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.
Monaco
– 31 Avenue de la Costa, Monte Carlo BP 339
Barclays Private Asset Management (Monaco)
S.A.M
K, M
K, M
K, M
Netherlands
– Prins Bernhardplein 200, 1097 JB
Amsterdam
Chewdef BidCo BV. (In Liquidation)
Philippines
– 21/F, Philamlife Tower, 8767
Paseo de Roxas, Makati City, 1226
Meridian (SPV-AMC) Corporation
Saudi Arabia
– 3rd Floor Al Dahna Center, 114 Al-Ahsa
Street, PO Box 1454, Riyadh 11431
Barclays Saudi Arabia (In Liquidation)
Singapore
– 10 Marina Boulevard, #24-01 Marina Bay
Financial Centre, Tower 2, 018983
Barclays Capital Futures (Singapore) Private
Limited
Barclays Capital Holdings (Singapore) Private
Limited
Barclays Merchant Bank (Singapore) Ltd.
Spain
– Calle Jose, Abascal 51, 28003, Madrid
Barclays Tenedora De Inmuebles SL.
BVP Galvani Global, S.A.U.
Switzerland
– Chemin de Grange Canal 18-20,
PO Box 3941, 1211, Geneva
Barclays Bank (Suisse) SA
Barclays Switzerland Services SA
BPB Holdings SA
United States
– Corporation Trust Company, Corporation
Trust Center, 1209 Orange Street,
Wilmington DE 19801
Archstone Equity Holdings Inc
Barclays Capital Derivatives Funding LLC
Barclays Capital Energy Inc.
Barclays Capital Holdings 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
C
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C
C
G, I
C
C
C
Barclays US Investments Inc.
Barclays US LLC
BCAP LLC
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
Sutton Funding LLC
TPProperty LLC
US Secured Investments LLC
– 1201 North Market Street, P.O. Box 1347
Wilmington, DE19801
Barclays Bank Delaware
Procella Investments No.2 LLC
Procella Investments No.3 LLC
Verain Investments LLC
– 2711 Centerville Road, Suite 400,
Wilmington, DE 19808
Protium Master Grantor Trust
– 251 Little Falls Drive, New Castle County,
Wilmington DE 19808
Barclays Capital Equities Trading GP
Lagalla Investments LLC
Relative Value Holdings, LLC
Surrey Funding Corporation
Sussex Purchasing Corporation
– 745 Seventh Avenue, New York NY 10019
Alynore Investments Limited Partnership
Barclays Payment Solutions Inc.
Curve Investments GP
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.
– 500 Forest Point Circle, Charlotte, North
Carolina 28273
Equifirst Corporation (In Liquidation)
– Aon Insurance Managers, Paul Street Suite
500, Burlington, VT05401
Barclays Insurance U.S. Inc.
Zimbabwe
– 2 Premium Close, Mount Pleasant Business
Park, Mount Pleasant, Harare
Branchcall Computers (Pvt) Limited
336 Barclays PLC Annual Report 2019
home.barclays/annualreport
NOTES TO THE FINANCIAL STATEMENTS
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.
Subsidiaries by virtue of control
% Note
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
00.00
00.00
00.00
10.00
Z
Z
Z
J
Joint Ventures
The related undertakings below are Joint
Ventures in accordance with s. 18, Schedule 4,
The Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations
2008 and are proportionally consolidated.
Joint Ventures
% Note
18.25
Z
United Kingdom
– All Saints Triangle, Caledonian
Road, London, N1 9UT
Vaultex UK Limited
50.00
Z
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.
43 Related undertakings continued
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.
Other Related Undertakings
% Note
United Kingdom
– 1 Churchill Place, London, E14 5HP
Barclaycard Funding PLC
PSA Credit Company Limited
(In Liquidation)
Barclays Covered Bond Funding LLP
Barclays Covered Bonds Limited
Liability Partnership
– St Helen’s, 1 Undershaft, London,
EC3P 3DQ
Igloo Regeneration (General Partner)
Limited
– 3-5 London Road, Rainham, Kent,
ME8 7RG
Trade Ideas Limited
– 50 Lothian Road, Festival Square,
Edinburgh, EH3 9WJ
Equistone Founder Partner II L.P.
Equistone Founder Partner III L.P.
– Enigma, Wavendon Business Park
Milton Keynes, MK17 8LX
Intelligent Processing Solutions Limited
– 65A Basinghall Street, London,
EC2V 5DZ
Cyber Defence Alliance Limited
– Gate House, Turnpike Road,
High Wycombe, Buckinghamshire
HP12 3NR
GW City Ventures Limited
GN Tower Limited
– 2nd Floor, 110 Cannon Street,
London, EC4N 6EU
Vectorcommand Limited (In
Liquidation) (Dissolved on 1 February
2020)
– 55 Baker Street, London, W1U 7EU
Formerly H Limited (In Liquidation)
– 15 Canada Square, London,
E14 5GL
Woolwich Countryside Limited
(In Liquidation)
– Haberfield Old Moor Road,
Wennington, Lancaster, LA2 8PD
Full House Holdings Limited
– 6th Floor 60 Gracechurch Street,
London, EC3V 0HR
BMC (UK) Limited
– 13-15 York Buildings, London,
WC2N 6JU
BGF Group PLC
– Aurora Building, 120 Bothwell
Street, Glasgow, G2 7JS
Buchanan Wharf (Glasgow)
Management Limited
Other Related Undertakings
% Note
Cayman Islands
– PO Box 309GT, Ugland House,
South Church Street, Grand Cayman,
KY1-1104
Cupric Canyon Capital LP
Cupric Canyon Capital GP Limited
Southern Peaks Mining LP
SPM GP Limited
Third Energy Holdings Limited
Germany
– Schopenhauerstraße 10, D-90409,
Nurnberg
Eschenbach Holding GmbH
Eschenbach Optik GmbH
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
Preferred Funding S.à r.l.
Preferred Investments S.à r.l.
Malta
– RS2 Buildings, Fort Road, Mosta
MST 1859
RS2 Software PLC
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
Portugal
Av. Manuel Júlio Carvalho e Costa,
no. 15-A, 2750-423 Cascais
Projepolska, S.A.
75.00
50.00
50.00
50.00
J
J, L
B
B
25.00
L, Z
20.00
Z
20.00
35.00
B, Z
B, Z
19.50
Z
25.00
E, Z
50.00
50.00
K, Z
Z
30.39
J, K, Z
70.32
J, Z
50.00
N, Z
67.43
J, Z
South Africa
– 9 Elektron Road, Techno Park,
Stellenbosch 7600
Imalivest Mineral Resources LP
40.18
F, J
24.54
Z
Sweden
– c/o ForeningsSparbanken AB,
105 34 Stockholm
EnterCard Group AB
78.00
E
United States of America
– 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
– 1415 Louisiana Street, Suite 1600,
Houston, Texas, 77002
Sabine Oil & Gas Holdings, Inc.
41.09 HH, Z
50.00
Z
55.69 HH, Z
90.10
Z
78.94 F, J, K, Z
21.70
21.70
Z
Z
70.00
W
96.30
33.33
33.33
R
FF
FF, I
30.26 GG, Z
24.50
Z
66.63
J, K, Z
40.00
K, Z
75.00
75.00
50.00
C, Z
C, Z
C, Z
23.25
Z
home.barclays/annualreport
Barclays PLC Annual Report 2019 337
Financial reviewShareholder informationRisk reviewStrategic reportGovernanceFinancial statements Shareholder information
Annual General Meeting
(AGM)
Location
This year’s AGM will be held at the
Scottish Events Campus (SEC),
Glasgow, Scotland, G3 8YW
Date
Thursday 7 May 2020
Time
11.00am
The Chairman and Group Chief Executive
will update shareholders on our performance
in 2019 and our goals for 2020. Shareholders
will also have the opportunity to ask the Board
questions at the meeting.
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River Clyde
Clydeside Expressway
Stobcross Road
Scottish
Event
Campus
FINNIESTON
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Exhibition Centre
Millennium
Bridge
SEC
Armadillo
Bell’s
Bridge
The SSE
Hydro
Congress Road
BBC
Scotland
River Clyde
Argyle Street
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You can find out more at:
home.barclays/agm
SEC Armadillo, Glasgow, Scotland, G3 8YW
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.
How do Barclays shareholders receive
their dividends?
%
54.0
2019
21.2
24.8
Direct to bank account
Scrip Dividend Programme (new shares)
Cheque
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.
Dividends
The Barclays PLC 2019 full year dividend for
the year-ended 31 December 2019 will be
6.0p per share, making the 2019 total
dividend 9.0p.
The Company understands the importance
of delivering attractive cash returns to
shareholders. The Company 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, the Company intends to pay
a progressive dividend taking into account
these objectives, and the 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.
The
Clyde
Arc
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.
To find out more, contact Equiniti
or visit: home.barclays/dividends
Key dates
3 April 2020
Full year dividend payment date
29 April 2020
Q1 Results Announcement
7 May 2020
Annual General Meeting at 11.00am
21 September 2020
Half year dividend payment date
338 Barclays PLC Annual Report 2019
home.barclays/annualreport
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
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 2019,
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
£23,288 to our shareholders, in addition to
the approximately £65,000 returned in 2018,
£212,000 returned in 2017, £1.65m returned
in 2016 and £2.2m in 2015.
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, £58,267 was
donated in 2019, taking the total donated
since 2015 to over £403,000.
J.P. Morgan Shareholder Services
+1 800 990 1135
(toll free in US and Canada)
+1 651 453 2128
(outside the US and Canada)
+1 866 700 1652
(hearing impaired)
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
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.
Please keep in mind that firms authorised
by the Financial Conduct Authority (FCA)
are unlikely to contact you out of the blue.
You should consider getting independent
financial or professional advice from
someone unconnected to the respective
firm before you hand over any money.
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.
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.
S
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o
d
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r
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i
n
f
o
r
m
a
t
i
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Note
a Lines open 8.30am to 5.30pm (UK time) Monday to
Friday, excluding public holidays.
Managing your shares online
Shareview
Barclays shareholders can go online to
manage their shareholding and find out about
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.
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:
StockTransfer@equiniti.com
or visit adr.com
home.barclays/annualreport
Barclays PLC Annual Report 2019 339
Financial reviewFinancial statementsRisk reviewStrategic reportGovernance
340 Barclays PLC Annual Report 2019
home.barclays/annualreport
effects of changes in valuation of credit market
exposures; changes in valuation of issued securities;
volatility in capital markets; changes in credit ratings of
any entity within the Group or any securities issued by
such entities; the potential for one or more countries
exiting the Eurozone; instability as a result of the exit by
the UK from the European Union and the disruption that
may subsequently result in the UK and globally; and the
success of future acquisitions, disposals and other
strategic transactions. A number of these influences and
factors are beyond the Group’s control. As a result, the
Group’s actual financial position, future results, dividend
payments, capital, leverage or other regulatory ratios or
other financial and non-financial metrics or performance
measures may differ materially from the statements
or guidance set forth in the 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 2019),
which are available on the SEC’s website at www.sec.gov.
Subject to our obligations under the applicable laws
and regulations of any relevant jurisdiction, (including,
without limitation, the UK and the US), in relation to
disclosure and ongoing information, we undertake
no obligation to update publicly or revise any
forward-looking statements, whether as a result
of new information, future events or otherwise.
The Barclays PLC Strategic Report 2019 was approved by
the Board of Directors on 12 February 2020 and signed
on its behalf by the Chairman.
Report of the Auditor
The Auditor’s report on the financial statements of
Barclays PLC for the year ended 31 December 2019
was unqualified, and their statement under section 496
of the Companies Act 2006 was also unqualified
(see page 232).
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 2019 to the corresponding twelve months
of 2018 and balance sheet analysis as at 31 December
2019 with comparatives relating to 31 December 2018.
The abbreviations ‘£m’ and ‘£bn’ represent millions and
thousands of millions of Pounds Sterling respectively;
the abbreviations ‘$m’ and ‘$bn’ represent millions and
thousands of millions of US Dollars respectively; and
the abbreviations ‘€m’ and ‘€bn’ represent millions and
thousands of millions of Euros 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/investor-relations/reports-and-events/
latest-financial-results.
The information in this announcement, which was
approved by the Board of Directors on 12 February 2020,
does not comprise statutory accounts within the
meaning of Section 434 of the Companies Act 2006.
Statutory accounts for the year ended 31 December
2019, which contain an unmodified 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 US
Securities and Exchange Commission (SEC) as soon as
practicable following their publication. Once furnished
with the SEC, a copy of the Form 20-F will be available
from the Barclays Investor Relations website at home.
barclays/annualreport 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 roadshows
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.
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. Forward-looking
statements can be made in writing but also may be made
verbally by members of the management of the Group
(including, without limitation, during management
presentations to financial analysts) in connection with
this document. Examples of forward-looking statements
include, among others, statements or guidance
regarding or relating to the Group’s future financial
position, income growth, assets, impairment charges,
provisions, business strategy, capital, leverage and other
regulatory ratios, payment of dividends (including
dividend payout ratios and expected payment strategies),
projected levels of growth in the banking and financial
markets, projected costs or savings, any commitments
and targets, estimates of capital expenditures, plans
and objectives for future operations, projected employee
numbers, IFRS impacts and other statements that are
not historical fact. By their nature, forward-looking
statements involve risk and uncertainty because they
relate to future events and circumstances. The
forward-looking statements speak only as at the date
on which they are made and such statements may be
affected by changes in legislation, the development of
standards and interpretations under IFRS, including
evolving practices with regard to the interpretation
and application of accounting and regulatory standards,
the outcome of 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 applicable to past,
current and future periods; UK, US, Eurozone and global
macroeconomic and business conditions; the effects of
any volatility in credit markets; market related risks such
as changes in interest rates and foreign exchange rates;
This report is printed on Revive 100 Offset, made from
100% FSC® Recycled certified fibre sourced from de-inked
post-consumer waste. The printer and the manufacturing
mill are both credited with ISO 14001 Environmental
Management Systems Standard and both are FSC®
certified. The mill also holds EMAS, the EU Eco-label.
Revive 100 Offset is a Carbon balanced paper which
means that the carbon emissions associated with its
manufacture have been measured and offset using the
World Land Trust’s Carbon Balanced scheme.
Barclays is a company
of opportunity makers,
working together to help
people rise – customers,
clients, colleagues
and society.
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 2019 suite of
documents available at
home.barclays/annualreport
Barclays PLC Strategic Report 2019
An overview of our 2019 performance, a focus
on our strategic direction, and a review of the
businesses underpinning our strategy.
Barclays PLC Annual Report 2019
A detailed review of Barclays 2019 performance with
disclosures that provide useful insight and go beyond
reporting requirements.
Barclays PLC Country Snapshot 2019
An overview of our tax contribution country by
country as well as our broader approach to tax,
including our UK tax strategy.
Barclays PLC Pillar 3 Report 2019
A summary of our risk profile, its interaction with
the Group’s risk appetite, and risk management.
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