20-F 1 d529811d20f.htm 20-F 20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 20-F

(Mark One)

 

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

OR

 

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report                     

 

Commission file numbers   Barclays PLC   1-09246
  Barclays Bank PLC   1-10257

BARCLAYS PLC

BARCLAYS BANK PLC

(Exact Names of Registrants as Specified in their Charter[s])

ENGLAND

(Jurisdiction of Incorporation or Organization)

1 CHURCHILL PLACE, LONDON E14 5HP, ENGLAND

(Address of Principal Executive Offices)

GARTH WRIGHT, +44 (0)20 7116 3170, GARTH.WRIGHT@BARCLAYS.COM

1 CHURCHILL PLACE, LONDON E14 5HP, ENGLAND

*(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Barclays PLC

 

Title of Each Class   

Name of Each Exchange

On Which Registered

25p ordinary shares

   New York Stock Exchange*

American Depositary Shares, each representing four 25p ordinary shares

   New York Stock Exchange

4.375% Fixed Rate Subordinated Notes due 2024

   New York Stock Exchange

2.75% Fixed Rate Senior Notes due 2019

   New York Stock Exchange

2.00% Fixed Rate Senior Notes due 2018

   New York Stock Exchange

3.65% Fixed Rate Senior Notes due 2025

   New York Stock Exchange

2.875% Fixed Rate Senior Notes due 2020

   New York Stock Exchange

5.25% Fixed Rate Senior Notes due 2045

   New York Stock Exchange

3.25% Fixed Rate Senior Notes due 2021

   New York Stock Exchange

4.375% Fixed Rate Senior Notes due 2026

   New York Stock Exchange

5.20% Fixed Rate Subordinated Notes due 2026  

   New York Stock Exchange

3.20% Fixed Rate Senior Notes due 2021

   New York Stock Exchange

Floating Rate Senior Notes due 2021

   New York Stock Exchange

Floating Rate Senior Notes due 2023

   New York Stock Exchange

3.684% Fixed Rate Senior Notes due 2023

   New York Stock Exchange

4.337% Fixed Rate Senior Notes due 2028

   New York Stock Exchange

4.950% Fixed Rate Senior Notes due 2047

   New York Stock Exchange

4.836% Fixed Rate Subordinated Callable Notes due 2028

   New York Stock Exchange

3.250% Fixed Rate Senior Notes due 2033

   New York Stock Exchange

 

* Not for trading, but in connection with the registration of American Depository Shares, pursuant to the requirements to the Securities and Exchange Commission.

Barclays Bank PLC

 

Title of Each Class

  

Name of Each Exchange

On Which Registered

Callable Floating Rate Notes 2035    New York Stock Exchange
2.650% Fixed Rate Senior Notes due 2021    New York Stock Exchange
Floating Rate Notes due 2021    New York Stock Exchange
Non-Cumulative Callable Dollar Preference Shares, Series 5    New York Stock Exchange*
American Depository Shares, Series 5, each representing one Non-Cumulative Callable Dollar Preference Share, Series 5    New York Stock Exchange
5.140% Lower Tier 2 Notes due October 2020    New York Stock Exchange
iPath® Bloomberg Commodity Index Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Agriculture Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Aluminum Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Cocoa Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Coffee Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Copper Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Cotton Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Energy Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Grains Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Industrial Metals Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Lead Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Livestock Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Natural Gas Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Nickel Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Platinum Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Precious Metals Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Softs Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Sugar Subindex Total ReturnSM ETN    NYSE Arca
iPath® Bloomberg Tin Subindex Total ReturnSM ETN    NYSE Arca
iPath® S&P GSCI® Total Return Index ETN    NYSE Arca
iPath® S&P GSCI® Crude Oil Total Return Index ETN    NYSE Arca
iPath® CBOE S&P 500 BuyWrite IndexSM ETN    NYSE Arca
iPath® MSCI India IndexSM ETN    NYSE Arca
iPath® EUR/USD Exchange Rate ETN    NYSE Arca
iPath® GBP/USD Exchange Rate ETN    NYSE Arca
iPath® JPY/USD Exchange Rate ETN    NYSE Arca
iPath® S&P 500 VIX Short-Term FuturesTM ETN    NYSE Arca
iPath® S&P 500 VIX Mid-Term FuturesTM ETN    NYSE Arca
iPath® Inverse S&P 500 VIX Short-Term FuturesTM ETN    NYSE Arca
iPath® Long Extended Russell 1000® TR Index ETN    NYSE Arca
iPath® Long Extended Russell 2000® TR Index ETN    NYSE Arca
iPath® Long Enhanced MSCI EAFE® TR Index ETN    NYSE Arca
iPath® Long Enhanced MSCI Emerging Markets Index ETN    NYSE Arca
iPath® Long Extended S&P 500® TR Index ETN    NYSE Arca
iPath® Global Carbon ETN    NYSE Arca
iPath® Optimized Currency Carry ETN    NYSE Arca
iPath® US Treasury Steepener ETN    NASDAQ
iPath® US Treasury Flattener ETN    NASDAQ
iPath® US Treasury 2-year Bull ETN    NASDAQ
iPath® US Treasury 2-year Bear ETN    NASDAQ
iPath® US Treasury 10-year Bull ETN    NASDAQ
iPath® US Treasury 10-year Bear ETN    NASDAQ
iPath® US Treasury Long Bond Bull ETN    NASDAQ
iPath® US Treasury Long Bond Bear ETN    NASDAQ
iPath® Pure Beta Broad Commodity ETN    NYSE Arca
iPath® Pure Beta S&P GSCI®-Weighted ETN    NYSE Arca
iPath® Pure Beta Cocoa ETN    NYSE Arca
iPath® Pure Beta Coffee ETN    NYSE Arca
iPath® Pure Beta Cotton ETN    NYSE Arca
iPath® Pure Beta Sugar ETN    NYSE Arca
iPath® Pure Beta Aluminum ETN    NYSE Arca
iPath® Pure Beta Copper ETN    NYSE Arca
iPath® Pure Beta Lead ETN    NYSE Arca
iPath® Pure Beta Nickel ETN    NYSE Arca
iPath® Pure Beta Crude Oil ETN    NYSE Arca
iPath® Seasonal Natural Gas ETN    NYSE Arca
iPath® Pure Beta Agriculture ETN    NYSE Arca
iPath® Pure Beta Grains ETN    NYSE Arca
iPath® Pure Beta Softs ETN    NYSE Arca
iPath® Pure Beta Industrial Metals ETN    NYSE Arca
iPath® Pure Beta Energy ETN    NYSE Arca
iPath® Pure Beta Livestock ETN    NYSE Arca
iPath® Pure Beta Precious Metals ETN    NYSE Arca
iPath® US Treasury 5-year Bull ETN    NASDAQ
iPath® US Treasury 5-year Bear ETN    NASDAQ
iPath® S&P 500 Dynamic VIX ETN    NYSE Arca
iPath® Inverse S&P 500 VIX Short-Term FuturesTM ETN (II)    NYSE Arca
iPath® GEMS IndexTM ETN    NYSE Arca
iPath® GEMS Asia 8 ETN    NYSE Arca
iPath® Asian and Gulf Currency Revaluation ETN    NYSE Arca
iPath® S&P MLP ETN    NYSE Arca
iPath® Series B S&P GCSI Crude Oil Return Index ETN    NYSE Arca
iPath® Series B Bloomberg Agriculture Subindex Total ReturnSM ETN    NYSE Arca
iPath® Series B Bloomberg Aluminum Subindex Total ReturnSM ETN    NYSE Arca
iPath® Series B Bloomberg Coffee Subindex Total ReturnSM ETN    NYSE Arca
iPath® Series B Bloomberg Copper Subindex Total ReturnSM ETN    NYSE Arca
iPath® Series B Bloomberg Cotton Subindex Total ReturnSM ETN    NYSE Arca
iPath® Series B Bloomberg Energy Subindex Total ReturnSM ETN    NYSE Arca
iPath® Series B Bloomberg Grains Subindex Total ReturnSM ETN    NYSE Arca
iPath® Series B Bloomberg Industrial Metals Subindex Total ReturnSM ETN    NYSE Arca
iPath® Series B Bloomberg Livestock Subindex Total ReturnSM ETN    NYSE Arca
iPath® Series B Bloomberg Nickel Subindex Total ReturnSM ETN    NYSE Arca
iPath® Series B Bloomberg Platinum Subindex Total ReturnSM ETN    NYSE Arca
iPath® Series B Bloomberg Precious Metals Subindex Total ReturnSM ETN    NYSE Arca
iPath® Series B Bloomberg Softs Subindex Total ReturnSM ETN    NYSE Arca
iPath® Series B Bloomberg Sugar Subindex Total ReturnSM ETN    NYSE Arca
iPath® Series B Bloomberg Tin Subindex Total ReturnSM ETN    NYSE Arca
iPath® Series B Bloomberg Natural Gas Subindex Total ReturnSM ETN    NYSE Arca
iPath® Series B S&P 500 VIX Short-Term FuturesTM ETNs    CBOE BZX Exchange
iPath® Series B S&P 500 VIX Mid-Term FuturesTM ETNs    CBOE BZX Exchange
Barclays ETN+ S&P 500® VEQTOR™ ETN    NYSE Arca
Barclays ETN+ Shiller CAPETM ETNs    NYSE Arca
Barclays ETN+ Select MLP ETN    NYSE Arca
Barclays ETN+ FI Enhanced Europe 50 ETN    NYSE Arca
Barclays ETN+ FI Enhanced Global High Yield ETN    NYSE Arca
Barclays ETN+ FI Enhanced Europe 50 ETN Series B    NYSE Arca
Barclays Women in Leadership ETN    NYSE Arca
Barclays Return on Disability ETN    NYSE Arca
Barclays Inverse US Treasury Composite ETN    NASDAQ

 

* Not for trading, but in connection with the registration of American Depository Shares, pursuant to the requirements to the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuers’ classes of capital or common stock as of the close of the period covered by the annual report.

 

Barclays PLC    25p ordinary shares      16,804,603,949  
Barclays Bank PLC    £1 ordinary shares      2,342,558,515  
   £1 preference shares      1,000  
   100 preference shares      31,856  
   $0.25 preference shares      106,000,000  
   $100 preference shares      58,133  

Indicate by check mark if each registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes   No

If this report is an annual or transition report, indicate by check mark if the registrants are not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act 1934.

Yes   No

Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrants: (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

Yes   No

Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web sites, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes   No

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Barclays PLC

 

Large Accelerated Filer    Accelerated Filer     Non-Accelerated Filer     Emerging growth company

Barclays Bank PLC

 

Large Accelerated Filer    Accelerated Filer     Non-Accelerated Filer     Emerging growth company

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards* provided pursuant to Section 13(a) of the Exchange Act.

 

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

*Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP

International Financial Reporting Standards as issued by the International Accounting Standards Board 

Other

*If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

Item 17

Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes   No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS.)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes   No


   SEC Form 20-F Cross reference information   
Form 20-F item number    Page and caption references

in this document*

1    Identity of Directors, Senior Management and Advisers    Not applicable
2    Offer Statistics and Expected Timetable    Not applicable
3    Key Information   
  

A.  Selected financial data

   166, 168, 211, 275-276, 409-410
  

B.  Capitalization and indebtedness

   Not applicable
  

C.   Reason for the offer and use of proceeds

   Not applicable
  

D.   Risk factors

   79-84
4    Information on the Company   
  

A.  History and development of the company

   162,204 (Note 6), 206 (Note 9), 216 (Note
16), 264 (Note 38), 265-266 (Note 39), 269-
271 (Note 43), 272-274, 388-389,
  

B.  Business overview

   ii (Market and other data), 155-162, 170-180,
201-202 (Note 2), 239-247 (Note 29)
  

C.   Organizational structure

   162, 260-261 (Note 36), 295-300 (Note 45)
  

D.   Property, plants and equipment

   231 (Note 21), 233-234 (Note 23), 236
(Note 25)
4A    Unresolved staff comments    Not applicable
5    Operating and Financial Review and Prospects   
  

A.  Operating results

   79, 82, 143, 155-162, 164-180, 213-215
(Note 15), 239-247 (Note 29), 347
  

B.  Liquidity and capital resources

   100, 113-114, 116, 124-136, 137-143, 192,
213-215 (Note 15), 239 (Note 28), 248-251
(Note 30), 251 (Note 31), 261, 264 (Note 38),
265-266 (Note 39), 343-349, 362-365
  

C.   Research and development, patents and licenses, etc.

   44
  

D.   Trend information

  
  

E.  Off-balance sheet arrangements

   239 (Note 28), 261-264 (Note 37), 265-266
(Note 39)
  

F.   Tabular disclosure of contractual obligations

   364-365
  

G.   Safe harbor

   ii (Forward-looking statements)
6    Directors, Senior Management and Employees   
  

A.  Directors and senior management

   5-6, 286-289
  

B.  Compensation

   51-71, 253-254 (Note 34), 255-259 (Note 35),
267-268 (Note 41), 385, 408
  

C.   Board practices

   5-6, 13, 57-60, 70-71, 72
  

D.   Employees

   47, 48, 170, 173, 177, 178
  

E.  Share ownership

   51-71, 253-254 (Note 34), 267-268 (Note 41),
292-294
7    Major Shareholders and Related Party Transactions   
  

A.  Major shareholders

   45, 284-285
  

B.  Related party transactions

   179, 267-268 (Note 41), 300, 385, 408
  

C.   Interests of experts and counsel

   Not applicable
8    Financial Information   
  

A.  Consolidated statements and other financial information

   188-192, 211 (Note 12), 239-247 (Note 29),
251 (Note 31), 195-271, 273, 275-276, 386-
387, 404-406
  

B.  Significant changes

   Not applicable
9    The Offer and Listing   
  

A.  Offer and listing details

   275-276
  

B.  Plan of distribution

   Not applicable
  

C.   Markets

   275
  

D.   Selling shareholders

   Not applicable
  

E.  Dilution

   Not applicable
  

F.   Expenses of the issue

   Not applicable
10    Additional Information   
  

A.  Share capital

   Not applicable
  

B.  Memorandum and Articles of Association

   43-46, 272-274
  

C.   Material contracts

   57-60
  

D.   Exchange controls

   279
  

E.  Taxation

   277-279
  

F.   Dividends and paying assets

   Not applicable
  

G.   Statement by experts

   Not applicable
  

H.   Documents on display

   279
  

I.    Subsidiary information

   260-261 (Note 36), 295-300
11    Quantitative and Qualitative Disclosure about Market Risk    87, 118-121, 143-144, 146-148, 331-337
12    Description of Securities Other than Equity Securities   
  

A.  Debt Securities

   Not applicable
  

B.  Warrants and Rights

   Not applicable
  

C.   Other Securities

   Not applicable
  

D.   American Depositary Shares

   275-276, 280-281
13    Defaults, Dividends Arrearages and Delinquencies    Not applicable
14    Material Modifications to the Rights of Security Holders and Use of Proceeds    Not applicable


15    Controls and Procedures   
  

A.  Disclosure controls and procedures

   286
  

B.  Management’s annual report on internal control over financial reporting

   41
  

C.   Attestation report of the registered public accounting firm

   186
  

D.   Changes in internal control over financial reporting

   41
16A    Audit Committee Financial Expert    12
16B    Code of Ethics    283
16C    Principal Accountant Fees and Services    19-20, 269 (Note 42), 282
16D    Exemptions from the Listing Standards for Audit Committees    Not applicable
16E    Purchases of Equity Securities by the Issuer and Affiliated Purchasers    46,251
16F    Change in Registrant’s Certifying Accountant    Not applicable
16G      Corporate Governance    283
17    Financial Statements    Not applicable (See Item 8)
18    Financial Statements    Not applicable (See Item 8)
19    Exhibits    Exhibit Index

 

  * Captions have been included only in respect of pages with multiple sections on the same page in order to identify the relevant caption on that page covered by the corresponding Form 20-F item number.


LOGO

Positioned for growth,

sharing and success

 

 

Barclays PLC and Barclays Bank PLC

2017 Annual Report on Form 20-F

 


Notes

The terms Barclays or Group refer to Barclays PLC together with its subsidiaries. Unless otherwise stated, the income statement analysis compares the year ended 31 December 2017 to the corresponding twelve months of 2016 and balance sheet analysis as at 31 December 2017 with comparatives relating to 31 December 2016. The abbreviations ‘£m’ and ‘£bn’ represent millions and thousands of millions of Pounds Sterling respectively; the abbreviations ‘$m’ and ‘$bn’ represent millions and thousands of millions of US Dollars respectively; and the abbreviations ‘m’ and ‘bn’ represent millions and thousands of millions of Euros respectively.

The information in this announcement, which was approved by the Board of Directors on 21 February 2018, does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2017, which includes certain information required for the Joint Annual Report on Form 20-F of Barclays PLC and Barclays Bank PLC to the US Securities and Exchange Commission (SEC) and which contain an unqualified audit report under Section 495 of the Companies Act 2006 (which does not make any statements under Section 498 of the Companies Act 2006) will be delivered to the Registrar of Companies in accordance with Section 441 of the Companies Act 2006.

Barclays is a frequent issuer in the debt capital markets and regularly meets with investors via formal road-shows and other ad hoc meetings. Consistent with its usual practice, Barclays expects that from time to time over the coming quarter it will meet with investors globally to discuss these results and other matters relating to the Group.

Certain non-IFRS measures

Barclays management believes that the non-IFRS performance measures included in this document provide valuable information to the readers of the financial statements as they enable the reader to identify a more consistent basis for comparing the business’ performance between financial periods, and provide more detail concerning the elements of performance which the managers of these businesses are most directly able to influence or are relevant for an assessment of the Group. They also reflect an important aspect of the way in which operating targets are defined and performance is monitored by Barclays’ management. However, any non-IFRS performance measures in this document are not a substitute for IFRS measures and readers should consider the IFRS measures as well. Refer to the appendix on pages 181 to 183 for further information, reconciliations and calculations of non-IFRS performance measures included throughout this document, and the most directly comparable IFRS measures.

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.

Key non-IFRS measures included in this document, and the most directly comparable IFRS measures, are:

– Average allocated equity represents the average shareholders’ equity that is allocated to the businesses. The comparable IFRS measure is average equity. A reconciliation is provided on page iii;

– Average allocated tangible equity is 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 shareholders’ equity for the quarter/year is the average of the monthly averages within that quarter/year. Period end allocated tangible equity is calculated as 12.0% (2016: 11.5%) of CRD IV fully loaded risk weighted assets for each business, adjusted for CRD IV fully loaded capital deductions, excluding goodwill and intangible assets, reflecting the assumptions the Group uses for capital planning purposes. The comparable IFRS measure is average equity. A reconciliation is provided on page iii;

– Average tangible equity is calculated as the average of the previous month’s period end tangible equity and the current month’s period end tangible equity. Period end tangible equity is calculated as 12.0% (2016: 11.5%) of CRD IV fully loaded risk weighted assets, adjusted for CRD IV fully loaded capital deductions, excluding goodwill and intangible assets, reflecting the assumptions the Group uses for capital planning purposes. The average tangible shareholders’ equity for the quarter/year is the average of the monthly averages within that quarter/year. The comparable IFRS measure is average equity. A reconciliation is provided on page iii;

– Basic earnings per ordinary share excluding litigation and conduct, losses related to Barclays’ sell down of BAGL and the re-measurement of US DTAs represents attributable profit excluding the impact of excluding litigation and conduct, losses related to Barclays’ sell down of BAGL and the re-measurement of US DTAs divided by the basic weighted average number of shares in issue. The comparable IFRS measure is basic earnings per share. A reconciliation is provided on page 183;

– Operating expenses excluding UK Bank Levy and litigation and conduct charges represents operating expenses excluding the impact of UK Bank Levy and the impact of charges for litigation and conduct. The comparable IFRS measure is operating expenses. A reconciliation to IFRS is provided on page 183;

– Profit attributable to ordinary equity holders of the parent excluding litigation and conduct, losses related to Barclays’ sell down of BAGL and the re-measurement of US DTAs represents profit/(loss) attributable to ordinary shareholders excluding the impact of charges for litigation and conduct, losses related to Barclays’ sell down of BAGL and the re-measurement of US DTAs. The comparable IFRS measure is attributable profit. A reconciliation to IFRS is provided on page 183;

– Profit before tax excluding impairment of Barclays’ holding in BAGL and loss on sale of BAGL represents profit/(loss) before tax excluding the impairment of Barclays’ holding in BAGL and loss on sale of BAGL. The comparable IFRS measure is profit before tax. A reconciliation to IFRS is provided on page 179;

 

Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  
 
  i


– Return on average allocated equity represents the return on shareholders’ equity that is allocated to the businesses. The comparable IFRS measure is return on equity. A reconciliation is provided on page iv;

– Return on average tangible shareholders’ equity excluding litigation and conduct, losses related to Barclays’ sell down of BAGL and the re-measurement of US DTAs BAGL is calculated as profit attributable to ordinary equity holders excluding the impact of charges for litigation and conduct, losses related to Barclays’ sell down of BAGL and the re-measurement of US DTAs BAGL, including an adjustment for the tax credit in reserves in respect of other equity instruments, as a proportion of average allocated tangible equity. The comparable IFRS measure is return on equity. A reconciliation is provided on page 183;

– Return on average allocated tangible equity is calculated as the annualised statutory profit after tax attributable to ordinary shareholders, including an adjustment for the tax credit in reserves in respect of other equity instruments, as a proportion of average allocated tangible equity. The comparable IFRS measure is return on equity. A reconciliation is provided on page iv;

– Return on average tangible shareholders’ equity is calculated as the annualised statutory profit after tax attributable to ordinary shareholders, including an adjustment for the tax credit in reserves in respect of other equity instruments, as a proportion of average tangible shareholders’ equity. The comparable IFRS measure is return on equity. A reconciliation is provided on page iv;

– Tangible net asset value per share is 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 183; and

– Transitional CET1 ratio according to FSA October 2012. This measure is calculated by taking into account the statement of the Financial Services Authority, the predecessor of the Prudential Regulation Authority, on CRD IV transitional provisions in October 2012, assuming such provisions were applied as at 1 January 2014. This ratio is used as the relevant measure starting 1 January 2014 for purposes of determining whether the automatic write-down trigger (specified as a Transitional CET1 ratio according to FSA October 2012 of less than 7.00%) has occurred under the terms of the Contingent Capital Notes issued by Barclays Bank PLC on November 21, 2012 (CUSIP: 06740L8C2) and April 10, 2013 (CUSIP: 06739FHK0). Please refer to page 139 for a reconciliation of this measure to CRD IV CET1 ratio.

Forward-looking statements

This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended, and Section 27A of the US Securities Act of 1933, as amended, with respect to the Group. Barclays cautions readers that no forward-looking statement is a guarantee of future performance and that actual results or other financial condition or performance measures could differ materially from those contained in the forward-looking statements. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as ‘may’, ‘will’, ‘seek’, ‘continue’, ‘aim’, ‘anticipate’, ‘target’, ‘projected’, ‘expect’, ‘estimate’, ‘intend’, ‘plan’, ‘goal’, ‘believe’, ‘achieve’ or other words of similar meaning. Examples of forward-looking statements include, among others, statements or guidance regarding or relating to the Group’s future financial position, income growth, assets, impairment charges, provisions, business strategy, structural reform, capital, leverage and other regulatory ratios, payment of dividends (including dividend payout ratios and expected payment strategies), projected levels of growth in the banking and financial markets, projected costs or savings, any commitments and targets and the impact of any regulatory deconsolidation resulting from the sell down of the Group’s interest in Barclays Africa Group Limited, estimates of capital expenditures and plans and objectives for future operations, projected employee numbers, IFRS 9 impacts and other statements that are not historical fact. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. These may be affected by changes in legislation, the development of standards and interpretations under International Financial Reporting Standards including the implementation of IFRS 9, evolving practices with regard to the interpretation and application of accounting and regulatory standards, the outcome of current and future legal proceedings and regulatory investigations, future levels of conduct provisions, the policies and actions of governmental and regulatory authorities, geopolitical risks and the impact of competition. In addition, factors including (but not limited to) the following may have an effect: capital, leverage and other regulatory rules (including with regard to the future structure of the Group) applicable to past, current and future periods; UK, US, Africa, Eurozone and global macroeconomic and business conditions; the effects of continued volatility in credit markets; market related risks such as changes in interest rates and foreign exchange rates; effects of changes in valuation of credit market exposures; changes in valuation of issued securities; volatility in capital markets; changes in credit ratings of any entities within the Group or any securities issued by such entities; the potential for one or more countries exiting the Eurozone; the implications of the exercise by the United Kingdom of Article 50 of the Treaty of Lisbon and the disruption that may result in the UK and globally from the withdrawal of the United Kingdom from the European Union and the success of future acquisitions, disposals and other strategic transactions. A number of these influences and factors are beyond the Group’s control. As a result, the Group’s actual future results, dividend payments, and capital and leverage ratios may differ materially from the plans, goals, expectations and guidance set forth in the Group’s forward-looking statements. Additional risks and factors which may impact the Group’s future financial condition and performance are identified in our filings with the SEC (including, without limitation, our annual report on form 20-F for the fiscal year ended 31 December 2017), which will be available on the SEC’s website at www.sec.gov.

Subject to our obligations under the applicable laws and regulations of the United Kingdom and the United States in relation to disclosure and ongoing information, we undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Market and other data

This document contains information, including statistical data, about certain Barclays markets and its competitive position. Except as otherwise indicated, this information is taken or derived from Datastream and other external sources. Barclays cannot guarantee the accuracy of information taken from external sources, or that, in respect of internal estimates, a third party using different methods would obtain the same estimates as Barclays.

Uses of Internet addresses

This document contains inactive textual addresses to internet websites operated by us and third parties. Reference to such websites is made for information purposes only, and information found at such websites is not incorporated by reference into this document.

References to Pillar 3 report

This document contains references throughout to Barclays annual risk report, the Pillar 3. Reference to the aforementioned report is made for information purposes only, and information found in said report is not incorporated by reference into this document.

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F
 
  ii


                                                                                            

 

 Average allocated equitya

  

 

 

 

 

2017

 

£bn

 

 

 

 

  

 

 

 

 

2016

 

£bn

 

 

 

  

 

 

 

 

2015

 

£bn

 

 

 

 Barclays UK      13.6        13.4        13.7  

Corporate and Investment Bank

     24.9        23.2        23.1  
Consumer, Cards and Payments      5.6        5.0        4.0  
 Barclays International      30.5        28.2        27.1  
 Head Officeb      10.6        8.0        3.9  
 Barclays Non-Core      2.4        7.8        11.2  
 Barclays Group      57.1        57.4        55.9  
        
        

 

 Effect of Goodwill and intangibles

  

 

 

 

    

£bn

 

 

 

     £bn        £bn  
 Barclays UK      (4.4)        (4.5)        (4.4)  

Corporate and Investment Bank

     (1.0)        (1.4)        (1.2)  

Consumer, Cards and Payments

     (1.4)        (1.3)        (1.0)  
 Barclays International      (2.4)        (2.7)        (2.2)  
 Head Officeb      (1.4)        (1.4)        (1.3)  
 Barclays Non-Core      (0.0)        (0.1)        (0.3)  
 Barclays Group      (8.2)        (8.7)        (8.2)  
        
        

 

 Average allocated tangible equityc

  

 

 

 

    

£bn

 

 

 

     £bn        £bn  
 Barclays UK      9.1        8.9        9.3  

Corporate and Investment Bank

     24.0        21.9        21.9  

Consumer, Cards and Payments

     4.2        3.6        3.0  
 Barclays International      28.1        25.5        24.9  
 Head Officeb      9.3        6.5        2.6  
 Barclays Non-Core      2.4        7.8        10.9  
 Barclays Group      48.9        48.7        47.7  

Notes

a This table shows the allocation of Group average equity across IFRS reporting segments.

b Includes the Africa Banking discontinued operation.

c This table shows average tangible equity for the Group and average allocated tangible equity for the IFRS reporting segments.

 

Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  
 
  iii


                                                                                            

 

 Profit/(loss) attributable to ordinary equity holders of the parent

  

 

 

 

 

2017

 

£m

 

 

 

 

  

 

 

 

 

2016

 

£m

 

 

 

  

 

 

 

 

2015

 

£m

 

 

 

 Barclays UK      893        857        (33)  

Corporate and Investment Bank

     269        1,342        1,180  

Consumer, Cards and Payments

     698        1,153        620  
 Barclays International      967        2,495        1,800  
 Head Office      (864)        109        11  
 Barclays Non-Core      (409)        (1,899)        (2,405)  
 Africa Banking discontinued operation      (2,335)        189        302  
 Barclays Group      (1,748)        1,751        (324)  
        
        

 

 Average allocated equitya

  

 

 

 

    

£bn

 

 

 

     £bn        £bn  
 Barclays UK      13.6        13.4        13.7  

Corporate and Investment Bank

     24.9        23.2        23.1  

Consumer, Cards and Payments

     5.6        5.0        4.0  
 Barclays International      30.5        28.2        27.1  
 Head Officeb      10.6        8.0        3.9  
 Barclays Non-Core      2.4        7.8        11.2  
 Barclays Group      57.1        57.4        55.9  
        
        

 

 Return on average allocated equityc

  

 

 

 

    

%

 

 

 

     %        %  
 Barclays UK      6.6%        6.4%        (0.2%)  

Corporate and Investment Bank

     1.1%        5.8%        5.1%  

Consumer, Cards and Payments

     12.5%        23.1%        15.3%  
 Barclays International      3.2%        8.8%        6.6%  
 Barclays Group      (3.1%)        3.0%        (0.6%)  

Notes

a This table shows average equity for the Group and average allocated equity for the IFRS reporting segments.

b Includes the Africa Banking discontinued operation.

c This table shows return on average equity for the Group and return on average allocated equity for the IFRS reporting segments.

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F
 
  iv


      

Governance

    

    

    

 

 

 

This section sets out our corporate governance processes and the role they play in supporting the delivery of our strategy, including reports from the Chairman and each of the Board Committee Chairmen.

    

      

 

 

Directors’ report         Page  

 

UK Corporate Governance Code

 

 

 

Index to disclosures

    2  

 

Letter from the Chairman

 

        3  

 

Who we are

 

 

Board of Directors

    5  
   

Group Executive Committee

 

    7  

 

What we did in 2017

 

 

Board report

    8  
  Board Audit Committee report     11  
  Board Risk Committee report     22  
  Board Reputation Committee report     27  
   

Board Nominations Committee report

 

    33  

 

How we comply

 

        38  

 

Other statutory information

 

        43  

People

 

        47  

Remuneration report

 

        51  

 

 

 

LOGO

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    1


      

Governance: Directors’ report

UK Corporate Governance Code – index to disclosures

    

    

 

 

 

“The purpose of corporate governance is to facilitate effective, entrepreneurial and prudent management that can deliver the long-term success of the company.”

 

The UK Corporate Governance Code

 

The UK Corporate Governance Code (the Code) is not a rigid set of rules. It consists of principles (main and supporting) and provisions. The Listing Rules require companies to apply the main principles and report to shareholders on how they have done so.

 

You can find our disclosures as follows:

    

      

 

Leadership

    Page  

Every company should be headed by an effective board which is collectively responsible for the long-term success of the company.

 

Board of Directors

    5  

Composition of the Board

    39  

There should be a clear division of responsibilities at the head of the company between the running of the board and the executive responsibility for the running of the company’s business. No one individual should have unfettered powers of decision.

 

Roles on the Board

    38  

The chairman is responsible for leadership of the board and ensuring its effectiveness on all aspects of its role.

 

Roles on the Board

    38  

As part of their role as members of a unitary board, non-executive directors should constructively challenge and help develop proposals on strategy.

 

Roles on the Board

    38  

Effectiveness

    Page  

The board and its committees should have the appropriate balance of skills, experience, independence and knowledge of the company to enable them to discharge their respective duties and responsibilities effectively.

 

Board of Directors

    5  

Board Diversity

    4  

There should be a formal, rigorous and transparent procedure for the appointment of new directors to the board.

 

Appointment and re-election of Directors

    35  

All directors should be able to allocate sufficient time to the company to discharge their responsibilities effectively.

 

Attendance

    38  

Time commitment

    39  

    

 

All directors should receive an induction on joining the board and should regularly update and refresh their skills and knowledge.

       

Induction

    39  

Training and development

    40  

The board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties.

 

Information provided to the Board

    40  

The board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors.

 

Review of Board and Board Committee effectiveness

    36  

All directors should be submitted for re-election at regular intervals, subject to continued satisfactory performance.

 

Composition of the Board

    39  

Appointment and re-election of Directors

    35  

Accountability

    Page  

The board should present a fair, balanced and understandable assessment of the company’s position and prospects.

 

Risk management

    77  
         

The board is responsible for determining the nature and extent of the principal risks it is willing to take in achieving its strategic objectives. The board should maintain sound risk management and internal control systems.

 

Risk management and internal control

    40  

The board should establish formal and transparent arrangements for considering how they should apply the corporate reporting, risk management and internal control principles, and for maintaining an appropriate relationship with the company’s auditors.

 

Board Audit Committee report

    11  

Accountability

    40  

Remuneration

    Page  

Executive directors’ remuneration should be designed to promote the long-term success of the company. Performance-related elements should be transparent, stretching and rigorously applied.

 

Remuneration report

    51  

There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his or her own remuneration.

 

Remuneration report

    51  

Relations with shareholders

    Page  

There should be a dialogue with shareholders based on the mutual understanding of objectives. The board as a whole has responsibility for ensuring that a satisfactory dialogue with shareholders takes place.

 

Stakeholder engagement

    42  

The board should use general meetings to communicate with investors and to encourage their participation.

 

Stakeholder engagement

    42  
 

 

 

2    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

Governance: Directors’ report

Chairman’s introduction

    

    

 

 

LOGO   

Throughout this period of activity and change, your Board has been providing critical oversight of executive management to oversee the successful execution of the Group’s long term strategy.

 

 

LOGO

     
     
     
     
  

Dear Fellow Shareholders

 

Welcome to my 2017 corporate governance report. In my Chairman’s letter in the Strategic report, I highlighted the significant milestones and achievements for Barclays in 2017, including the further sell-down of our interest in Barclays Africa Group Limited, the closure of Barclays Non-Core, progress towards the establishment of our ring-fenced bank in 2018 as well as preparations for the UK’s departure from the EU. Throughout this period of activity and change, your Board has been providing critical oversight of executive management to oversee the successful execution of the Group’s long term strategy.

 

I firmly believe and have often said that the role of the Board is to create long term, sustainable value for our shareholders. In order to do this, we must have a robust corporate governance framework, providing systems of checks and controls to ensure accountability and drive better decision-making, and also policies and practices which ensure that the Board and its Committees operate effectively. Part of this is creating an environment which encourages a constructive relationship between the Board and executive management to enable an appropriate level of debate, challenge and support in the decision-making process. I am pleased to report that in 2017 your Board and executive management continued to demonstrate this dynamic as we worked together in executing strategy.

 

The impending changes to our Group corporate structure following structural reform has been a significant area of focus for the Board in 2017 and no doubt will continue to be at the forefront of our minds in 2018. After approving for appointment Sir Gerry Grimstone as the Chairman of Barclays International and Sir Ian Cheshire as the Chairman of Barclays UK, we worked closely with both of them to recruit high quality candidates to build the boards of those two entities. Our aim is to ensure that corporate governance within Barclays is in line with best practice for FTSE100 companies and as a Board we will work hard to ensure that our governance framework is always providing the

  

strong foundation needed for effective management of the Group.

 

Board changes in 2017

Through the Board Nominations Committee, we are always considering whether we have the right mix of individuals on the Board, providing an appropriate balance and diversity of skills, experience and perspectives. It is important that it is inherent within the composition of the Board that a broad range of perspectives and views are able to be provided which are representative of our customers, clients and employees as the foundations of our bank. In addition, we are also regularly thinking about Board succession planning and ensuring we have a strong pipeline of directors to steer the Group over the long-term. With this in mind, we brought on three new non-executive Directors in 2017: Sir Ian Cheshire, Matthew Lester and Mike Turner CBE, all of whom have significant board-level experience and bring specific sector and technical expertise to your Board. During 2017, Diane de Saint Victor and Steve Thieke, both non-executive Directors, left the Board and I thank them on behalf of the Board for their contributions and service.

 

With the changes in 2017, our current female representation on the Board sits at 21%. Last year I reported that we set ourselves a Board diversity target of having 33% female representation on the Board by 2020. We are conscious that our gender diversity balance on the Board has fallen from 2016, but remain committed to achieving the target that we have set. Ensuring diversity of gender, as well as diversity in its other forms such as ethnicity, is built into our governance processes around Board composition and succession planning, and you can read more about this in the Board Nominations Committee report on pages 33 to 37.

 

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    3


      

Governance: Directors’ report

Chairman’s introduction

    

    

 

 

Conduct, culture and values

The Board also actively supports diversity throughout the Group. To attract and retain the best talent, we need to create an environment in which colleagues can thrive, develop and achieve their ambitions. I am very proud of the initiatives that we have at Barclays to encourage diversity and support inclusion among colleagues. Most recently, we launched a campaign aimed at increasing mental health awareness as Barclays aims to become a “mental health confident” organisation, and we are delighted that our Chief Internal Auditor, Sally Clark, is the Executive sponsor for “Be Well”, our well-being initiative. Everything we do at Barclays is underpinned by the Barclays Values and Purpose, and we must act with respect, transparency and integrity in our interactions with stakeholders and with each other to create the right culture, and encourage the right behaviours by colleagues, across the Group. With that framework, we can build and maintain the trust and confidence of our stakeholders and the market.

An important part of our strategy in relation to cultural progress and embedding our Barclays Values is our citizenship strategy, the Shared Growth Ambition, where our long-term aim is to create and grow a collection of products, services and partnerships that improve the lives of people in the communities that we serve. In 2017 we launched Barclays’ “green bonds” as part of our support for the transition to a sustainable and low carbon economy. This was the first green bond issued by a UK bank using UK assets, and you can read more about this in Barclays’ Strategic report. Initiatives like this not only enable us to contribute meaningfully to society, but also enable us to better understand the environment in which we operate and our wider societal obligations, supporting the Board’s objective of delivering sustainable returns to shareholders.

 

LOGO   You can read more about the
Shared Growth Ambition at
home.barclays/citizenship

Stakeholder views

As a Board we are conscious of the impact that our business and decisions have on our customers, clients and employees as well as our wider societal impact. It is through an appreciation of our stakeholders that we can create a strategy aimed at delivering sustainable returns to our shareholders over the long term. The Board is supported in this role by the Board Reputation Committee, which monitors key indicators across the areas of conduct, culture, citizenship and customer satisfaction, as well as Barclays’ reputation and events that occur which may impact the trust in our brand.

The Board receives information about, and engages with, our various stakeholders throughout the year and one of the most important dates in our calendar is our Annual General Meeting, which gives the Board an opportunity to meet our shareholders and hear their views. During the year the Board is kept informed of shareholder views through regular

updates from the Head of Investor Relations, as well as the views of employees through the results of the Barclays Your View employee opinion surveys. Another key stakeholder of Barclays is our regulators, and during 2017 the Board invited representatives of our regulators to attend meetings to hear directly their views and expectations of Barclays. All of these views form the context in which Board decision-making takes place and feeds into the considerations and debate when determining the Group’s strategy.

Board effectiveness

To deliver our strategy and achieve the delivery of long-term, sustainable value for shareholders requires an effective Board. It is an important part of my role as Chairman to satisfy myself that the Board – both collectively and its individual members – operates effectively. Each year, we conduct a self-assessment of our performance with the aid of an independent facilitator. As part of this process, I receive a report on the performance of our individual Directors, and our non-executive Directors, led by our Senior Independent Director, have the opportunity to review my performance. I am pleased to report that the results of the findings showed that your Board and its Committees are still operating effectively. There are, of course, areas to work on and challenges ahead once the new Group structure is crystallised following the stand-up of our new ring-fenced bank in 2018. Ensuring that there is clear accountability and delineated responsibilities in the new structure, not just between boards but also between committees and between the boards and the executive team, will be a key focus for us in 2018. You can read more about the findings and the review process undertaken for 2017 on page 36.

Looking ahead

2018 will be another pivotal year for Barclays with the execution of our new Group corporate structure, and I look forward to working closely with the boards of Barclays UK and Barclays International to embed a strong framework to ensure clear, effective and consistent corporate governance. We will continue to work closely with executive management on improving performance within the Group’s businesses, without losing sight of the need to constantly be acting in line with the Barclays Values and Purpose to build on and retain the trust and confidence of our customers, clients, employees. Together with your Board, we remain focused on working hard to execute the Group’s strategy in order to create sustainable long-term value for our shareholders.

John McFarlane

Chairman

21 February 2018

Board diversity

The Board has a balanced and diverse range of skills and experience. All Board appointments are made on merit, in the context of the diversity of gender, skills, experience and background required to be effective.

Balance of non-executive Directors:

executive Directors

 

LOGO

 

Gender balance

 

LOGO

 

Length of tenure

(Chairman and non-executive Directors)

 

LOGO

 

 

1 0-3 years    6
2 3-6 years    4
3 6-9 years    2
Industry experience

(Chairman and non-executive Directors)*

 

1 Financial Services    12 (100%)
2 Political/regulatory experience    12 (100%)
3 Current/recent Chair/CEO    5 (42%)
4 Accountancy/auditing    2 (17%)
5 Operations and Technology    1 (8%)
6 Retail/marketing    1 (8%)
International experience**

(Chairman and non-executive Directors)*

 

1 International (UK)    10 (83%)
2 International (US)    2 (17%)
3 International (Rest of the World)    2 (17%)

Note

  * Individual Directors may fall into one or more categories  
  ** In relation to Board experience based on the location of the headquarters/registered office of a company  

 

    

 

 

4    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

Governance: Directors’ report

Who we are – Board of Directors

    

    

 

 

Board of Directorsa

Barclays understands the importance of having a Board with the right balance of skills, experience and diversity, and the composition of the Board is regularly reviewed by the Board Nominations Committee. The skills and experience of the current Directors and the value they bring to the Barclays Board are highlighted below.

LOGO

 

Full biographies can be accessed online via

www.home.barclays/investorrelations

 

 

     

LOGO

 

  John McFarlane

  Chairman

 

  Appointed:

  1 January 2015

Relevant skills and experience

John is Chairman of Barclays PLC and Barclays Bank PLC. He is a senior figure in global banking and financial services circles having spent over 40 years in the sector.

John is currently chairman of TheCityUK and a member of the Financial Services Trade and Investment Board and the European Financial Round Table. Other current non-executive directorships include Westfield Corporation, Old Oak Holdings Limited and The International Monetary Conference. John was previously chairman of Aviva plc where he oversaw a transformation of the company FirstGroup plc, and the Australian Bankers Association. He was also a non- executive director of The Royal Bank of Scotland, joining at the time of the UK government rescue. Prior to that he was CEO of Australia and New Zealand Banking Group Limited for 10 years, group executive director of Standard Chartered and head of Citibank in the UK.

Other current appointments

Member of Cranfield School of Management Advisory Board; Member of Institut International d’Etudes Bancaires; Member of the President’s Committee Confederation of British Industry

Committees

Nominations (Chairman)

 

     

LOGO

 

  Jes Staley

  Group Chief

  Executive

 

  Appointed:

  1 December 2015

Relevant skills and experience

Jes joined Barclays as Group Chief Executive on 1 December 2015. He has nearly four decades of extensive experience in banking and financial services. He worked for more than 30 years at JP Morgan, initially training as a commercial banker, later advancing to the leadership of major businesses involving equities, private banking and asset management and ultimately heading the company’s Global Investment Bank. Jes is currently a member of the Institute of International Finance and formerly served as managing partner at BlueMountain Capital. These roles have provided him with a vast experience in leadership and he brings a wealth of investment banking knowledge to Barclays’ Board.

Other current appointments

None

Committees

None

 

 

     

LOGO

 

  Sir Gerry Grimstone

  Deputy Chairman and   Senior

  Independent Director

 

  Appointed:

  1 January 2016

Relevant skills and experience

Sir Gerry brings to the Board a wealth of investment banking, financial services and commercial experience gained through his senior roles at Schroders and his various board positions. Sir Gerry has global business experience across the UK, Asia, the Middle East and the US. Sir Gerry has significant experience as a non-executive director and chairman. He is currently the chairman of Standard Life Aberdeen plc, independent non-executive board member of Deloitte NWE LLP, board adviser to the Abu Dhabi Commercial Bank and the lead non-executive at the Ministry of Defence.

Other current appointments

Financial Services Trade and Investment Board

Committees

Nominations, Reputation (Chairman)

 

     

LOGO

 

  Mike Ashley

  Non-executive

 

  Appointed:

  18 September 2013

Relevant skills and experience

Mike has deep knowledge of auditing and associated regulatory issues, having worked at KPMG for over 20 years, where he was a partner. Mike was the lead engagement partner on the audits of large financial services groups including HSBC, Standard Chartered and the Bank of England. While at KPMG, Mike was Head of Quality and Risk Management for KPMG Europe LLP, responsible for the management of professional risks and quality control. He also held the role of KPMG UK’s Ethics Partner.

Other current appointments

ICAEW Ethics Standards Committee; International Ethics Standards Board for Accountants; Chairman, Government Internal Audit Agency; Charity Commission

Committees

Audit (Chairman), Nominations, Risk, Reputation

 

 

 

 

a Full Director biographies can be found on pages 286 to 288
     

LOGO

 

  Tim Breedon CBE

  Non-executive

 

  Appointed:

  1 November 2012

Relevant skills and experience

Tim joined Barclays after a distinguished career with Legal & General, where, among other roles, he was the group chief executive until June 2012. Tim’s experience as a CEO enables him to provide challenge, advice and support to the executive on performance and decision-making.

Tim brings to the Board extensive financial services experience, knowledge of risk management and UK and EU regulation, as well as an understanding of the key issues for investors.

Other current appointments

Marie Curie; Chairman, Apax Global Alpha Limited; Chairman, The Northview Group

Committees

Audit, Nominations, Remuneration, Risk (Chairman)

 

     

LOGO

 

  Sir Ian Cheshire

  Non-executive

 

  Appointed:

  3 April 2017

Relevant skills and experience

Sir Ian joined Barclays in April 2017 as a non-executive Director and the Chairman of Barclays UK. From his lengthy executive career including his time as Group Chief Executive of Kingfisher plc, Sir Ian brings to the Board substantial business experience particularly in the international retail sector, as well as experience in sustainability and environmental matters. He holds strong credentials in leadership as well as being highly regarded by the Government for his work with various Government departments.

Other current appointments

Business Disability Forum President’s Group; Debenhams plc; Maisons du monde; Menhaden plc; lead non-executive director for the Government

Committees

Nominations

 

     

LOGO

 

  Mary Francis CBE

  Non-executive

 

  Appointed:

  1 October 2016

Relevant skills and experience

Mary has extensive board-level experience across a range of industries. She is a non-executive director of Swiss Re Group and Ensco plc and was formerly senior independent director of Centrica and a non-executive director of the Bank of England, Aviva and Alliance & Leicester. She held senior executive positions in the UK Treasury and Prime Minister’s Office and in the City as Director General of the Association of British Insurers. She brings to Barclays strong understanding of the interaction between public and private sectors and skills in strategic decision-making and all aspects of board governance.

Other current appointments

Advisory Panel of The Institute of Business Ethics

Committees

Remuneration, Reputation

 

 

 

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    5


      

Governance: Directors’ report

Who we are – Board of Directors

    

    

 

     
LOGO  

  Crawford Gillies

  Non-executive

 

  Appointed:

  1 May 2014

Relevant skills and experience

Crawford has extensive business and management experience, gained with Bain & Company and Standard Life plc. These roles have provided him with experience in strategic decision-making and knowledge of company strategy across various sectors and geographical locations.

Crawford has also held board and committee chairman positions during his career, notably as chairman of the remuneration committees of Standard Life plc and MITIE Group PLC and is a senior independent director at SSE plc.

Other current appointments

Chairman, The Edrington Group Limited

Committees

Audit, Nominations, Remuneration (Chairman)

 

     
LOGO  

  Reuben Jeffery III

  Non-executive

 

  Appointed:

  16 July 2009

Relevant skills and experience

Reuben has extensive financial services experience, particularly within investment banking and wealth management, through his role as CEO and president of Rockefeller & Co. Inc. and Rockefeller Financial Services Inc. and his former senior roles with Goldman Sachs, head of the European Financial Institutions Group. His various government roles in the US, including as chairman of the Commodity Futures Trading Commission and as undersecretary of state, provides Barclays’ Board with insight into the US political and regulatory environment.

Other current appointments

Advisory Board of Towerbrook Capital Partners LP; Financial Services Volunteer Corps; The Asia Foundation

Committees

Nominations, Risk

 

     
LOGO  

  Matthew Lester

  Non-executive

 

  Appointed:

  1 September 2017

Relevant skills and experience

Matthew joined Barclays as a non-executive Director in September 2017 and contributes strong financial management and regulatory experience to the Board, having held a number of senior finance roles across a range of business sectors, including financial services. Most recently was chief financial officer of Royal Mail Group. Matthew’s financial expertise enables him to analyse effectively complex reporting and risk management processes. He is currently a non-executive director of Man Group plc and Capita plc, where he also chairs the audit and risk committees of both companies.

Other current appointments

None

Committees

Audit, Risk

 

 

     
LOGO  

  Tushar Morzaria

  Group Finance Director

 

  Appointed:

  15 October 2013

Relevant skills and experience

Tushar joined Barclays in 2013 having spent the previous four years in senior management roles with JP Morgan Chase, most recently as the CFO of its Corporate & Investment Bank. Throughout his time with JP Morgan he gained strategic financial management and regulatory relations experience. Since joining the Barclays Board he has been a driving influence on the Group’s cost reduction programme and managing the Group’s capital plan, particularly in response to Structural Reform.

Other current appointments

Member of the 100 Group main committee

Committees

None

 

     
LOGO  

  Dambisa Moyo

  Non-executive

 

  Appointed:

  1 May 2010

Relevant skills and experience

Dambisa is an international economist and commentator on the global economy, having completed a PhD in economics. Dambisa has a background in financial services and a wide knowledge and understanding of African economic, political and social issues, in addition to her experience as a director of companies with complex, global operations. She served as a non-executive director of SABMiller plc (2009-2016) and Seagate Technology (2015-2017).

Other current appointments

Chevron Corporation; Barrick Gold Corporation

Committees

Remuneration, Reputation

 

     
LOGO  

  Diane Schueneman

  Non-executive

 

  Appointed:

  25 June 2015

Relevant skills and experience

Diane joined Barclays after an extensive career at Merrill Lynch, holding a variety of senior roles, including responsibility for banking, brokerage services and technology provided to the company’s retail and middle market clients, and latterly for IT, operations and client services worldwide. She brings a wealth of experience in managing global, cross-discipline business operations, client services and technology in the financial services industry. Diane is a member of the board of Barclays US LLC, Barclays’ US intermediate holding company and chair of Barclays Services Limited.

Other current appointments

None

Committees

Audit, Risk

 

 

     
LOGO  

  Mike Turner CBE

  Non-executive

 

  Appointed:

  1 January 2018

Relevant skills and experience

Mike has considerable business and board level experience gained from his lengthy career with BAE Systems PLC where he was CEO as well as his non-executive positions. He has a strong commercial background and experience in strategy and operational performance culture. Mike brings significant leadership and strategic oversight experience to the Board, particularly from his roles as chairman of Babcock International Group PLC and GKN Plc.

Other current appointments

Member of the UK Government’s Apprenticeship Ambassadors Network

Committees

Reputation

 

 

Company Secretary

 

     
LOGO  

  Stephen Shapiro

  Appointed:

  1 November 2017

Relevant skills and experience

Stephen was appointed Company Secretary in November 2017 having previously served as the Group Company Secretary and Deputy General Counsel of SABMiller plc. Prior to this, he practised law as a partner in a law firm in South Africa, and subsequently in the UK. Stephen has extensive experience in corporate governance, legal, regulatory and compliance matters. Stephen has also previously served as Chairman of the ICC UK’s Committee on Anti-Corruption as well as on working groups of the GC100, providing business input into key areas of legislative and policy reform.

 

 

 

 

6    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

Governance: Directors’ report

Who we are – Group Executive Committee

    

 

 

 

Group Executive Committeea

LOGO

 

Biographies for Jes Staley, Group Chief Executive, and Tushar Morzaria, Group Finance Director, who are members of the Group Executive Committee, which is chaired by Jes Staley, can be found on pages 5 and 6.

 
 

 

     
LOGO  

  Paul Compton

  Group Chief Operating   Officer

 

     
LOGO  

  Bob Hoyt

  Group General Counsel

 

     
LOGO  

  Laura Padovani

  Interim Group Chief   Compliance Officer

 

     
LOGO  

  Tristram Roberts

  Group Human   Resources Director

 

 

Group Executive Committee meetings are also attended on a regular basis by the Chief Internal Auditor, Sally Clark, and by an ex-officio member, drawn from senior management. The current ex-officio member is Barry Rodrigues, Head of Barclaycard International.

     
LOGO  

  Tim Throsby

  President, Barclays

  International and Chief

  Executive Officer,

  Corporate and

  Investment Bank

 

     
LOGO  

  Ashok Vaswani

  CEO, Barclays UK

 

     

LOGO

 

 

  C S Venkatakrishnan

  Chief Risk Officer

     
 

 

 

a Executive Committee biographies can be found on pages 288 to 289
 

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    7


      

Governance: Directors’ report

What we did in 2017

Board report

    

 

 

 

The Role of the Board

The Board of Directors is responsible for promoting the highest standards of corporate governance in Barclays.

LOGO

  

Further details about our corporate governance framework, policies and

Board responsibilities can be found online at home.barclays/corporategovernance

  

 

We act in a way that we consider promotes the success of Barclays for the benefit of shareholders as a whole, and are accountable to the shareholders for creating and delivering sustainable value. It is our responsibility as the Board to ensure that management not only delivers on short-term objectives, but promotes the long-term growth of Barclays. Our corporate governance framework embeds what we believe are the right culture, values and behaviours throughout the Group and supports our role in determining strategic objectives and policies.

In addition to setting strategy and overseeing its implementation, we are also responsible for ensuring that management maintains an effective system of internal control. An effective system of internal control should provide assurance of effective and efficient operations, internal financial controls and compliance with law and regulation. In meeting this responsibility, we consider what is appropriate for the Group’s business and

reputation, the materiality of financial and other risks and the relevant costs and benefits of implementing controls. See page 40 for further details on those systems of controls.

The Board is the decision-making body for matters that, owing to their strategic, financial or reputational implications or consequences, are considered significant to the Group. A formal schedule of powers reserved to the Board ensures that our control of these key decisions is maintained. A summary of the matters reserved to the Board can be found at home.barclays/corporategovernance. It includes the approval of appointments to the Board, Barclays’ strategy, financial statements, capital expenditure and any major acquisitions, mergers or disposals.

Board Committees

The main Board Committees are the Board Audit Committee, the Board Nominations Committee, the Board Remuneration Committee, the Board Reputation Committee

and the Board Risk Committee. Pursuant to authority granted under our Articles of Association, each Board Committee has had specific responsibilities delegated to it by the Board. Further information on the role and activities of each of the Board Committees can be found in this report on pages 11 to 37 and in their individual terms of reference, which have been approved by the Board and are available at home.barclays/corporategovernance.

In addition, the Regulatory Investigations Committee was formed in 2012 and focused on providing Board-level oversight of regulatory investigations. In 2017, this Committee was disbanded with residual matters being brought under the oversight of the Board Audit Committee or falling directly under the Board’s oversight, as appropriate.

You can read more about what the Board and each of the Board Committees did during 2017 on the following pages.

 

 

LOGO

 

8    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

    

    

 

 

LOGO

 

      Strategic goals      Principal risks  

 

Strategy formulation and monitoring

 

                 
Debated and provided input to management on the formulation of overall Group strategy, and reflected on the Group strategy with longer term views on what could be done to accelerate returns and build capital. The topics covered include:      LOGO        LOGO  

    potential growth opportunities, and key trends and risks, for Barclays UK and Barclays International

     

     constraints and risks to strategy execution, including economic assumptions, expected regulatory requirements on capital and solvency ratios, anticipated changes to accounting rules including IFRS 9, investor expectations, and potential impacts for clients and customers

     

    a strategic approach to costs optimisation, including analysing the impact on costs of different structural initiatives such as product redesign and automation

     

    impact of continuing legacy conduct issues on capital requirements and profit targets

     

    options for the location of Barclays’ operations in Europe, driven by the EU Referendum result.

                 
Discussed regular updates from the Group Chief Executive on the progress being made against the Group’s 2017 execution priorities and capital targets, received insights on stakeholder, employee and cultural matters (including results from employee opinion surveys), and updates on items of focus for the Group Executive Committee.      LOGO        LOGO  
Considered the strategy, and assessed the progress of execution of strategy, in the businesses within each of Barclays UK and Barclays International.      LOGO        LOGO  
Monitored the progress of the sell down of the Group’s remaining interest in Barclays Africa Group Limited.      LOGO        LOGO  
Monitored the progress of the rundown and subsequent closure of Barclays Non-Core.      LOGO        LOGO  
Monitored the progress of the Group’s execution of its structural reform programme – see the case study on page 10 for further details.      LOGO        LOGO  
Monitored the potential implications of the UK’s preparations to leave the EU following the EU Referendum result; approved and monitored progress of the expansion of Barclays Bank Ireland’s operations in preparation for Brexit – see the case study on page 10 for further details.      LOGO        LOGO  

Finance, including capital and liquidity

 

                 
Debated and approved the Group’s Medium Term Plan for 2017-2019.      LOGO        LOGO  
Regularly assessed financial performance of the Group and its main businesses through reports from the Group Finance Director.      LOGO        LOGO  
Reviewed and approved Barclays’ financial results prior to publication, including approving final and interim dividends.      LOGO        LOGO  
Discussed market and investor reaction to Barclays’ strategic and financial results announcements, with insights provided by the Head of Investor Relations.      LOGO        LOGO  
Provided input, guidance and advice to senior management on the high-level shape of Barclays’ 2018-2020 Medium Term Plan and subsequently approved the final plan.      LOGO        LOGO  

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    9


      

Governance: Directors’ report

What we did in 2017

Board report

    

 

 

      Strategic goals      Principal risks  

 

Governance and risk, including regulatory issues

 

                 
Debated and approved the 2017 risk appetite for the Barclays Group.      LOGO        LOGO  
Regularly assessed Barclays’ overall risk profile and emerging risk themes, hearing directly from the Chief Risk Officer and the Chairman of the Board Risk Committee.      LOGO        LOGO  
Received reports on Barclays’ operational and technology capability, including specific updates on cyber risk capability and the strategy for technology and infrastructure services.      LOGO        LOGO  
Approved the Group’s 2017 Recovery Plan and US Resolution Plan.      LOGO        LOGO  
Invited representatives of Barclays’ UK and US regulators to meetings to enable the Board to hear first-hand about regulatory expectations and their specific views on Barclays.      LOGO        LOGO  
Considered and debated proposals for the establishment of a programme to further enhance Barclays’ management information framework across all businesses and entities within the Group.      LOGO        LOGO  
Discussed and received regular updates directly from the Chief Controls Officer on the Group’s internal controls and framework, and monitored progress of the Barclays Internal Control Enhancement Plan (the programme for remediation of identified risk and control issues).      LOGO        LOGO  
Considered regular updates from the Group General Counsel on the legal and regulatory risks and issues facing Barclays – refer to note 29 in the financial statements.      LOGO        LOGO  
Considered matters relating to Board succession and approved appointments to the Board and Board Committees.                  
Received and considered regular updates from the Chairmen of the Board’s principal Board Committees on the matters discussed at Board Committee meetings. See the reports of each Board Committee set out on the following pages for further details.      LOGO        LOGO  
Received regular updates (following the establishment of each respective board) from the Chairs of the Barclays UK and Barclays International divisional boards and the Group Service Company.      LOGO        LOGO  
Considered updates on views of major shareholders, particularly in the period leading up to the 2017 Annual General Meeting.      LOGO        LOGO  
Discussed the Board and Committee governance framework in the context of structural reform, and considered significant developments in UK corporate governance and other corporate governance matters.                  
Considered the results of the 2016 Board effectiveness review and proposed action plan, and considered the process for and findings of the 2017 Board effectiveness review. See page 36 for further details of this process and the findings for 2017.      LOGO        LOGO  
Other, including compensation                  
Considered progress on Barclays’ talent and succession planning (and hosted receptions for key talent within the Group), and received updates on the Bank’s diversity and inclusion initiatives, including from the Chairman of the Board Nominations Committee.      LOGO        LOGO  
Considered and approved the 2017 incentive funding pools for the Group and allocation among each business and function – see the Remuneration report on pages 51 to 74 for further details.      LOGO        LOGO  

 

 

Governance in Action – Structural reform and Brexit

Execution of structural reform

The execution of our structural reform programme was a significant focus for the Group in 2017 as we move towards the legal entity stand up of our ring-fenced bank in 2018. Building on from the work carried out in 2016, the Board continued to closely monitor and evaluate progress on the execution of the programme in 2017. Specific matters addressed by the Board included the following:

 

  overseeing the establishment of the Group Service Company, which was launched on 1 September 2017

 

  monitoring the stakeholder communications plan (including, in particular, the communications plan for customers and employees)

 

  considering regular updates on migrating sort codes with a focus on any potential impact on customers and clients

  

  overseeing and approving various transfers of assets and liabilities among Barclays Group entities including establishing a Committee to provide appropriate Board-level oversight of the processes involved

 

  with the support of the Board Nominations Committee, debating the composition of, and appointments to each of, the boards of Barclays UK, Barclays International and the Group Service Company and discussing the appropriate governance arrangements for the new Group structure.

 

Preparations for Brexit

Another area of focus for the Board was preparations for the impact of the UK’s exit from the EU. Barclays has created an internal programme specifically in relation to the planning and preparation for Brexit. The Board debated potential EU hubs for Barclays’

 

  

European operations and decided to pursue expansion in Ireland where we have been operating for over 40 years and have an existing banking licence held by Barclays

Bank Ireland. Specific matters considered by the Board included debating the feasibility of a significant expansion of Barclays Bank Ireland’s operations, the transfer of capital and resources to Barclays Bank Ireland and assessing the progress being made with applications for the necessary regulatory licensing requirements with the relevant authorities.

 

The successful completion of the Group’s structural reform programme and further progress on our Brexit plans will continue to be areas of focus for the Board in 2018.

 

10    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

Governance: Directors’ report

What we did in 2017

Board Audit Committee report

    

 

 

           

LOGO

 

  

Solid progress has been made in turning the controls enhancement programme into a ‘business as usual’

activity, with an emphasis on achieving sustainable

progress.

 

 

LOGO

       
       
       
       

Dear Fellow Shareholders

In writing this report I have reflected on how Barclays has been working to embed the significant strategic changes put in place during 2016 while responding to new challenges driven by the external landscape, in particular the delivery of Structural Reform and preparation for Brexit.

 

As I reported in 2017, the Committee continues to consider a critical part of its role to be ensuring that the commitment to strengthening Barclays’ control environment is maintained throughout this transformational period. My Committee colleagues and I have been encouraged by the increased rigour applied to oversight of the Group control environment following the creation of the Chief Controls Office at the end of 2016. This has given the Committee greater clarity and transparency regarding thematic control environment issues impacting the Group, and has helped to highlight areas of the business where there may be a concentration of issues and where focus on remediation is required. Regular updates on the overall control environment framework have also continued to be provided to the Board over the course of the year, underlining the importance that the Board of Barclays places on this programme of activity.

 

Solid progress has been made in turning the controls enhancement programme into a ‘business as usual’ activity, with an emphasis on achieving sustainable progress. The Committee has observed heightened focus and attention across the organisation on the importance of having robust processes in place across the business to self-identify controls issues and ensure that there are effective remediation plans in place for which senior management are accountable. The embedding of the Chief Controls Office as part of the first line of management within the organisation has also been helpful in delineating more clearly for the organisation the respective roles of the second and third lines of defence. The controls office has taken over the co-ordination of the Risk and Control Self-Assessment process and this will

  

continue to be an area of focus in 2018 as management develops a more detailed, granular self-assessment process which should assist in proactively identifying controls which require remediation. Further details may be found in the Risk Management and Internal Control section on page 40.

 

The Committee has continued to engage with senior management regarding areas of controls weaknesses in their businesses and has received presentations from a number of different areas of the organisation on the actions taken to address unsatisfactory audit reports.

 

In assessing control issues for disclosure in the Annual Report, the Committee has continued to apply similar definitions to those used for assessing internal financial controls for the purposes of Sarbanes-Oxley. The conclusion we have reached is that there are no control issues that are considered to be a material weakness, which merit specific disclosure.

 

The Committee has continued to oversee the performance and effectiveness of internal and external audit, the main independent assurance mechanisms that serve to protect shareholders’ interests.

 

I continue to hold regular meetings with the Chief Internal Auditor and members of her senior management team to ensure I am aware of current work programmes and any emerging issues. I also agreed the Chief Internal Auditor’s objectives and the outcomes of her performance assessment and remuneration. The Committee also held a networking event with Barclays Internal Audit (BIA) during 2017, enabling Committee members to meet on a less formal basis with senior members of the BIA management team.

 

During 2017, the Committee continued to monitor closely the implementation of the action plan to address the recommendations arising from the review undertaken by the PRA of BIA to increase its effectiveness.

The Chartered Institute of Internal Auditors requires an independent external review of

  

internal audit functions to be carried out at least every five years and during 2017, the Committee commissioned an independent external quality assessment of BIA, further details of which may be found on page 19. The Committee was satisfied with the conclusions drawn in the report, while noting that there were a number of areas for potential development. The Committee considered that the need for a period of stability and consolidation within BIA would be particularly important to embedding existing initiatives and the Committee will continue to monitor this and other recommendations during 2018. In preparation for Structural Reform, BIA has aligned its audit planning and reporting to the new legal entity structure.

 

The Committee continued to exercise its responsibility for ensuring the integrity of Barclays’ published financial information by debating and challenging the critical judgements and estimates made by management. The exercise of appropriate judgement in preparing the financial statements is critical in ensuring that Barclays reports to its shareholders in a fair, balanced and transparent way. During the course of 2017, the Committee oversaw Barclays’ transition to KPMG as Barclays’ statutory auditor which was approved by shareholders at the 2017 annual general meeting. The lead audit partner is Guy Bainbridge who has held this role since KPMG’s appointment as the Group’s auditor. KPMG has brought fresh challenge and insight not only on accounting judgements and policies but also on financial controls which the Committee has found valuable. The report that follows sets out details of the material matters considered by the Committee since my last report. One of the key developments in accounting policy in 2017 has been Barclays’ preparation for the implementation of the IFRS 9 impairment standard on 1 January 2018. The Committee reviewed the guidance note to non-executive Directors from the PRA in relation to IFRS 9 implementation and was comfortable that the areas highlighted by the PRA were being

           

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    11


      

Governance: Directors’ report

What we did in 2017

Board Audit Committee report

    

 

 

addressed. Further details of the Committee’s consideration of the judgements and financial impacts relating to the implementation of the new standard may be found in the ‘Governance in Action’ section of the Committee report on page 21.

I have continued to hold the role of Whistleblower’s Champion, a position required by the FCA to be held at Board level. As champion, I continue to have specific responsibility for the integrity, independence and effectiveness of the Barclays’ policies and procedures on whistleblowing, including the procedures for protecting employees who raise concerns from detrimental treatment. As Whistleblower’s Champion and as Chairman of the Committee, I have been involved in overseeing the implementation of the suggested enhancements following the benchmarking review undertaken in 2017 at the request of the Board of Barclays.

Responsibility for the oversight of litigation, investigation and competition matters has transitioned to the Committee, in line with the Committee’s existing responsibility for the oversight of matters related to disclosure and provisioning. The Committee has received regular updates on these matters from the Group General Counsel, with matters of particular significance to the Group continuing to be subject to oversight by the Board of Barclays.

I attended meetings of the IHC audit committee to gain a first-hand insight into the issues being addressed by that committee and have held regular meetings with the chairmen elect of the Barclays UK and Barclays International audit committees. The chairmen or chairmen elect of all those entities have attended at least one Committee meeting during 2017. I also met frequently with other members of senior management, including the Group Finance Director, and continued my engagement with Barclays’ regulators both in the UK and US. I have reported regularly on the activities of the Committee to the Board of Barclays.

Committee performance

The Committee’s performance during 2017 was assessed as part of an internal committee effectiveness review. The conclusion of my Board colleagues and standing attendees at Committee meetings was that the Committee is regarded as operating effectively and the Board takes assurance from the quality of the Committee’s work. It is considered well constituted with the right balance of skills and experience. The main area identified for improvement was the need to manage a demanding agenda efficiently so that time is allocated to the most significant items for discussion.

Last year’s review commented on the need to strengthen the depth of financial and accounting expertise on the Committee via new appointments, which I am pleased was addressed through the appointment of Matthew Lester to the Committee when he joined the Board of Barclays in September 2017. The review also highlighted the need to ensure that the way in which the Committee works with the Board Reputation and Board Risk Committees continues to capture all significant issues effectively while minimising any overlap. I continued to work closely with my fellow Board Committee chairmen during 2017, particularly with the Board Risk Committee chairman in order to clarify the responsibility of the respective committees for operational risk issues, which each Committee has a role in overseeing.

You can read more about the outcomes of the Board effectiveness review on page 36.

Looking ahead

In 2018, in addition to overseeing management’s progress in continuing to embed the role of the Chief Controls Office and the Group’s management of controls remediation, the Committee will be focusing on some significant accounting issues, including in particular, monitoring the impact of IFRS 9 and the resultant disclosures. The Committee is looking forward to working with the audit committees of Barclays UK and Barclays International as we discharge our responsibilities and focus on ensuring efficient and effective coverage of the business under the new group structure. We have already agreed an allocation of responsibilities, and embedding the necessary reporting and information flows across the three audit committees to ensure all of them can discharge their responsibilities efficiently will be a key area of focus.

Mike Ashley

Chairman, Board Audit Committee

21 February 2018

Committee allocation of time (%)

 

LOGO

 

          2017      2016
1   Control issues      11*          23
2   Business control environment      15          19
3   Financial results      33          36
4   Internal audit matters       25          11
5   External audit matters        8            6
6  

Other

(incl governance

and compliance)

       8            4

 

* The time allocation in 2017 has reduced following the streamlining of the reporting of control issues through the Chief Controls Office.
The increased time allocation to internal audit matters in 2017 reflects the role of the Committee in (i) overseeing the recommendations arising from the review undertaken by the PRA of Barclays Internal Audit to increase its effectiveness, and (ii) the independent external quality assessment of Barclays Internal Audit which was commissioned by the Committee in 2017.

Committee composition and meetings

The Committee is composed solely of independent non-executive Directors, with membership designed to provide the breadth of financial expertise and commercial acumen it needs to fulfil its responsibilities. Its members as a whole have experience of the banking and financial services sector in addition to general management and commercial experience. Mike Ashley, who is the designated financial expert on the Committee for the purposes of the US Sarbanes-Oxley Act, is a former audit partner who during his executive career acted as lead engagement partner on the audits of a number of large financial services groups. Following the Board’s finding that the Committee could be strengthened by the appointment of an additional member with direct accounting and auditing experience, Matthew Lester was appointed to the Board and Committee with effect from 1 September 2017. During his executive career, Matthew held a number of senior finance roles across a range of business sectors, including financial services, and most recently was the Chief Financial Officer of Royal Mail Group. You can find more details of the experience of Committee members in their biographies on pages 5 and 6.

The Committee met 10 times in 2017 and the chart above shows how it allocated its time. Meetings are generally arranged well in advance and are scheduled in line with Barclays’ financial reporting timetable. One additional meeting was arranged to select an appropriate service provider for the independent review of Barclays Internal Audit and to undertake an early review of particular issues relevant to the financial statements. Committee meetings were attended by management, including as required the Group

 

 

 

12    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


 

    

    

    

    

 

 

Chief Executive, Group Finance Director, Chief Internal Auditor, Chief Controls Officer, Chief Risk Officer, Chief Operating Officer, General Counsel and Head of Compliance, as well as representatives from the businesses and other functions. The lead audit partner of KPMG (the Group’s external auditor), Guy Bainbridge, attended all Committee meetings since January 2017. The Committee held a number of private sessions with each of the Chief Internal Auditor or the lead audit partner, which were not attended by management. The lead audit partner of PwC, the Group’s previous external auditor, attended meetings until the end of February 2017 to deliver its final audit report to the Committee on the 2016 financial statements before PwC resigned as the Group’s statutory auditor.

 

Member   Meetings attended/eligible to attend  

Mike Ashley

         10/10  

Tim Breedon

     10/10  

Crawford Gillies

     10/10  

Diane Schueneman*

     8/10  

Matthew Lester

(from 1 September 2017)

     1/3  

 

* Did not attend due to personal circumstances.
Did not attend owing to existing commitments with other boards (the Committee meeting dates were set before Matthew joined the Board).

Committee role and responsibilities

The Committee is responsible for:

 

  assessing the integrity of the Group’s financial reporting and satisfying itself that any significant financial judgements made by management are sound

 

  evaluating the effectiveness of the Group’s internal controls, including internal financial controls

 

  scrutinising the activities and performance of the internal and external auditors, including monitoring their independence and objectivity

 

  overseeing the relationship with the Group’s external auditor

 

  reviewing and monitoring the effectiveness of the Group’s whistleblowing procedures

 

  overseeing significant legal and regulatory investigations, including the proposed litigation statement for inclusion in the statutory accounts.

 

LOGO  

The Committee’s terms of

reference are available at

home.barclays/corporategovernance.

The Committee’s work

The significant matters addressed by the Committee during 2017 and in evaluating Barclays’ 2017 Annual Report and financial statements, are described on the following pages.

Financial statement reporting issues

The Committee’s main responsibility in relation to Barclays’ financial reporting is to review with both management and the external auditor the appropriateness of Barclays’ financial statements, including quarterly results announcements and half-year and annual financial statements and supporting analyst presentations, with its primary focus being on:

 

  the quality and acceptability of accounting policies and practices

 

  any correspondence from financial reporting regulators in relation to Barclays’ financial reporting

 

  material areas where significant judgements have been made, along with any significant assumptions or estimates, or where significant issues have been discussed with or challenged by the external auditor

 

  an assessment of whether the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess Barclays’ position and performance, business model and strategy.

Accounting policies and practices

The Committee discussed reports from management in relation to the identification of critical accounting judgements and key sources of estimation uncertainty, significant accounting policies and the proposed disclosure of these in the 2017 Annual Report. Following discussions with both management and the external auditor, the Committee approved the critical accounting judgements, significant accounting policies and disclosures, which are set out in note 1, ‘Significant accounting policies’, to the consolidated financial statements.

There was one significant change in accounting policy during the period which was the early adoption of IFRS 9 (Financial Instruments) in relation to own credit, resulting in the recognition of fair value movements through the Statement of Comprehensive Income. Further information regarding this change can be found in note 1 to the consolidated financial statements. Two new significant accounting standards became effective from 1 January 2018, IFRS 9 (Financial Instruments) and IFRS 15 (Revenue Recognition). Further information regarding these changes can be found in note 1 to the consolidated financial statements. During 2017, the Committee was regularly updated on Barclays’ preparations for the implementation of IFRS 9, in particular in relation to the new expected loss model which represents a fundamental change in approach

to impairment. The Committee discussed with management the key technical decisions and interpretations required and Barclays’ approach to these. Further details of the Committee’s role in overseeing the Group’s IFRS 9 preparations can be found on page 21, ‘Governance in Action’.

Financial reporting regulators and Barclays

The Committee from time to time considers comment letters and papers from external bodies including the SEC and the Financial Reporting Council (FRC). In that regard, the Committee considered the following:

 

  The FRC’s Year-End Advice Letter to Audit Committee Chairs and Finance Directors which highlighted key developments for 2017/18 annual reports.

 

  The FRC’s Annual Review of Corporate Reporting which summarised key characteristics of good corporate reporting for the 2017/18 reporting year.

 

  The PRA note of advice to Non-executive Directors regarding IFRS 9 implementation which set out a series of questions for consideration to ensure audit committees were well prepared for the transition and its implications.

The Committee sought to ensure that Barclays took due account of the matters raised in the letters and papers described above in its external reporting and has sought to enhance and clarify relevant disclosures.

The Committee from time to time considers comment letters from the SEC in relation to its reviews of Barclays’ Annual Report and other publicly filed financial statements. Such comment letters and Barclays’ responses are made publicly available by the SEC on its website, www.sec.gov, once it has closed each such review. Barclays received one comment letter from the SEC during 2017 requesting clarification from the SEC in relation to its 2017 half year filing. Barclays responded to clarify the queries raised by the SEC. The letter did not raise any material concerns or disclosure items.

Significant judgements and estimates

The significant judgements and estimates and actions taken by the Committee in relation to the 2017 Annual Report and financial statements are outlined below. The significant judgements and estimates are broadly comparable in nature to prior years. Each of these matters was discussed with the external auditor during the year and, where appropriate, have been addressed n the Auditors’ Report on pages 186 to 187.

 

 

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    13


      

Governance: Directors’ report

What we did in 2017

Board Audit Committee report

    

 

 

 

Area of focus    Reporting issue    Role of the Committee    Conclusion/action taken

Conduct provisions

(refer to Note 27 to the

financial statements)

   Barclays makes certain assumptions and estimates, analysis of which underpins provisions made for the costs of customer redress, such as for Payment Protection Insurance (PPI).   

 Regularly analysed the judgements and estimates made with regard to Barclays’ provisioning for PPI claims, taking into account forecasts and assumptions made for PPI complaints and actual claims experience for Barclays and the industry as a whole, including the volume of invalid PPI claims.

 

 Debated the impact on the future range of provisions arising from (i) the FCA’s introduction of August 2019 as the timebar on claims, (ii) the PPI marketing campaign, and (iii) the progress of the proposed fee cap on the submission of PPI complaints by Claims Management Companies which is being considered by the UK Parliament.

 

 Evaluated proposed additional provisions for PPI, considering whether the total provision is within the modelled range of future outcomes, and whether the external auditor agreed with management’s analysis and approach.

 

 Monitored the position on provisions for alternative PPI (card protection and payment break plan insurance) and considered whether further provisions were required.

 

  

The Committee and management continue to monitor closely any changes in customer or claims management companies’ behaviour in light of the FCA timebar and marketing campaign and the ongoing impact of the Plevin case. Having regard to the actual claims experience over 2017 the Committee agreed with management’s assessment that the current provision of £1,600m was appropriate. The Committee noted that this estimate remains subject to significant uncertainty in particular regarding the level of valid customer claims that may be received in the period to August 2019. In this context the Committee was satisfied that sensitivities to the key variables were appropriately disclosed.

 

Legal, competition

and regulatory

provisions

(refer to Notes 27 to 29

to the financial

statements)

   Barclays is engaged in various legal, competition and regulatory matters. The extent of the impact on Barclays of these matters cannot always be predicted, but matters can give rise to provisioning for contingent and other liabilities depending on the relevant facts and circumstances. The level of provisioning is subject to management judgement on the basis of legal advice and is therefore an area of focus for the Committee.   

 Evaluated advice on the status of current legal, competition and regulatory matters.

 

 Assessed management’s judgements and estimates of the levels of provisions to be taken and the adequacy of those provisions, based on available information and evidence.

 

 Considered the adequacy of disclosure, recognising that any decision to set provisions involves significant judgement.

  

The Committee discussed provisions and utilisation. Having reviewed the information available to determine what was both probable and could be reliably estimated, the Committee agreed that the level of provision at the year end was appropriate. The Committee also considered that the disclosures made provided the appropriate information for investors regarding the legal, competition and regulatory matters being addressed by the Group.

 

 

Valuations

(refer to Notes 14 to 18

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, including the Group’s Education, Social Housing and Local Authority (ESHLA) portfolio.   

 Evaluated reports from Barclays Valuations Committee, with particular focus on the matters below.

 

 Monitored the valuation methods applied by management to significant valuation items, including the ESHLA portfolio, a valuation disparity with a third party in respect of a specific long-dated derivative portfolio, and the approach to the marking of Own Credit.

 

 Monitored and discussed the impact of negative interest rates on derivative valuation.

 

 Considered the treatment of the re-integration of Non-Core residual operations into the core business.

 

  

The Committee discussed these matters and agreed that a minor modification be made to the valuation of the specific long-dated derivative portfolio where there existed significant valuation disparity. This did not result in a material change to the fair value recorded by the Group. The Committee noted that, following efforts by management to restructure derivative agreements impacted by negative interest rates, any residual uncertainty was now insignificant.

 

 

 

 

14    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

    

    

    

    

 

 

 

Area of focus    Reporting issue     Role of the Committee    Conclusion/action taken

Impairment

(refer to Note 7 to the

financial statements)

   Where appropriate, Barclays models potential impairment performance, allowing for certain assumptions and sensitivities, the size, particularly where to agree allowances for credit impairment, including agreeing the timing of the recognition of any impairment and estimating forbearance has been granted.   

 Assessed impairment experience against forecast and whether impairment provisions were appropriate.

 

 Evaluated credit impairment reports (reviewed by the Group Impairment Committee) presented by the Chief Risk Officer.

 

 Considered a report from the Chief Risk Officer on the position in the US Cards portfolio and monitored the position to determine whether increase in impairment would be required.

 

 Considered a report from the Group Impairment Committee on the adequacy of loan impairment allowances as at 31 December 2017, including assessing internal and external trends, methodologies and key management estimates.

 

  

The Committee reviewed model adjustments made by management to ensure that impairment allowances were set at appropriate and adequate levels. The Committee reviewed the impairment charge in Barclaycard US arising in the third quarter from the asset sale in the first quarter. The Committee also reviewed three material single name charges in the Corporate Bank.

 

The committee agreed that the provision levels for impairment were appropriate.

Tax

(refer to Note 10 to the

financial statements)

   Barclays is subject to taxation in a number of jurisdictions globally and makes judgements with regard to provisioning for tax at risk and on the recognition and measurement of deferred tax assets.   

 Evaluated the appropriateness of tax risk provisions to cover existing tax risk.

 

 Confirmed the forecasts and assumptions supporting the recognition and valuation of deferred tax assets was in line with Barclays Medium Term Plan.

 

 Monitored the impact to Barclays of the new US framework for tax legislation covering a broad range of tax proposals which was enacted on 22 December 2017 and which had a substantial impact on the measurement of the Group’s US deferred tax assets. The Committee also considered the potential impact of the Base Erosion Anti-abuse Tax (BEAT) which was introduced as part of the new legislation.

  

The Committee reviewed Barclays’ global tax risk and associated provisions for the full year and noted that the level of tax provisions remained at about the same level, although the amount of gross tax risk was assessed as slightly reduced.

 

In relation to the treatment of deferred tax assets the Committee noted that those due to US tax losses (£1,520m) are forecast to be utilised by 2019 which is significantly earlier than the first expiry date of 2028.

 

The Committee agreed with management’s view that it was appropriate not to take account of any potential future BEAT liabilities in the measurement of the deferred tax assets. It noted that this would be in line with recent US GAAP pronouncements and as disclosed management is also continuing to assess the full impact to the Group of the complex provisions in the new US legislation.

 

 

 

 

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    15


      

Governance: Directors’ report

What we did in 2017

Board Audit Committee report

    

 

 

 

Area of focus    Reporting issue    Role of the Committee    Conclusion/action taken

Fair, balanced and understandable reporting

(including country-by-country reporting and Pillar 3 reporting)

   Barclays is required to ensure that its external reporting is fair, balanced and understandable. The Committee undertakes an assessment on behalf of the Board in order to provide the Board with assurance that it can make the statement required by the UK Code on Corporate Governance.   

 Assessed, through discussion with and challenge of management, including the Group Chief Executive and Group Finance Director, whether disclosures in Barclays’ Annual Report and other financial reports were fair, balanced and understandable.

 

 Evaluated reports from Barclays’ Disclosure Committee on its assessment of the content, accuracy and tone of the disclosures.

 

 Established through reports from management that there were no indications of fraud relating to financial reporting matters.

 

 Evaluated the outputs of Barclays’ internal control assessments and Sarbanes-Oxley s404 internal control process.

 

 Assessed disclosure controls and procedures.

 

 Confirmed that management had reported on and evidenced the basis on which representations to the external auditors were made.

  

Having evaluated all of the available information and the assurances provided by management, the Committee concluded that the processes underlying the preparation of Barclays’ published financial statements, including the 2017 Annual Report and financial statements, were appropriate in ensuring that those statements were fair, balanced and understandable.

 

In assessing Barclays’ financial results statements over the course of 2017, the Committee specifically addressed and provided input to management on the disclosure and presentation of:

 

 the classification of Barclays’ holding in Barclays Africa as an available for sale asset with effect from 1 June 2017

 

 the closure of Barclays Non-Core business and the reintegration of the remaining businesses and portfolio

 

 the Group Finance Director’s presentations to analysts

 

 the level of segmental reporting.

 

The Committee recommended to the Board that the 2017 Annual Report and financial statements are fair, balanced and understandable.

 

 

 

 

16    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

    

    

    

 

 

 

Other significant matters

Apart from financial reporting matters the Committee has responsibility for oversight of the effectiveness of Barclays’ internal controls, the performance and effectiveness of BIA and

 

  

    

the performance, objectivity and independence of the external auditor. The most significant matters considered during 2017 are described in the table below.

 

  
Area of focus    Matter addressed    Role of the Committee    Conclusion/action taken

Internal control

Read more about the Barclays’ internal control and risk management processes on

page 40.

   The effectiveness of the overall control environment, including the status of any material control issues and the progress of specific remediation plans.   

 Evaluated and tracked the status of the most material control issues identified by management via regular reports from the Chief Controls Officer, assessed against the new Controls Maturity Model created as part of the Barclays Internal Controls Enhancement Programme (BICEP).

 

 Evaluated the status of specific material control issues and associated remediation plans, including in particular those relating to model risk, resilience, cyber, compliance, technology, credit risk, transaction operations and data management which remained open as at December 2017 and which were reported as ‘on track’ to return to satisfactory status within agreed timeframes.

 

 Considered the second line of defence role in the oversight of operational risk controls, including financial controls over operational risk.

 

 Evaluated reports on the internal control environment from the external auditor.

 

 Discussed lessons learned from specific control incidents and how these could be applied to Barclays’ business globally.

 

 Assessed the progress of the enhancements being made to Barclays’ risk and control self-assessment (RCSA) process.

 

 Clarified the role and responsibilities of the Committee in relation to the split of responsibility for operational risk between the Committee and the Board Risk Committee.

 

  

The Committee welcomed the positive change in approach that the BICEP programme had driven across the business, notably that the first line of defence was now more focused on proactively self-identifying control issues rather than waiting for them to be highlighted by the second or third lines of defence. The Committee continued to emphasise the importance of a disciplined self-assessment by management.

 

The Committee provided feedback on the reporting of material control issues, requesting further detail regarding completion dates, key milestones and current status for significant remediation projects to enable closer monitoring and help drive accountability at the appropriate management level.

 

The Committee challenged the application of the lessons learned process in view of the low level of coverage of significant control incidents. Management has taken steps to enhance the process and ensure compliance. Going forward this will be tracked by the Chief Controls Office.

 

The Committee has continued to use the output from the RCSA process in its review of the control environment. While providing a reasonable overview of the control environment, the Committee welcomes management’s plans to put in place a more granular process which should provide greater visibility on controls requiring remediation and associated risks. This approach was piloted in 2017 and will be rolled out across the Group in 2018.

     The effectiveness of the control environment in each individual business, including the status of any material control issues and the progress of specific remediation plans.   

 Assessed reports on individual businesses and functions on their control environment, questioned the heads of the relevant businesses or functions on control concerns and scrutinised any identified control failures and closely monitored the status of remediation plans or workstreams to enhance the respective control environments.

 

 Received updates directly from senior management, and scrutinised action plans, in relation to remediation plans following unsatisfactory audit findings.

 

 Reviewed updates from management on the Designated Market Activity (DMA) remediation plan which addresses Barclays’ regulatory commitments to the Fed and other US and UK regulators in relation to sales and trading practices across the FX Rates and other markets related business areas.

 

  

The Committee received deep dive control environment presentations from Barclays International and Barclays UK. These provided further detail of management’s assessment of the business unit control environment and key areas of focus, including key controls hot spots for the businesses.

 

The Committee also received a number of presentations from business heads following unsatisfactory audit reports. The Committee challenged the business regarding their role in identifying the control issues and requested confirmation from management regarding the remediation programme, timeframe and accountability for delivery and which are subsequently monitored.

 

The Committee was encouraged that the level of resources being devoted to the DMA programme now shows that it is on track to meet its milestones.

 

 

 

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    17


      

Governance: Directors’ report

What we did in 2017

Board Audit Committee report

    

 

 

 

 

Area of focus    Matter addressed    Role of the Committee    Conclusion/action taken
     The effectiveness of the control environment in the Chief Operating Office (COO) and the status and remediation of any material control issues.   

 Scrutinised on a regular basis the COO control environment, taking the opportunity to directly challenge and question functional leaders, including the Chief Operating Officer on the progress of remediation plans.

 

 Clarified the Committee’s ongoing responsibility for the oversight of controls matters relating to the Group Service Company.

 

 The Committee received a deep dive control environment presentation from the Chief Information Officer regarding Technology control issues.

  

The Committee was pleased to note continuing progress over 2017 to address control issues in accordance with the agreed timescales.

 

The Committee also received updates on the following matters:

 

 Data

 Security of Secret and Confidential Data (SSCD)

 Client Assets and Money (CASS), and

  Payments.

 

     The adequacy of the Group’s arrangements to allow employees to raise concerns in confidence without fear of retaliation and the outcomes of any substantiated cases.   

 Considered the results of the “Your View Survey” in relation to employee views on their ability to safely speak up in their business/ function and whether they could report instances of dishonest or unethical behaviour without fear.

 

 Received an update on enhancements to Barclays’ whistleblowing programme following the announcement of the PRA/FCA investigations and the outcome of the independent review that was commissioned by the Board.

 

 Monitored instances of retaliation reports and whether any instances had been substantiated.

 

 Monitored whistleblowing metrics, including case load and case ageing.

 

  

The Committee discussed the importance of ongoing dialogue and regular training to ensure that the route for escalations was clear and cases were directed to the relevant team for investigation and resolution.

 

The Committee supported the focus on training both to colleagues on the channels available, and also managers on how to handle whistleblowing issues. The Committee also emphasised the importance of sharing positive outcomes of whistleblowing incidents where possible.

 

The Committee was pleased to note that volumes of cases remain proportionate to Barclays’ size and footprint.

 

As Whistleblowing Champion, the Chairman of the Committee made an annual report to the Board on whistleblowing matters.

 

Internal audit    The performance of BIA and delivery of the internal audit plan, including scope of work performed, the level of resources and the methodology and coverage of the internal audit plan.   

 Scrutinised and agreed internal audit plans and methodology and deliverables for 2017 and the first half of 2018, including reviewing the number of audits for delivery following the alignment of the Audit Universe to Barclays new structure following Structural Reform.

 

 Monitored BIA’s response to feedback received from the PRA as part of its review of internal audit, including independence and impact, quality and weight of resources, productivity and methodology.

 

 Monitored delivery of the agreed audit plans, including assessing internal audit resources and hiring levels and any impacts on the audit plan and reviewing the reasons for the postponement of audits in greater depth.

 

 Debated audit risk appetite and issue validation.

 

 Tracked the levels of unsatisfactory audits, including discussing the time taken to issue audit reports and the reasons for any delays.

 

 Discussed BIA’s assessment of the management control approach and control environment in Barclays UK, Barclays International and the functions.

 

 Evaluated the outcomes from BIA’s annual self-assessment.

 

 Commissioned an independent external review of BIA. The reviewer was selected as a result of a tender process also run by the Committee.

  

The Committee received semi-annual thematic controls reports from BIA and a quarterly operational report during 2017.

 

The Committee reiterated its support for BIA’s recruitment plans which reflected significant activity during 2017 to ensure appropriate audit coverage to support the focus on BIA quality across the audit cycle. The Committee Chairman provided input into the recruitment of the two key roles of Head of Internal Audit in Barclays UK and Barclays International.

 

The Committee observed that the issues arising from unsatisfactory audits indicated that there was still work to do in embedding the required level of control consciousness across the Group and ensuring that control exceptions were highlighted clearly in management reporting. The Committee also requested that senior management support BIA in holding individuals accountable for failure to remediate risks effectively where they had failed BIA validation.

 

The Committee confirmed that it was satisfied with the outcome of the self-assessment of BIA performance and the independent external review, both of which evidenced that the function generally conforms to the standards set by the Institute of Internal Auditors. It further confirmed that it felt able to rely on the work of BIA in discharging its own responsibilities.

 

The Committee is providing oversight over the actions arising from the external review. See page 19 below for further details of the review.

 

 

 

 

18    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

    

    

    

    

 

 

 

 

Area of focus    Matter addressed    Role of the Committee    Conclusion/action taken
External audit    The work and performance of KPMG   

 Met with key members of the KPMG audit team to discuss the 2017 audit plan and agree areas of focus.

 

 Assessed regular reports from KPMG on the progress of the 2017 audit and any material accounting and control issues identified.

 

 Discussed KPMG’s feedback on Barclays’ critical accounting estimates and judgements.

 

 Discussed KPMG’s draft report on certain control areas and the control environment ahead of the 2017 year end.

 

 Discussed the approach to KPMG’s annual report to the PRA which will be issued following completion of the 2017 audit.

 

 Considered the draft SOX controls report and the draft audit opinion.

 

  

The Committee approved the audit plan and the main areas of focus.

 

The Committee also approved the principal services agreement and terms of engagement in connection with KPMG’s appointment as the Group’s auditors.

 

Read more about the Committee’s role in assessing the performance, effectiveness and independence of the external auditor and the quality of the external audit below.

The Committee also covered the following matters:

 

 tracked the progress of specific work being done to enhance Barclays’ financial crime controls, including the function’s investigation capabilities, in particular in relation to prevention and detection activities. The Committee also assessed the Group Money Laundering Officer’s annual report

 

 assessed the status of the programme in place to ensure Barclays’ compliance with client assets (CASS) regulatory requirements, including approving the annual client assets audit report and discussing the potential impact of Structural Reform on client assets

 

 evaluated the outcomes of the assessment of the Committee’s performance and any areas of Committee performance that needed to be enhanced

 

 reviewed and updated its terms of reference, recommending them to the Board for approval.

 

In addition to these matters, as highlighted above in the section of the table headed ‘Internal audit’ the Committee commissioned an independent review of BIA which was undertaken by Deloitte during the second half of 2017. The Chartered Institute of Internal Auditors requires an independent external review of internal audit functions to be carried out at least every five years. Following a selection process, the Committee commissioned Deloitte to conduct this review reporting directly to the Committee. The report concluded that:

 

 BIA demonstrates general conformance with the relevant standards and guidelines.

 

 BIA has an effective core audit methodology which reflects investment in Agile ways of working and data analytics which has helped to drive continuous improvement. In this respect it is aligned with or ahead of peers.

  

 BIA’s purpose and remit is clearly defined and the function is positioned appropriately within the governance framework of the organisation/ its role as an objective third line of defence. This role has been supported by the clearer delineation of the first line role of the newly created Chief Controls Office.

 

 The focus on increased headcount in BIA will help drive audit capacity and capability through enhanced specialist skills/ knowledge. Deloitte reported that BIA cares about its people and has created a supportive environment in which to work.

 

 While there are opportunities to improve BIA’s impact, they are able to deliver effective feedback on the operation of controls that address key risks.

 

The report paid close attention to the matters raised in the 2016 PRA letter regarding BIA, and Deloitte met with the PRA as part of its review. The Committee was satisfied with the conclusions drawn in the report, while noting the potential development areas identified, in particular, extending the use of data analytics. BIA has drawn up an action plan in response to the review and the Committee will continue to monitor the delivery of this plan.

 

External auditor

Following an external audit tender in 2015, PWC was replaced in 2017 as Barclays’ statutory auditor by KPMG. Guy Bainbridge of KPMG is Barclays’ senior statutory auditor with effect from the audit for the 2017 financial year.

  

Assessing external auditor effectiveness, auditor objectivity and independence and non-audit services

The Committee is responsible for assessing the effectiveness, objectivity and independence of the Group’s Auditor, KPMG and in 2017 the Committee was particularly concerned to ensure that the external auditor transition period was managed effectively. This responsibility was discharged throughout the year at formal Committee meetings, during private meetings with KPMG and via discussions with key executive stakeholders. In addition to the matters noted above, during 2017 the Committee:

 

 approved the terms of the audit engagement letter and associated fees, on behalf of the Board

 

 discussed and agreed revisions to the Group policy on the Provision of Services by the Group Statutory Auditor and regularly analysed reports from management on the non-audit services provided to Barclays.

 

 evaluated and approved revisions to the Group policy on Employment of Employees or Workers from the Statutory Auditor and ensured compliance with the policy by regularly assessing reports from management detailing any appointments made

 

 was briefed by KPMG on critical accounting judgements and estimates

 

 assessed any potential threats to independence that were self-identified and reported by KPMG

 

 reviewed the report on KPMG issued by the FRC’s Audit Quality Review team.

 

 

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    19


      

Governance: Directors’ report

What we did in 2017

Board Audit Committee report

    

 

 

KPMG’s performance, independence and objectivity during 2017 were formally assessed at the beginning of 2018 by way of a questionnaire completed by key stakeholders across the Group. The questionnaire was designed to evaluate KPMG’s audit process and addressed matters including the auditor transition, quality of planning and communication, technical knowledge, the level of scrutiny and challenge applied and KPMG’s understanding of the business. In addition KPMG have nominated a senior partner on the audit team reporting to the Senior Statutory Auditor to have specific responsibility for ensuring audit quality. The Committee therefore met with the partner concerned without the Senior Statutory Auditor in order to receive a report on his assessment of audit quality.

Taking into account the results of all of the above, the Committee considered that KPMG maintained their independence and objectivity and the audit process was effective.

Non-audit services

In order to safeguard the Auditor’s independence and objectivity, Barclays has in place a policy setting out the circumstances in which the Auditor may be engaged to provide services other than those covered by the Group audit. The Group Policy on the Provision of Services by the Group Statutory Auditor (the “Policy”) applies to all Barclays’ subsidiaries and other material entities over which Barclays has significant influence. The Policy therefore included Barclays Africa Group Limited up until the point of accounting deconsolidation. The core principle of the Policy is that non-audit services (other than those legally required to be carried out by the Group’s Auditor) should only be performed by the Auditor in certain, controlled circumstances. The Policy sets out those types of services that are strictly prohibited and those that are allowable in principle. Any service types that do not fall within either list are considered by the Committee Chairman on a case by case basis, supported by a risk assessment provided by management.

Under the Policy, the Committee has pre-approved all allowable services for which fees are less than £100,000, or less than £25,000 for tax advisory and tax planning services. However, all proposed work, regardless of the fees, must be sponsored by a senior executive and recorded on a centralised online system, with a detailed explanation of the clear commercial benefit arising from engaging the auditor over other potential service providers. The audit firm engagement partner must also confirm that the engagement has been approved in accordance with the auditor’s own internal ethical standards and does not pose any threat to the auditor’s independence or objectivity. All requests to engage the auditor are assessed by independent management before work can commence. Requests for allowable service types in respect of which the fees are expected to meet or exceed the above thresholds must be approved by the Chairman of the Committee before work is permitted to

begin. Services where the fees are expected to be £250,000 or higher must be approved by the Committee as a whole. All expenses and disbursements must be included in the fees calculation. The thresholds remained the same following the annual review of the Policy in 2017.

During 2017, all engagements where expected fees met or exceeded the above thresholds were evaluated by either the Committee Chairman or the Committee as a whole who, before confirming any approval, assured themselves that there was justifiable reason for engaging the auditor and that its independence and objectivity would not be threatened. No requests to use KPMG were declined in 2017 (2016: one). On a quarterly basis, the Committee scrutinised details of individually approved and pre-approved services undertaken by KPMG in order to satisfy itself that they posed no risk to independence, either in isolation or on an aggregated basis. For the purposes of the Policy, the Committee has determined that any pre-approved service of a value of under £50,000 is to be regarded as clearly trivial in terms of its impact on Barclays’ financial statements and has required the Group Financial Controller to specifically review and confirm to the Committee that any pre-approved service with a value of £50,000-£100,000 (or up to £25,000 for tax advisory and tax planning services) may be regarded as clearly trivial. The Committee undertook a review of pre-approved services at its meeting in December 2017 and satisfied itself that such pre-approved services were clearly trivial in the context of their impact on the financial statements.

The fees payable to KPMG for the year ended 31 December 2017 amounted to £48m, of which £10m (2016: £17m) was payable in respect of non-audit services (KPMG was appointed as the Group’s statutory auditor from the financial year beginning 1 January 2017). A breakdown of the fees payable to the auditor for statutory audit and non-audit work can be found in Note 42. Of the £10m of non-audit services provided by KPMG during 2017, the significant categories of engagement, i.e. services where the fees amounted to more than £500,000, included:

 

  audit-related services: services in connection with Client Asset Sourcebook Rules (“CASS) audits (while the CASS audit fell within the auditor’s scope of services, the fees for such services did not form part of the global fee arrangements and therefore required separated Audit Committee approval pursuant to the Policy)
  quality assurance: support in connection with reports on the internal controls applicable to IBOR submission processes

 

  transaction support: ongoing attestation and assurance services for treasury and capital markets transactions to meet regulatory requirements, including regular reporting obligations and verification reports

The fees paid to PwC for non-audit work during 2017, in the period before they resigned as the Group’s statutory auditor, and after they had resigned but before they were non-independent of certain Group entities (and therefore still fell within the Policy), were £3m (2016: £8m). Significant categories of engagement approved in 2017 included:

 

  transaction support: ongoing support for treasury and capital markets transactions, including providing comfort and accounting letters to meet trust deed and regulatory obligations (this ongoing support transitioned to KPMG during 2017).

The Committee also reviewed the level of consultancy spend with PwC during 2017, which it had asked to be monitored in the immediate period after they stepped down as the Group’s auditors. Work with an estimated value of £1m million was awarded to PwC during the year (this was in addition to the £3m in fees paid to PwC for non-audit services referred to above).

The Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014

An external audit tender was conducted in 2015 and the decision was made to appoint KPMG as Barclays’ external auditor with effect from the 2017 financial year, with PwC resigning as the Group’s statutory auditor at the conclusion of the 2016 audit.

Barclays is in compliance with the requirements of The Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014, which relates to the frequency and governance of tenders for the appointment of the external auditor and the setting of a policy on the provision of non-audit services.

 

 

 

20    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

    

    

    

    

 

 

 

             

 

  Governance in Action – Preparation for IFRS 9

           
 

A significant activity for the Committee during 2017 has been overseeing the Group’s preparation for the implementation of IFRS 9.

 

IFRS 9 Financial Instruments is effective from 1 January 2018 and replaces the IAS 39 accounting standard. The new standard sets out the recognition and measurement requirements for financial instruments and has three parts: classification and measurement of financial assets, the requirements for impairment of financial assets and a hedge accounting model that is designed to more closely reflect risk management. As permitted, Barclays intends to continue with the existing IAS 39 hedge accounting model. The new impairment accounting model however has a significant impact on Barclays and the changes are complex and wide ranging classification and measurement also results in a number of much less significant changes. IFRS 9 has therefore been the subject of significant regulatory and market focus. Barclays has worked with the industry and regulators to agree a transitional framework for regulatory capital and on disclosures and has taken note of the best practice recommendations they have issued for the management of the transition to the new standard.

 

The Committee received regular updates on the status, judgements and financial impacts relating to the implementation of IFRS 9 during 2017 and the first quarter of 2018. It has overseen the steps required for Barclays’ transition to the new standard, in particular the delivery into production of the models and controls which are required for its implementation.

 

  

Throughout the process, the Committee emphasised to management the importance of developing the models to support business decision making to manage risk and ensure appropriate customer outcomes. The Committee reviewed the internal governance and validation processes in Risk and Finance and received regular updates from KPMG on their assurance work. The Committee also received reports from BIA following the audits undertaken in respect of the IFRS 9 programme, with a number of further audits planned for 2018. The Committee also reviewed the key estimates made by management in considering future economic scenarios and the criteria for determining when significant credit deterioration is observed.

 

In line with its terms of reference, the Committee has been closely involved in the review of all material external financial reporting relating to IFRS 9 and is focussed on ensuring clarity, completeness and appropriateness of the Group’s disclosures, particularly given the complexity and technical challenges of this standard. The Committee reviewed the best estimate impact on the Group which was disclosed in Barclays’ third quarter results and the updated IAS 8 disclosures included in the 2017 financial statements.

 

      

    

    

           

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    21


      

Governance: Directors’ report

What we did in 2017

Board Risk Committee report

    

 

 

           

LOGO

 

  

The Committee continued to monitor UK economic trends, consumer behaviour and portfolio performance, and a prudent approach to lending was maintained.

 

 

LOGO

       
       

Dear Fellow Shareholders

The focus of the Committee during 2017 has continued to be on assessing the impact of important macro-economic and market developments on the risk profile of the Group. Credit risk management during 2017 was primarily concerned with the level of exposure to consumer debt both in the UK and US. In the UK, the Committee in 2016 had accepted the recommendation of Management to pursue a conservative approach to managing growth and balances in credit card debt. This had been prompted by the rising level of personal debt in the UK and concerns of weaker growth and higher inflation resulting from the country’s vote to leave the European Union. This theme persisted in 2017, as the Committee continued to monitor UK economic trends, consumer behaviour and portfolio performance, and a prudent approach to lending was maintained. In the US, in late 2016, there had been nascent signs of weakness in the consumer credit portfolio. The Committee had requested Management to perform detailed analyses of the balances and, based on this work, approved in early 2017 the sale of a proportion of the weaker segments of the portfolio. This action, along with increased conservatism during the year in lending and portfolio quality, has moderated the impact on Barclays of increasing delinquencies among US credit card borrowers being seen among US credit card lenders.

 

While the impairment performance of the Bank was largely within plan, wholesale credit performance in the UK was slightly weaker than in the US. The Bank experienced higher impairment in its corporate lending book in the UK from the default of certain borrowers in the service sector. In the US, improved economic conditions, and higher energy prices resulted in favourable corporate impairment trends compared to 2016.

  

In recent years, the Committee has been closely supervising the strengthening of the capital position of the Bank. Progress continued in 2017 as the Bank’s capital ratios continued to improve. In assessing the adequacy of the Bank’s capital position, the Committee took into account current financial performance, the impact of expected regulatory developments (including structural reform), and estimates of the costs of resolving past conduct and litigation issues. Likewise, the Committee is pleased that the liquidity risk in the Bank has been closely monitored and strengthened over the past year.

 

An important role of the Committee each year is to recommend the risk appetite of the Bank to the Board: its ability to earn an appropriate return while being able to withstand shocks in the market and economic environment. In addition, the Committee monitors closely the assessment of the Bank’s performance under a variety of regulatory stress tests. We evaluate not just the outcome of these analyses but the means by which they are performed, particularly the assessment of model risk. These efforts increased in 2017, as the Bank prepared for the first stress test of the US Intermediate Holding Company (IHC), in addition to completing the newly introduced Biennial Exploratory Scenario for the Bank of England stress test.

 

The Committee assesses external conditions as part of establishing risk appetite. These remain challenging and our objective was to position the Bank conservatively to deal with economic uncertainty. Key themes that developed during 2017 with potential to have a significant first order impact on Barclays’ businesses included heightened political and economic risk in the UK in the backdrop of Brexit negotiations, increased geo-political risk impacting the delicately poised global economy, and a shortage of new transaction flow in Leveraged Finance underwriting driving tighter terms. Other emerging risks with potential to impact Barclays include volatility in the UK Pension scheme, UK property price stress and volatility in financial markets after a long period of quiescent asset

  

appreciation. The Committee maintains regular oversight of exposure to the key risk themes it has identified and actions taken by Management in response.

 

During the year, the Committee also evaluated the financial and capital impacts of operational risk. The Committee has noted, and encouraged, the efforts by Management to improve the Risk and Control Self-Assessment programme in Operational Risk. This work is important in an environment of heightened cyber risk and increased operational complexity as the Bank implements structural reform.

 

As in past years, the Committee reviewed the execution by Management of material regulatory programmes and initiatives. These included the BCBS239 effort to improve the quality and reliability of data and information, and IFRS 9, a new standard for the estimation of credit impairment.

 

Committee performance

The performance of the Committee during 2017 was assessed as part of an internal annual Committee effectiveness review. The conclusion of my Board colleagues was that the Committee is considered to operate effectively and that the Board continues to have a high degree of confidence in the diligence and coverage of the Committee. Feedback from the review indicated that the Committee was both effective and influential in identifying areas of risk where Barclays needs to change its performance or adjust its risk profile.

 

One of the areas identified for improvement was to consider whether the Committee would benefit from deeper expertise by including a member with a risk function management background and we will give further consideration to this in 2018. The review also highlighted the need to ensure that the way in which the Committee works with the Board Reputation and Board Audit Committees continues to capture all significant issues effectively while minimising any overlap. I continued to work closely with my fellow Board Committee Chairmen during

           

 

22    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

    

    

    

    

 

 

2017, particularly with the Board Audit Committee Chairman in order to clarify the responsibility of each committee in relation to operational risk matters during the year which each Committee has a role in overseeing. We will work to embed this further in 2018. The Committee will also focus on ensuring there is a framework in place to ensure clear allocation of responsibilities regarding the Committee’s interaction with the risk committees of Barclays UK and Barclays International under the new Group structure.

You can read more about the outcomes of the Board effectiveness review on page 40.

Looking ahead

2018 is important for Barclays as it completes the restructuring required under the structural reform programme. As a result, the firm will have two important subsidiary legal entities in Barclays UK, the core domestic franchise in the UK, and Barclays International, the Corporate and Investment Banking and international consumer businesses of the firm. These will be in addition to the US Intermediate Holding Company, which is part of Barclays International. The Committee will pay close attention to the executive’s management of risk within and across these entities.

We expect that credit and employment conditions in the UK will continue to be uncertain, as future trade and economic arrangements with the EU take shape. In the US, the impact of the corporate tax reform on the health of companies and consumers will need assessment. Lastly, the Committee will continue to monitor the risk to Barclays from volatility in financial markets, which have experienced many years of steady asset appreciation.

Tim Breedon

Chairman, Board Risk Committee

21 February 2018

 

  Committee allocation of time (%)

 

   LOGO

 

      2017        2016  

1 Risk profile/risk appetite (incl capital and liquidity management)

     53        52  

2 Key risk issues

     26        26  

3 Internal control/risk policies

     12        8  

4 Other (incl remuneration and governance issues)

     9        14  

Committee composition and meetings

The Committee is composed solely of independent non-executive Directors. Details of the skills and experience of the Committee members can be found in their biographies on pages 5 to 6.

The Committee met nine times in 2017, with two of the meetings held at Barclays’ New

York offices. The chart above shows how the Committee allocated its time during 2017. Committee meetings were attended by management, including the Group Chief

Executive, Group Finance Director, Chief Internal Auditor, Chief Risk Officer, Barclays Treasurer and Group General Counsel, as well as representatives from the businesses and other representatives from the Risk function. Representatives from Barclays’ external auditor, KPMG, and until March 2017, representatives from the outgoing external auditor, PwC, also attended meetings.

Member   Meetings attended/eligible to  attend

Tim Breedon

      9/9

Mike Ashley

  9/9

Reuben Jeffery

  9/9

Diane Schueneman

  9/9
Matthew Lester (from 1 September 2017)   3/3
Steve Thieke (to 10 May 2017)   3/3

Committee role and responsibilities

The Committee’s main responsibilities include:

 

  reviewing and recommending to the Board the Group’s financial and operational risk appetite

 

  monitoring the Group’s financial and operational risk profile

 

  commissioning, receiving and considering reports on key financial and operational risk issues

 

LOGO    The Committee’s terms of reference are available at
home.barclays/corporategovernance
 

 

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    23


      

Governance: Directors’ report

What we did in 2017

Board Risk Committee report

    

 

 

 

The Committee’s work   

The significant matters addressed by the Committee during 2017 are described below:

 

  
Area of focus    Matter addressed    Role of the Committee    Conclusion/action taken
Risk appetite and stress testing, i.e. the level of risk the Group chooses to take in pursuit of its business objectives, including testing whether the Group’s financial position and risk profile provide sufficient resilience to withstand the impact of severe economic stress.    The risk context to Medium Term Plan (MTP), the financial parameters and constraints and mandate and scale limits for specific business risk exposures; the Group’s internal stress testing exercises, including scenario selection and financial constraints, stress testing themes and the results and implications of stress tests, including those run by the Bank of England (BoE).   

  Assessed the risk context for the 2017 MTP, including general economic and financial conditions and how these had been reflected in planning assumptions.

 

  Debated the assumptions, parameters and results of the internal stress test of the risk appetite of the 2017 MTP.

 

  Discussed and agreed mandate and scale limits for Credit, Market and Treasury and capital risk.

 

  Evaluated the BoE annual cyclical stress test results, and the results of a stress test under the BoE biennial exploratory scenario.

 

  Observed and debated regulatory and market reaction to the publication of BoE stress test results.

 

  Considered and approved internal stress test themes and the financial constraints and scenarios for stress testing risk appetite for the 2018 MTP.

 

  Considered the Federal Reserve Board’s feedback on the US Intermediate Holding Company’s Comprehensive Capital Analysis and Review (“CCAR”) capital plan following the submission of the CCAR stress test results.

  

The Committee recommended the proposed risk appetite for 2017 to the Board for approval, although noted that this may need to be revisited to take account of the impact of IFRS 9 in due course. It encouraged management to make further progress on enhancing infrastructure used to conduct the internal stress test. The Committee approved the 2017 annual stress test results for submission to the BoE, including the range of management actions and overlays designed to mitigate risk impacts.

 

Similarly, the Committee approved the results of the stress test under the BoE biennial exploratory scenario and recommended that the results should be taken into consideration for strategy projections.

 

In recommending the internal stress test and risk appetite for the 2018 MTP, the Committee noted and considered that the severity of the internal stress test had been higher than normal, which provided added resilience to the various challenges for the MTP, such as macroeconomic issues.

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.    The trajectory to achieving required regulatory and internal targets and capital and leverage ratios.   

  Debated on a regular basis, capital performance against plan, tracking the capital trajectory, any challenges and opportunities and regulatory policy developments.

 

  Assessed on a regular basis, liquidity performance against both internal and regulatory requirements.

 

  Regularly monitored capital and funding requirements on a legal entity basis.

 

  Assessed the possible implications of litigation and investigations on the Group’s liquidity position, including a review of the Bank’s liquidity risk control framework.

 

  Monitored the funding risk and capital volatility associated with the Barclays pension scheme.

 

  

The Committee supported the forecast capital and funding trajectory and the actions identified by management to manage the Group’s capital position. It approved the proposed capital and liquidity processes for Barclays UK for submission to the regulator as part of its banking licence application.

 

The Committee considered and approved the Group capital adequacy assessment together with the methodologies and results of the reverse stress testing for the submission of the 2017 Internal Capital Adequacy Assessment Process (ICAAP) as well as the Group’s 2017 Individual Liquidity Adequacy Assessment Process (ILAAP).

Political and economic risk, i.e. the impact on the Group’s risk profile of political and economic developments and macroeconomic conditions.    The potential impact on the Group’s risk profile of political developments, such as elections in other European countries, as well as continuing to monitor the impact of the aftermath of the UK’s EU Referendum.   

  Monitored progress on actions to mitigate the risk of the potential impact of negative interest rates in the UK on Barclays.

 

  Monitored the potential impacts of Brexit, including a “hard” Brexit.

 

  Considered trends in the UK economy, including risk of inflation amid negative real wage growth.

 

  Continued to monitor the risks relating to South Africa while Barclays still had control of Barclays Africa Group Limited (BAGL).

 

  Monitored Barclays’ exposures to certain products, and with particular focus on redenomination risk, and the risk of a single country leaving the Euro.

 

  

Following the further sell-down of the equity stake in Barclays Africa and the subsequent proportionate regulatory deconsolidation, the Committee agreed that South Africa should be removed as an ongoing risk theme, although it continued to maintain oversight of any emerging risk. It also agreed to remove negative interest rates as a key risk theme on the basis that the actions previously identified and agreed to mitigate the risk were nearing completion.

 

The Committee suggested that monitoring geo-political risks in Europe should be broadened to include other regions, but requested that China continue to be reported as a separate geo-political risk theme.

 

 

 

24    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

    

    

    

    

 

 

 

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, particularly in London and the South East; levels of UK consumer indebtedness, particularly in the context of the risk of inflation and negative real wage growth; and the performance of the UK and US Cards businesses, including levels of impairment.   

  Continued to assess and monitor conditions in the UK property market in case of signs of stress.

 

  Evaluated how management was tracking and responding to rising levels of consumer indebtedness, particularly unsecured credit in both the UK and US.

 

  Discussed the PRA’s statement on consumer credit and unsecured lending in the UK, and considered Barclays’ response to the PRA statement.

 

  Scrutinised the performance of the UK and US Cards businesses, including the level of impairment.

 

  Reviewed and approved proposals for frameworks relating to Securities Financial Limits and Maximum Exposure Governance.

 

  Scrutinised a strategic review of business activity in the Corporate and Investment Bank (CIB).

  

The Committee focused on effective collections capability as an important tool of risk management.

 

The Committee encouraged management to carry on with its conservative approach to UK lending.

 

The Committee approved changes to the risk appetite levels for US Cards.

 

The Committee requested more granular detail of the impact of strategy changes on risk limits and oversight.

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.   

  Tracked operational risk key indicators via regular reports from the Head of Operational Risk.

 

  Debated specific areas of emerging risks, including conduct risk, cyber, execution risk, technology and data, including the controls that had been put in place for managing and avoiding such risks.

 

   The Committee focused its attention on the financial and capital impacts of operational risk. In relation to fraud, it encouraged management to further integrate strategy, models and operations.
Risk framework and governance    The frameworks, policies and talent and tools in place to support effective risk management and oversight.   

  Monitored progress on the implementation of an enhanced modelling framework, including receiving updates from Barclays Internal Audit on findings in relation to specific modelling processes.

 

  Tracked the progress of significant risk management projects, including the progress on achieving compliance with the Basel Committee for Banking Supervision 239 (BCBS239) regulation for risk data aggregation principles as well as the roll out of the Risk and Control Self Assessment (RCSA) process across the Group. Please see the “Governance in Action” box on page 26 for further details about the Committee’s role in overseeing the RCSA process.

 

  Assessed risk management matters raised by Barclays’ regulators and the actions being taken by management to respond.

 

  Endorsed Legal risk and Model risk, as new Principal Risks under the ERMF, forming part of the Committee’s roles and responsibilities in future.

 

  Reviewed the implementation of the Enterprise Risk Management Framework during 2017 which had been designed to address feedback from the PRA following a review of the EMRF.

 

  

The Committee requested a gap analysis together with an action plan to remediate specific weaknesses identified in the internal audit in relation to modelling.

 

The Committee assessed during the year the Group’s risk management capability in the form of a Risk Capability Scorecard and reviewed and approved proposals for the external third party evaluation which was scheduled to be performed in early 2018.

Remuneration    The scope of any risk adjustments to be taken into account by the Board Remuneration Committee when making remuneration decisions for 2017.   

  Debated, in a joint meeting with the Board Reputation Committee, the Risk function’s view of 2017 performance, making a recommendation to the Board Remuneration Committee on the financial and operational risk factors to be taken into account in remuneration decisions for 2017.

   The Committee discussed the report of the Chief Risk Officer and considered the proposal put forward in relation to the impact of relevant risk factors in determining 2017 remuneration decisions, noting that it should also include positive events such as the 2017 Banking Standards Board report which had reported improvements on 2016.

 

 

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    25


      

Governance: Directors’ report

What we did in 2017

Board Risk Committee report

    

 

               
 

In addition, the Committee also covered the following matters in 2017:

 

  assessed Barclays’ exposures to the leveraged finance market, general conditions in that market and approved an updated leveraged finance framework which would be submitted annually to the Committee for approval

 

  was briefed by PwC on main risk issues identified during the 2016 year-end audit, specifically impairment, post-model adjustments, forbearance control issues, key valuation judgements (including in relation to the ESHLA portfolio), and key assumptions used in the pension scheme liabilities

 

  requested and evaluated a report on partnership programmes in the US Cards business with a focus on risk profile and credit quality

 

  considered a report on the effectiveness of the Committee and any areas of the Committee’s performance that could be improved

 

  reviewed and updated its terms of reference, recommending them to the Board for approval.

   Governance in Action – Risk and Control Self Assessment Programme    
  

 

A key focus of the Committee in 2017 was oversight of the implementation of a revised Risk and Control Self Assessment (RCSA) programme. The RCSA enhancement programme was established as part of Barclays’ commitment to the effective management the Group’s Operational risk and extend both the scope of coverage across a wider range of risks, and also improve the granularity of management’s risk and control assessments of business processes. The programme is the firm-wide process led approach for management to identify and regularly assess material inherent risks and their associated controls, in order to mitigate these risks and reduce the likelihood and/or severity of losses to the firm from a Risk event.

 

In 2017, a number of pilot RCSAs were rolled out across the Group in addition to the regular RCSA process, which was also enhanced. Improvements were also made in the assessment of inherent risk values and the aggregation process for risk and control assessments across risk types. During the year, the Committee reviewed progress in terms of the RCSAs completed across the Group, and also considered the next steps in the review process and the results of the residual risk assessments. Based on the results of the pilot RCSAs undertaken,

 

  

 

the Committee was satisfied that the process will improve management’s understanding of the risk and control environment, so they can prioritise and remediate ineffective controls where required.

 

Following completion of the pilot RCSA programme, the Committee considered the ways in which the RCSA programme could be enhanced for the wider implementation of the programme in 2018. The Committee considered specific revisions of the 2017

RCSA programme with the aim of:

 

  improving the identification of inherent risk, control effectiveness and residual risk by going into detail at a more granular process level

  increasing the degree of independent challenge provided by all three lines of defence

  increasing the granularity of assessments for a further set of pilot RCSAs to estimate inherent risk at activity level by risk type, together with the identification and assessment of detailed operating controls by activity and residual risk.

 

The Committee will continue to work with management in 2018 on further refining and enhancing the RCSA programme.

   
 
               

 

26    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

Governance: Directors’ report

What we did in 2017

Board Reputation Committee report

    

 

 

           

LOGO

 

  

The Committee has been well positioned during 2017, a time of significant organisational change for the Group, to ensure that our people, whether within Barclays UK, Barclays International or the Group Service Company, continue to demonstrate behaviours and conduct that are consistent with the Barclays Values.

 

 

LOGO

       
       

 

Dear Fellow Shareholders

This is my second report to you as Chairman of the Board Reputation Committee. At the conclusion of my last report I commented that the Committee, by way of its membership, executive engagement and reporting processes, had built a strong foundation on which to base its future operations and drive Barclays to be a governance leader in conduct, culture and reputation matters. This strong foundation has ensured that the Committee has been well positioned during 2017, a time of significant organisational change for the Group, to ensure that our people, whether within Barclays UK, Barclays International or the Group Service Company, continue to demonstrate behaviours and conduct that are consistent with the Barclays Values.

 

On two occasions during 2017 the Committee extended an invite to representatives of the Banking Standards Board (BSB) to present and discuss the outcomes of their 2016 and 2017 assessments of Barclays. As an independent third party with insights across the banking industry as a whole, the Committee attaches significant value to the insights offered by the BSB and I would like to extend my personal thanks to Dame Colette Bowe and her team at the BSB for their continuing work to promote the highest standards of behaviour in UK banking and restore public trust in the sector. We were encouraged to hear that the results had generally improved between 2016 and 2017 and were particularly pleased to see how strongly the Barclays Values still resonate with our colleagues. The Committee also carefully considered the BSB’s feedback on results relating to colleague resilience and you will find an outline of our discussion on colleague well-being on page 29.

 

  

 

One of the key challenges faced by the Committee is how to maintain oversight of Group Conduct and Culture matters as a whole, without overlooking the cultural differences that, naturally and quite rightly, exist between our different operating businesses and support functions. During the year the Committee actively discussed this challenge and, in an attempt to address this, I rebalanced the Committee’s agenda by introducing business and functional “Deep Dive” sessions into each meeting. The Deep Dives allow the Committee to understand the conduct, culture and customer satisfaction issues being faced in specific areas of the business and the actions undertaken to address them. Whilst consideration of our well-refined dashboards and Reputation risk reports ensure that Group-level metrics, challenges and initiatives remain clearly visible and subject to Committee consideration and challenge. You can read about some of the Deep Dives undertaken by the Committee during 2017 on the following pages.

 

A significant output from the Committee during 2017 resulted from discussions around Barclays’ historic commitments to the financing of certain fossil fuels projects, which resulted in a decision to develop a more proactive approach to the management of sustainability issues across the Barclays business. I would encourage you to refer to the Governance in Action box on page 32 for further details on this initiative.

  

 

Committee performance

Through the process of the annual Board effectiveness review, which confirmed the continued effectiveness of the Committee, the ongoing evolution of the Committee’s role and the increased impact that it had during the last year was clearly acknowledged. An area that the review identified for further consideration was the continued oversight of Conduct and Reputation risk matters in the post-structural reform corporate structure, which I will ensure is addressed by the Committee ahead of April 2018.

 

Looking ahead

Finally, I would like to record my thanks to Mike Roemer, who stepped down as Group Chief Compliance Officer in October 2017, for his outstanding contribution to the work of the Committee during his tenure in that role. I would also like to thank Diane de Saint Victor, who stepped down from the Committee on her retirement from the Board in May 2017. I look forward to working with our new Committee member, Mike Turner and, subject to regulatory approval, our new Group Chief Compliance Officer, Laura Padovani, as we continue to support the delivery of the Board’s collective vision of the Barclays Values.

 

Sir Gerry Grimstone

Chairman, Board Reputation Committee

21 February 2018

 

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    27


      

Governance: Directors’ report

What we did in 2017

Board Reputation Committee report

 

 

 

  Committee allocation of time (%)

 

   LOGO

 

      2017      2016*  

1 Conduct and compliance

     36%        33%  

2 Culture

     20%        21%  

3 Customer satisfaction

     14%        6%  

4 Citizenship

     16%        13%  

5 Brand & other Reputation risk

     14%        27%  

* 2016 figures have been rebased according to the significant matters considered by the Committee in 2017.

 

Committee composition and meetings

The Committee is composed solely of independent non-executive Directors. During 2017, Diane de Saint Victor stepped down from the Committee and the Barclays Board with effect from 10 May 2017.

The Committee met four times during 2017 and the chart to the left shows how it allocated its time. Committee meetings were attended by representatives from management, including the Group Chief Executive, Chief Compliance Officer, Chief Internal Auditor, Chief Risk Officer, Group General Counsel, Group Chief of Staff, Group HR Director and the Heads of Corporate Communications, Citizenship and Reputation, as well as senior representatives from the businesses and other functions. A representative from KPMG, Barclays’ external auditor, attended each Committee meeting during the year and representatives from the BSB attended two meetings during 2017.

 

Member   Meetings attended/eligible to attend  

Sir Gerry Grimstone

        4/4  

Mike Ashley

    4/4  

Mary Francis

    4/4  

Dambisa Moyo

    4/4  
Diane de Saint Victor (to 10 May 2017)     1/1  

Committee role and responsibilities

The principal purpose of the Committee is to:

 

  support the Board in promoting its collective vision of Barclays’ purpose, values, culture and behaviours

 

  ensure, on behalf of the Board, the efficiency of the processes for identification and management of Conduct and Reputation risk

 

  oversee Barclays’ conduct in relation to its corporate and societal obligations, including setting the guidance, direction and policies for Barclays’ approach to customer and regulatory matters and Barclays’ Citizenship Strategy, including advising the Board and management on these matters.

 

LOGO   The Committee’s terms of reference
are available at
home.barclays/corporategovernance
 

 

 

The Committee’s work         

The significant matters addressed by the Committee during 2017 are described below:

 

  
Area of focus    Matter addressed    Role of the Committee    Conclusion/action taken
Conduct risk    Monitoring the risks that can arise from the inappropriate supply of financial services, including instances of wilful or negligent misconduct.   

  Discussed updates from management on Conduct risk and considered performance against Conduct risk indicators at each meeting.

 

  Discussed the specific Conduct risks associated with certain business areas and the status of initiatives in place to address those risks and further strengthen the culture of the business.

 

  Received reports from Barclays Internal Audit (BIA) in respect of internal audit activities on conduct risk management matters, including details of any unsatisfactory audit reports and remediation steps identified.

 

  Discussed and approved the Conduct Risk Framework, with Conduct risk having been identified as a Principal Risk under the Barclays Enterprise Risk Management Framework (ERMF).

 

  Received forward looking information on regulatory developments, including the issuance of new consultations by regulators, that might have a Conduct risk impact on Barclays in the future.

 

  Approved the annual Compliance Plan.

 

  Considered and approved the proposed methodology for calculating Conduct risk adjustments to incentive pools.

  

In line with its re-categorisation under the ERMF, the Committee adopted Board-level oversight of financial crime risk and conducted a Deep Dive into this area. The Conduct dashboard report was updated to include financial crime information and metrics, and the Committee was encouraged by management’s open and transparent approach to engaging with regulators on financial crime matters.

 

The Committee considered the differing regulatory requirements placed on the UK and US Cards businesses and have suggested that a “Barclays view” should overlay the requirements of local regulations to ensure that all retail facing businesses within the Group operate within a framework that prioritises the concept of “Treating Customers Fairly”.

 

During discussion of the realignment of businesses between Barclays UK and Barclays International, the Committee encouraged management to take advantage of opportunities presented by structural reform to address some areas of Conduct risk by harmonising policies and operations, in areas such as collections and affordability assessments.

 

The Committee considered an update from BIA on the use of Conduct risk information by legal entities within the Group and their assessment of reporting mechanisms and the escalation of issues up the organisational hierarchy.

 

 

 

28    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

    

    

    

    

 

 

 

Area of focus    Matter addressed    Role of the Committee    Conclusion/action taken
Cultural progress    Reviewing management’s progress on embedding a values-based culture across the organisation.   

  Debated culture dashboards presented at each meeting and the progress being made to embed cultural change across Barclays globally.

 

  Received regular updates on colleague engagement metrics and the results of employee YourView surveys and considered proposed changes to the YourView methodology.

 

  Approved the adaption of the Culture dashboard to include the monitoring of cultural attributes across the firm.

 

  Considered and discussed with representatives of the BSB the results of their 2016 and 2017 Annual Reviews of Barclays.

 

  Considered a Deep Dive analysis on culture within Barclaycard UK, including the process and challenges of integrating the UK Cards business into Barclays UK.

 

  Considered feedback from the FCA on the Conduct and Culture dashboards.

 

  Received information on management’s initiatives to improve colleague well-being and resilience, including actively encouraging employees to work dynamically and providing a supportive environment in which colleagues feel able to talk about the impacts of stress and mental health concerns.

 

  Considered draft disclosures on the Gender Pay Gap within the Group and industry comparators.

  

Through consideration of the Culture dashboards and YourView results, the Committee was encouraged by the consistently strong sustainable engagement scores achieved throughout 2017. Improvements have been made in the area of colleague enablement, however the Committee appreciated management’s acknowledgement that further improvement is still required in this area, notably in terms of reducing perceived bureaucracy throughout the organisation.

 

The Committee discussed the importance of a culture in which colleagues feel able to speak up and raise concerns. Particular attention has been paid to whistleblowing metrics throughout the year and, on recommendation of the Committee, the YourView survey system now contains a direct link to Barclays’ whistleblowing resources with the intention of further encouraging and supporting employees to report instances of unethical or inappropriate behaviour.

 

Additional and more detailed information is becoming available to the Committee, by way of reporting on cultural attributes, on what employees perceive to be the most prevalent facets of Barclays’ organisational culture. It is intended that this information be used to monitor attainment of a set of desired attributes and facilitate further discussion and action in order to achieve this.

 

By way of discussion of the FCA’s feedback on Barclays’ dashboards, the Committee acknowledged that the dashboards are just one of a number of key management information tools used to set its agenda and facilitate an ongoing discussion with management on culture which leads, in some cases, to deliberate actions being taken by the Group and business executive committees.

 

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    29


      

Governance: Directors’ report

What we did in 2017

Board Reputation Committee report

    

 

 

 

Area of focus    Matter addressed    Role of the Committee    Conclusion/action taken
Customer satisfaction    Ensuring fair outcomes for customers by monitoring complaints volumes, the standard and quality of complaints handling processes and other relevant metrics.   

  Debated complaints dashboards and performance against key indicators at each meeting.

 

  Gave consideration to the impact that matters, such as an effective communication channel, have on customer complaints volumes.

 

  Considered the quality of the processes in place to address and resolve customer complaints.

 

  Monitored trends in the underlying causes of complaints and considered forward looking analysis to identify events (both industry wide and Barclays-specific) which could influence the volume and timings of complaints.

 

  Considered the differing complaints profiles of the Barclays UK and Barclays International businesses and the actions being undertaken to positively improve the customer journey by utilising complaints management information (MI).

 

  Requested further insight into the first line management of customer complaints and conducted a Deep Dive into Barclays UK’s complaints handling processes (Barclays UK receives the majority of Barclays’ customer complaints given its retail focus).

 

  Requested additional Deep Dives on areas of the Barclays International business that have a retail customer base and considered the complaints profiles of those businesses.

 

  Considered the progress being made by relevant businesses to improve their respective net promoter score (NPS).

  

The Committee was pleased to see a general downward trend in the number of complaints received by Barclays during 2017.

 

While the Committee still receives a Group-wide report on complaints, underlying reporting has been refined in line with organisational changes to ensure the Committee receives a clear view on the complaints metrics of Barclays UK and Barclays International respectively. The Committee made recommendations to management, in the context of the structural reform programme, in respect of ensuring a consistent “Barclays” customer experience is received by retail clients whether they are being serviced by Barclays UK or Barclays International.

 

The Committee developed its understanding of how complaints MI is mapped by Barclays UK in order to identify root causes and received information on the strategic initiatives being undertaken to address them. The Committee’s Deep Dive also led to further refinement of the Barclays UK Complaints dashboards to include complaints volumes by channel. The analysis of the data revealed a high level of customer satisfaction with Barclays’ online bank offering.

 

The Committee was pleased to see an increase in Barclays UK’s NPS during the course of 2017 and support management’s objective of further increasing NPS to ensure Barclays UK remains competitive against challenger and start-up banks.

 

In relation to Barclays International’s business areas, the Committee was encouraged to hear that complaints volumes were at an all-time low within Barclaycard US (BCUS) but noted management’s desire to improve the business’s net promoter score against key US competitors. The Committee also considered the approach being taken by Barclays Partner Finance (BPF) to identify potential areas of future complaints and proactively reaching out to customers to resolve issues before complaints arise.

 

 

30    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

    

    

    

    

 

 

 

Area of focus    Matter addressed    Role of the Committee    Conclusion/action taken
Citizenship    Monitoring progress against the Shared Growth Ambition (Barclays’ Citizenship Plan for 2016-2018) and the effectiveness of policy statements on Citizenship matters.   

  Considered the Citizenship dashboards presented at each meeting and assessed status updates on the Shared Growth Ambition.

 

  Reviewed Barclays’ ratings and relative peer ranking in external Environment, Social, Governance (ESG) benchmarks and tracked external perceptions on Citizenship through stakeholder and media analysis.     

 

  Received information on new Citizenship initiatives such as the #Digisafe campaign which aims to educate individuals to better protect themselves against digital fraud.     

 

  Received an update from Barclays’ Global Head of Financial Crime in respect of the function’s development of intelligenceled initiatives to combat fraud.     

 

  Reviewed and recommended the approval of Barclays’ statement on modern slavery.

 

  

The Committee was very pleased to see that Citizenship metrics demonstrate a high level of colleague pride in the contribution Barclays makes to the community and society.

 

The Committee is very encouraged by management’s decision to dedicate resource to financial crime, skills and employability and digital empowerment initiatives that provide benefits not only to Barclays and its customers, but to the banking industry and UK population more generally.

 

Reputation and brand    Ensuring that the Barclays brand is proactively managed and Reputation risks and issues are identified and managed appropriately.   

  Reviewed Reputation risk updates from management, receiving specific information on those issues deemed to constitute the most significant Reputation risks and issues in each quarter.     

 

  Regularly evaluated the measures being taken to enhance the Barclays brand and to understand, and propose action to improve, where appropriate, external perceptions of the Bank.     

 

  Considered whether the process for identifying, managing and overseeing Reputation risk was functioning effectively.

  

The Committee approved the Reputation Risk Framework, confirming that Reputation risk is now a Principal Risk under the ERMF. Significant discussion also took place in respect of the correlation between cultural indicators, conduct outcomes and Reputation risk.     

 

The Committee requested further refinement of the Reputation risk reporting received to include sentiment analysis of media coverage and metrics on Barclays’ social media presence.     

 

The Corporate Relations priorities for 2017 were pre-approved by the Committee and fulfilment of those priorities kept under review throughout the year. This process improved management’s ability to more effectively understand and monitor external perceptions of Barclays among key stakeholders.     

 

The Committee requested that management undertake work to further refine the components of Reputation risk, clarify the process for identifying risks, enhance management oversight and give consideration to how the overall process can be better communicated.

 

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    31


      

Governance: Directors’ report

What we did in 2017

Board Reputation Committee report

    

 

             

 

The Committee also covered the following matters:

 

 received a report on management’s annual review of the effectiveness of compliance with the Volcker Rule (restrictions on proprietary trading and certain fund investments by banks operating in the US)

 

 received a report from management on Barclays’ Swap Dealer Annual Compliance Report

 

 discussed the outcome of an externally facilitated review on Barclays compliance with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and its comparative performance against its peers.

 

 approved, from a Reputation risk perspective, a proposal to restructure certain intra-group shareholdings and enhance capital utilisations

 

 assessed and discussed a report on the Committee’s performance

 

 reviewed and updated its terms of reference.

 

 

 

Governance in Action – Responding to Stakeholder Concerns

 

During the year, the Committee gave consideration to Barclays’ exposure to environmental, social and sustainability matters through its business relationships and challenged management to establish a more formal and proactive approach to documenting policy positions and guidelines in relevant sectors.

 

In response to recommendations from the Committee, management commenced work to review Barclays’ involvement and practices in certain ‘sensitive sectors’ and is in the process of drawing up proposals for sector-specific policies that will articulate the forward looking intentions of Barclays in these areas. The Committee will be reviewing and approving these policies during 2018 and look forward to reporting on their content and implementation in next year’s Annual Report.

 

The Committee considers that the establishment of sector-specific policies and guidelines will be a significant step in further enhancing the role that Barclays plays in the wider business community and believe they will improve the quality of the Company’s future reporting on climate change and other matters of social and environmental interest.

 

   
LOGO  

Read more about Barclays’ risk

management on pages 77 to 78 and in our

Pillar 3 Report, which is available online

at barclays.com/annualreport

 

     
 
             

        

 

 

32    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

Governance: Directors’ report

What we did in 2017

Board Nominations Committee report

    

 

 

 

LOGO

  

 

In 2017 we made significant progress towards our new Group governance structure in preparation for structural reform and the stand up of our ring-fenced bank in 2018, with appointments having been made to both the Barclays UK and Barclays International divisional boards.

 

 

LOGO

 

Dear Fellow Shareholders

In 2017 we made significant progress towards our new Group governance structure in preparation for structural reform and the stand up of our ring-fenced bank in 2018, with appointments having been made to both the Barclays UK and Barclays International divisional boards. We are delighted to welcome the new directors to those boards, led by Sir Gerry Grimstone as Chairman of Barclays International (subject to regulatory approval) and Sir Ian Cheshire as Chairman of Barclays UK (which will become our ring-fenced bank). We continued to refine the details of how the Group Board will interact with those boards and the boards of our other strategically significant subsidiaries, building on the Governance Guiding Principles created in 2016. We look forward to working collaboratively with them to ensure that the roles and responsibilities of each board are clear, while providing effective governance of the Group and protection of shareholder interests.

 

In view of the significant changes to our Group corporate structure, and always bearing in mind the long term strategy of the Group, the Committee continues to regularly consider our Board composition and succession plans, ensuring it comprises the right balance of diversity, skills and experience to provide the strategic oversight needed to steer the business of the Group. We conducted searches for non-executive Directors in 2017 and were pleased to appoint Matthew Lester and Mike Turner CBE to the Board, in addition to the appointment of Sir Ian Cheshire. Matthew, Mike and Sir Ian each bring with them significant board-level experience and you can find out more about their background and relevant skills and experience that they bring to the Board in their profiles on pages 5 to 6.

 

I have previously emphasised that it is a key part of our role to be satisfied that there are proper processes in place for executive succession, and this continues to remain another key consideration of the Committee. We closely monitored the status and progress

 

  

of the Barclays Talent and Succession strategy, providing input and guidance to management to ensure we attract and retain the best talent for the Group. As a Committee, we also discuss ways in which we can develop and nurture high performing individuals within senior management to strengthen our succession pipeline, including the use of ex officio posts to relevant executive committees to give those individuals exposure to Group matters and leadership.

 

Our people are the driving force in sustaining our business and we firmly believe in the benefits of having a diverse workforce. I am proud to see the number and variety of diversity and inclusion initiatives we have at Barclays to develop and support colleagues, and ultimately to encourage them to grow their careers with us. While we recognise that diversity is not only about gender, it is nevertheless an important element of diversity and we have set ourselves a target of 33% female representation on the Board by 2020, which as a Board we remain committed to achieving. Please see page 37 for further information about our approach to diversity at both Board and Group Executive Committee levels.

 

Committee performance

The performance of the Committee was assessed as part of the annual Board effectiveness review and I am pleased to report that the results show that it is performing effectively, with the role and responsibilities of the Committee clear and well understood. One area identified for consideration is that the Committee should be mindful of ensuring that all non-executive Directors receive the same flow of information in relation to decisions and discussions by the Committee, which I will address in my updates to the Board as Chairman of the Board Nominations Committee, and outside of scheduled Board meetings to the extent appropriate. The report on the Board effectiveness review can be found on page 36.

 

    

Looking ahead

In 2018 we look forward to the execution of our new Group structure and to the implementation of robust processes providing clear, consistent and effective corporate governance for the Group post-structural reform. Throughout this period of change, the Committee will continue to ensure that we have the right people leading the strategic direction of Barclays, motivating colleagues and sustaining our business over the long term.

 

John McFarlane

Chairman, Board Nominations Committee

21 February 2018

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    33


      

Governance: Directors’ report

What we did in 2017

Board Nominations Committee report

    

 

 

 

  Committee allocation of time (%)

 

   LOGO

 

      2017        2016  
1 Corporate governance matters      8        20  
2 Board and Committee composition      42        36  
3 Succession planning and talent      33        31  
4 Board effectiveness      11        8  
5 Other      6        5  

Committee composition and meetings

The Committee is composed solely of independent non-executive Directors. John McFarlane, as Chairman of the Board, is also Chairman of the Committee. Mike Ashley, Tim Breedon, Crawford Gillies, and Sir Gerry Grimstone, being the Chairmen of each of the other Board Committees, and Sir Ian Cheshire (as Chairman of Barclays UK) and Reuben

Jeffery III, are also members of the Committee. Details of the skills and experience of the Committee members can be found in their biographies on pages 5 and 6.

During 2017 there were three meetings of the Committee, including one held at Barclays’ New York offices. Attendance by members at Committee meetings is shown below and the chart to the left shows how the Committee allocated its time. Committee meetings were attended by the Group Chief Executive, with the Group HR Director, the Head of Talent, and the Global Head of Diversity and Inclusion attending as appropriate.

 

Member   Meetings attended/eligible to attend  
John McFarlane         3/3  
Mike Ashley     3/3  
Tim Breedon     3/3  
Crawford Gillies     3/3  
Sir Gerry Grimstone     3/3  
Reuben Jeffery III     3/3  
Sir Ian Cheshire (from 9 May 2017)     0/1

 

* Sir Ian Cheshire did not attend owing to prior commitments, but his views and comments were made available to, and considered by, the Committee.

 

Committee role and responsibilities

The principal purpose of the Committee is to:

 

  support and advise the Board in ensuring that the composition of the Board and its Committees is appropriate and enables them to function effectively

 

  examine the skills, experience and diversity on the Board and plan succession for key Board appointments, planning ahead to deal with upcoming retirements and to fill any expected skills gaps

 

  provide Board-level oversight of the Group’s talent management programme and diversity and inclusion initiatives

 

  agree the annual Board effectiveness review process and monitor the progress of any actions arising

 

  ensure the Board has appropriate corporate governance standards and practices in place and keep these under review to ensure they are consistent with best practice.

 

LOGO    The Committee’s terms of reference are available at

home.barclays/corporategovernance

 

 

The Committee’s work

The significant matters addressed by the Committee during 2017 are described below:

 

Area of focus    Matter addressed    Role of the Committee    Conclusion/action taken
Board and Board Committee composition    The membership of the Barclays PLC Board and the current and future composition of the Board and its Committees.   

  Reviewed the Board skills matrix and discussed the key skills and experience needed on the Board in the context of future strategic direction, including any areas requiring strengthening for skills and succession and conducted a search for non-executive Directors.

 

  Considered the skills and composition of the Board in a post-structural reform environment.

 

  Reviewed the membership, size and composition of Board Committees.

  

The Committee identified the need to appoint an additional non-executive Director with chairman or CEO experience to add further depth to the Board.

 

During the year it recommended for appointment to the Board Mike Turner CBE, Sir Ian Cheshire (brought on as Chairman of Barclays UK) and Matthew Lester (following the Committee’s previous recommendation of an additional non-executive Director with accounting and auditing experience). The Committee agreed that a search would be conducted for an additional female non-executive Director to promote diversity of gender on the Board and in recognition of the Board’s commitment to achieving 33% female representation on the Board by 2020.

 

The Committee agreed to review the role, purpose and composition of the Group Board once the Barclays UK and Barclays International Boards were fully constituted and operational as divisional boards. It noted that changes to Board Committee membership may take place once those boards, as well as the Group Service Company board, were operational so that a holistic view can be taken on appropriate memberships and cross-memberships of boards and committees.

 

Please refer to page 35 for more details of the Board’s approach to the recruitment of new Directors.

 

 

 

 

34    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

    

    

    

    

 

 

 

 

Area of focus    Matter addressed    Role of the Committee    Conclusion/action taken
Board composition of Barclays UK and Barclays International in preparation for the legal entity stand up in 2018 under the structural reform programme    The composition of the Barclays UK and Barclays International divisional boards.   

  Considered the board skills matrix for Barclays UK and Barclays International.

 

  Considered updates on the establishment of boards of Barclays UK and Barclays International and discussed the suitability of potential candidates identified to join those boards.

  

The Committee, in reviewing the skills matrices for Barclays UK and Barclays International following appointments to those boards, is of the view that there do not appear to be any skills gaps across the two boards, subject to the recruitment of a non-executive Director with retail banking experience to the Barclays UK board. It discussed opportunities for interaction between the Barclays PLC, Barclays UK and Barclays International boards and agreed to consider opportunities for engagement at board and committee level going forward.

 

Executive succession planning and talent management    Succession planning and talent management at Group Executive Committee level.   

  Considered updates on, and progress being made against, Barclays’ Talent and Succession strategy, including monitoring diversity within the talent pipeline.

 

  Discussed updates from the Group HR Director on Group Executive Committee succession plans, including assessing emergency cover, the existing talent pipeline and any potential gaps.

 

  Considered individuals identified as potential Group Executive Committee successors and discussed next steps for their development.

 

  Considered the succession plans for the most critical business unit and functional roles and discussed how to develop the high performing individuals identified.

 

  

The Committee welcomed the progress made in the Group Executive Committee succession planning, but noted that there was further work to be done in ensuring we are able to recruit and retain the best talent for the Group. It noted that the boards of Barclays UK and Barclays International, once established, would be able to take a more granular view of succession to some of the roles. The Committee also discussed the use of ex officio posts to both the Group Executive Committee and business executive committees to give senior individuals exposure to Group matters as a further way of developing those individuals to ensure a healthy pool of potential candidates in the succession pipeline.

 

 

In addition, the Committee covered the following matters:

 

  considered the results of, and the action plan in respect of, the 2016 Board effectiveness review and the process for the 2017 Board and Committee effectiveness review

 

  reviewed and confirmed the effectiveness of the processes for authorising Directors’ conflicts of interests and Directors’ induction and training

 

  considered a report on the effectiveness of the Committee

 

  reviewed the Committee’s terms of reference.

Appointment and re-election of Directors

Board and Board Committee composition is a standing item for consideration at each Committee meeting. This includes the consideration of potential new non-executive Director appointments, both in respect of planned succession for known retirements and as a result of the ongoing review of the skills and experience needed on the Board in order for it to continue to operate effectively.

The Committee frequently considers a skills matrix for the Board, which identifies the core competencies, skills, diversity and experience required for the Board to deliver its strategic aims and govern the Group effectively. Certain attributes identified in the skills matrix have a target weighting attached to them and these are regularly updated over time to reflect the

needs of the Group. The Committee reviews the skills matrix when considering a new appointment to the Board, as well as reviewing the current and expected Board and Board Committee composition. This helps to determine a timeline for proposed appointments to the Board.

When recruiting a new non-executive Director, the specific skills that are needed are identified, for example, an individual with international experience, or recent history serving on a particular board committee. The Charter of Expectations contains the key competencies and skills expected of non-executive Directors, and these, in addition to other details such as expected time commitment, will be included in an individual specification. The Committee as a whole then considers curriculum vitae and references for potential candidates. Any candidates who are shortlisted will be interviewed by members of the Committee and, if applicable, key shareholders and Barclays’ regulators may be asked to provide feedback on the proposed appointment. The Board is updated on the progress of the recruitment and interview process, and any feedback from the interviews is provided to the Board alongside a recommendation for appointment.

Executive search firms Egon Zehnder and Buchanan Harvey were instructed to assist with the search for non-executive Directors during 2017. Neither firm has any other connection to Barclays, other than to provide recruitment services. Open advertising for

Group Board positions was not used in 2017, as the Committee believes that targeted recruitment is the optimal way of recruiting for Board positions. Both of the firms used for non-executive Director recruitment have signed up to the Voluntary Code of Conduct for Executive Search Firms, which include measures designed to improve gender diversity on boards.

In 2017, Barclays announced the appointments of Sir Ian Cheshire, Matthew Lester and Mike Turner CBE as non-executive Directors, with each Director bringing specific skills and experience to fill the role previously identified by the Committee as well as all having extensive board-level experience (see pages 5 to 6 for details of each Director’s experience and background). Diane de Saint Victor and Steve Thieke both stood down from the Board with effect from the end of the 2017 AGM.

The Directors in office at the end of 2017 were subject to an effectiveness review, as described on page 36. Based on the results of the review the Board accepted the view of the Committee that each Director proposed for election or re-election continues to be effective and that they each demonstrated the level of commitment required in connection with their role on the Board and the needs of the business.

 

 

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    35


      

Governance: Directors’ report

What we did in 2017

Board Nominations Committee report

    

 

 

 

 

Review of Board and Board Committee effectiveness

Process

Each year, an evaluation is conducted on the effectiveness of the Board, the Board Committees and individual Directors. Full external evaluations of Board effectiveness have been undertaken in the past two years. In view of the impending new Group corporate structure, following which another external evaluation will be carried out once the structure has had time to settle, the Board decided to focus this year’s review on individual Director performance to monitor the Board’s progress and to inform the agenda of the next full external review process.

Independent Board Evaluation facilitated the effectiveness review for 2016 and was engaged again to conduct the 2017 Board review, also again led by Ffion Hague. Independent Board Evaluation is an independent external consultancy with no other connection to Barclays. Consistent with previous years, Ffion Hague carried out interviews with the Directors to obtain feedback on the effectiveness of the Board throughout 2017.

Independent Board Evaluation issued a report to the Board on the findings of the effectiveness review. In addition, the Chairman was provided with a report and feedback on the performance of each of the

Directors, and the Senior Independent Director received a report on the Chairman.

Following consideration of the findings of the 2017 Board and Committee effectiveness reviews, the Directors remain satisfied that the Board and each of the Board Committees are operating effectively.

Outcomes of 2017 review

Board performance is considered to be improving, with more effective and insightful questions being asked in Board debates and a better balance being struck between support and challenge. In particular, the Directors were positive about:

 

  the preparations for structural reform

 

  project execution, such as the remediation of control issues and preparations for Brexit

 

  the recruitment of high quality new Board members and members for the boards of Barclays UK and Barclays International.

The Directors were also pleased with progress on strengthening the senior executive team and deepening relationships between Directors and key executives. The executive team feels well supported by the Board and is grateful for that support.

Business performance is a concern for Board members, and the Board is focused on improving this within the Group. This will be a particular area of focus in 2018. The

restructuring of the Group in April 2018 is also a significant focus for the Group and regarded as a major challenge. The Board is cognisant of the challenges of ensuring the new Group corporate structure is effective and efficient, and is conscious of the need to maintain good governance overall and minimise duplication. The interaction between the Group Board and the boards of our strategically significant subsidiaries will be closely monitored and thought will be given to identifying opportunities for engagement with subsidiary board members to develop and maintain a good working relationship. The impact of the new structure on Board work and governance will be a key area of review for the 2018 external evaluation of the Board.

Committee effectiveness

The 2017 Board Committee effectiveness review was carried out internally, led by the Company Secretary. A questionnaire was circulated to all Committee members with a report of the findings of the effectiveness review provided to the Chair of each Committee as well as an update to the Board. The conclusion from the Committee reviews is that the Committees are working well, and you can read more about the findings for each Board Committee within each Committee Chairman’s letter.

 

 

Progress against 2016 findings

Following the 2016 Board effectiveness review facilitated by Independent Board Evaluation, a number of findings were identified and the summary below sets out the Board’s progress against those actions in 2017.

 

      2016 findings    Actions taken/findings in 2017
Board priorities   

Create regular broad-based risk oversight Board sessions to allow Directors to look across the risk spectrum.

 

Schedule a debate on the role of the Board and non-executive Directors and link the conclusions to revised Board objectives to help focus the Board’s agenda.

 

  

Time was scheduled for free-ranging discussion around risk, strategy and the Bank’s long term plan during the Board’s annual strategy session.

 

The review reported that Board discussion was more focused and struck a balance between support and challenge.

 

 

Board/executive relationship

  

 

Positive and constructive relations between the Board and the new management team were reported.

 

  

 

The review found that the relationship between the Board and executive management deepened during 2017, with executive management feeling well supported.

 

 

Optimise communication and collaborationa

  

 

Continue to optimise the information flow between Directors in the run-up to structural reform in 2018.

 

Consider agreeing common values for the Group and the banking subsidiary boards in the new structure.

 

  

 

The Chairman continued to hold meetings with non-executive Directors ahead of Board meetings to brief them on current issues.

 

Further principles and practices were developed for interaction between the Board and the boards of Barclays UK and Barclays International, building on the Governance Guiding principles created in 2016.

 

 

Board appointment process

  

 

Continue to refine the Board skills matrix to ensure it aligns with the Group’s strategy and informs the succession plan for key Board roles. Implement more regular reporting to the Board on potential non-executive Directors under consideration.

 

  

 

The Board skills matrix and succession plan were kept under review, with separate skills matrices established for the Barclays UK and Barclays International boards. Board members were updated on recruitment progress and details of potential candidates.

 

 

Director induction

  

 

Continue to enhance the Director induction process with a focus on providing broader governance training to anyone who has not previously served on a UK PLC board.

 

  

 

The induction programme was reviewed to factor in tailored governance training for new Directors and was extended also to directors of Barclays UK, Barclays International and the Group Service Company.

 

 

Reporting to the Boardb

  

 

Review reporting arrangements on strategy implementation and review the KPIs or dashboard reports for key initiatives.

 

  

 

The form and content of reporting to the Board was reviewed and refreshed by management to ensure that the Board is provided with appropriate management information on strategy and execution priorities.

 

Notes

a  In 2016 this finding was named “Greater awareness of Board Committee work”.

b  In 2016 this finding was named “Dealing more strategically with global regulation”.

 

 

 

36    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

    

    

    

    

 

 

        
 

Diversity on the Board and Group Executive Committee

 

      

The Board continues to have regard to the Hampton-Alexander Review recommendations to improve gender diversity among FTSE leadership teams and the Parker Review recommendations on the ethnic diversity of UK boards.

 

The Committee recognises the importance of ensuring that there is broad diversity inclusive of, but not limited to, gender, ethnicity, geography and business experience on the Board, while continuing to recommend all appointments based on merit in the context of the skills and experience required. Barclays’ approach to Board diversity is set out in full in the Board Diversity Policy, which can be found online at home.barclays/corporategovernance. Our Board Diversity Policy recognises that a truly diverse Board will include and make good use of the differences in skills, experience, background, race, gender and other distinctions brought by each Director, with such differences

 

With regard to ethnic diversity, the Board considers that Barclays is currently well-positioned in terms of representation at Board level and also at Group Executive Committee level when taking into account the Parker Review definition (being “individuals of Black, East Asian, Latin American, Middle Eastern or South Asian ethno-cultural backgrounds”). The Board will continue to monitor the overall diversity of our leadership pipeline to ensure we are attracting the broadest spectrum of leaders to Barclays.

 

During 2017, the Committee received regular updates from the Global Head of Diversity and Inclusion covering the full spectrum of Barclays’ diversity and inclusion agenda, including the actions being taken regarding dynamic working, colleague inclusion, workforce diversity, mental health awareness and social mobility. The Committee is pleased with the progress being made and discussed ways in which inclusion might be tracked. Management is continuing to work on drawing together indicators across the Group to develop a metric to measure progress on inclusion.

      

being considered in determining the optimum composition of the Board. When executive search firms are engaged to assist with the recruitment of a new Director, diversity is identified as a key factor. In addition, the external Board evaluation considered diversity when assessing the effectiveness of the Board. The Barclays Board target of 33% female representation among Directors by 2020 is formally reflected in the Board Diversity Policy as well as being noted in the Board skills matrix. Noting the current gender diversity balance on the Board, and as mentioned earlier in this report, the Committee has commissioned the recruitment of a further female non-executive Director to strengthen the diversity of gender on the Board. Further details about the current diversity balance of the Board can be found on page 4.

 

The Committee is also mindful of the current gender diversity balance of the Group Executive Committee, but is satisfied with the overall level of diversity across that Committee standing at 33% and with the percentage of women among the direct reports of Group Executive Committee members strengthening our succession pipeline. Further, Barclays is committed to achieving 33% female representation among the Group Executive Committee and their direct reports by 2020, and is currently reporting 25% female representation among this population. In 2017, the Group Executive Committee continued the initiative introduced by the Group Chief Executive in 2016 of having one ex-officio position on the Committee to broaden the scope of perspectives and contributions made, with each appointee serving for a four-month rotation.

 

 

 

LOGO

  

 

Further details about the current diversity balance of the Board can be found on page 4. More details on Barclays diversity and inclusion strategy and the progress made can be found on page 47.

      
                 

 

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    37


      

Governance: Directors’ report

How we comply

 

Leadership

As highlighted earlier in this report, the Board of Directors is responsible for promoting the highest standards of corporate governance in Barclays. We act in a way that we consider promotes the success of Barclays for the benefit of shareholders as a whole, and are accountable to the shareholders for creating and delivering sustainable value. We are responsible for setting strategy and overseeing its implementation, and also ensuring that management maintains an effective system of internal control.

For further information about the role of the Board and its responsibilities, together with the Board governance framework, please see page 8.

Roles on the Board

Executive and non-executive Directors share the same duties and are subject to the same constraints. However, in line with the principles of the Code, a clear division of responsibilities has been established. The Chairman is responsible for leading and managing the work of the Board, while responsibility for the day-to-day management of Barclays has been delegated to the Group

Chief Executive. The Group Chief Executive is supported in this role by the Group Executive Committee. Further information on membership of the Group Executive Committee can be found on page 7.

As a Board we have set out our expectations of each Director in Barclays’ Charter of Expectations. This includes role profiles and the behaviours and competencies required for each role on the Board, namely the Chairman, Deputy Chairman, Senior Independent Director, non-executive Directors, executive Directors and Committee Chairmen. The Charter of Expectations is reviewed annually to ensure it remains relevant and up-to-date. It is published on home.barclays/corporategovernance to ensure that there is complete transparency of the standards we set for ourselves.

Attendance

As members of the Board of Directors we are expected to attend every Board meeting. In 2017, we attended both scheduled and additional Board meetings, as recorded in the table below. The Chairman met privately with the non-executive Directors ahead of each scheduled Board meeting, and if, owing to exceptional circumstances, a Director was not able to attend a Board meeting they ensured that their views were made known to the Chairman in advance of the meeting.

 

 

Board Attendance    Independent   

Scheduled
Meetings
eligible

to attend

     Scheduled
Meetings
attended
     %
attendance
    

Additional
Meetings
eligible

to attend

     Additional
meetings
attended
     %
attendance
 
Group Chairman                     
John McFarlane    On appointment      8        8        100        7        7        100  
Executive Directors                     
Tushar Morzaria    Executive Director      8        8        100        4        4        100  
Jes Staley    Executive Director      8        8        100        4        4        100  
Non-executive Directors                     
Mike Ashley    Independent      8        8        100        7        7        100  
Tim Breedon    Independent      8        8        100        7        6        86  
Sir Ian Cheshire    Independent      6        5        83        4        4        100  
Mary Francis    Independent      8        8        100        7        7        100  
Crawford Gillies    Independent      8        7        88        7        7        100  
Sir Gerry Grimstone    Senior Independent Director      8        8        100        7        7        100  
Reuben Jeffery III    Independent      8        8        100        7        7        100  
Matthew Lester    Independent      3        3        100        1        1        100  
Dambisa Moyo    Independent      8        7        88        7        7        100  
Diane Schueneman    Independent      8        8        100        7        7        100  
Mike Turner CBEa    Independent      -        -        n/a                      n/a  
Former Directors                     
Diane de Saint Victor    Independent      3        3        100        3        3        100  
Steve Thieke    Independent      3        3        100        3        3        100  
Secretary                     
Stephen Shapiro           2        2        100                      n/a  
Former Secretaries                     
Lawrence Dickinson         1        1        100        1        1        100  
Claire Davies           5        5        100        6        6        100  

Note

a Mike Turner CBE joined the Board with effect from 1 January 2018. As part of his induction programme, he attended the December 2017 board meeting.

 

38    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

    

    

 

 

Board Committee cross-membership

The table below shows the number of cross-memberships of our non-executive Directors across our Board Committees.

 

    

Board Audit

Committee

   Board Nominations
Committee
   Board Remuneration
Committee
   Board Reputation
Committee

Board Risk  

Committee  

  

 

4

 

  

 

3

  

 

1

  

 

1

Board Reputation   Committee  

  

 

1

 

  

 

2

  

 

2

  

Board Remuneration   Committee  

  

 

2

    

  

 

2

     

Board Nominations   Committee  

  

 

3

    

        

 

Effectiveness

Composition of the Board

In line with the requirements of the Code, a majority of the Board are independent non-executive Directors. The Board currently comprises a Chairman, who was independent on appointment, two executive Directors and eleven non-executive Directors. We consider the independence of our non-executive Directors annually, using the independence criteria set out in the Code and by reviewing performance against behaviours that we have identified as essential in order to be considered independent. As part of this process, the Board keeps under review the length of tenure of all Directors, which is a factor that is considered as part of its deliberations when determining independence of our non-executive Directors. The independence criteria can be found in Corporate Governance in Barclays at home.barclays/corporategovernance.

The Board Nominations Committee considers Board succession planning and regularly reviews the composition of the Board and the Board Committees to ensure that there is an appropriate balance and diversity of skills, experience, independence and knowledge. The size of the Board is not fixed and may be revised from time to time to reflect the changing needs of the business and the Board Nominations Committee will consider the balance of skills and experience of current Directors when considering a proposed appointment.

Each year we carry out an effectiveness review in order to evaluate our performance as a Board, as well as the performance of each of the Board Committees and individual Directors. This annual review assesses whether each of us continues to discharge our respective duties and responsibilities effectively and is considered when deciding whether individual Directors will offer themselves for election or re-election at the AGM. More information on the 2017 Board effectiveness review can be found on page 36.

Our biographies containing our relevant skills and experience, Board Committee membership and other principal appointments can be found on pages 5 and 6. Details of changes to the Board in 2017 and year to date are disclosed on page 3.

The service contracts for the executive Directors and the letters of appointment for the Chairman and non-executive Directors are available for inspection at our registered office.

Time commitment

We are expected to allocate sufficient time to our role on the Board in order to discharge our responsibilities effectively. This includes attending, and being well-prepared for, all Board and Board Committee meetings, as well as making time to understand the business, meet with executives and regulators, and complete ongoing training. As stated in our Charter of Expectations, time commitment is agreed with each non-executive Director on an individual basis. Set out below is the average expected time commitment for the role of non-executive Directors and the other non-executive positions on the Board. For these additional positions there is an expectation that, in order to effectively fulfil extra responsibilities, additional time commitment is required.

 

Role    Expected time commitment
Chairman    80% of a full time position
Deputy Chairman    At least 0.5 days a week
Senior Independent Director    As required to fulfil the role
Non- executive Director    30 days a year (membership of one Board Committee included, increasing to 40 days a year if a member of two Board Committees)
Committee Chairmen    At least 60 days a year (including non-executive Director time commitment)

The Chairman must commit to expend whatever time is necessary to fulfil his duties and, while this is expected to be equivalent to 80% of a full time position, his Chairmanship of the Group, and leadership of the Board, has priority over other business commitments. In exceptional circumstances, we are all expected to commit significantly more time to our work on the Board.

Induction

On appointment to the Board, all Directors receive a comprehensive induction which is tailored to the new Director’s individual requirements. The induction schedule is designed to quickly provide the new Director with an understanding of how the Group works and the key issues that it faces. The Company Secretary consults the Chairman when designing an induction schedule, giving consideration to the particular needs of the new Director. When a Director is joining a Board Committee the schedule includes an induction to the operation of that committee.

On completion of the induction programme, the Director should have sufficient knowledge and understanding of the nature of the business, and the opportunities and challenges facing Barclays, to enable them to effectively contribute to strategic discussions and oversight of the Group.

Following their appointment in 2017, Sir Ian Cheshire, Matthew Lester and Mike Turner CBE received induction programmes on joining the Board. In line with normal practice, they met with the Company Secretary, the current non-executive Directors and members of the Group Executive Committee and certain other senior executives.

 

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    39


      

Governance: Directors’ report

How we comply

    

    

 

Training and development

In order to continue to contribute effectively to Board and Board Committee meetings, Directors are regularly provided with the opportunity to take part in ongoing training and development and can also request specific training that we may consider necessary or useful. As part of our annual performance review with the Chairman, we discuss any particular development needs that can be met through either formal training or meeting with a particular senior executive. In 2017, Directors received ongoing training in relation to legal and regulatory developments, including in relation to the requirements of, and responsibilities under, the UK Senior Managers Regime.

Conflicts of Interest

In accordance with the Companies Act 2006 and the Articles of Association the Board has the authority to authorise conflicts of interest. Directors are required to declare any potential or actual conflicts of interest that could interfere with their ability to act in the best interests of the Group. The Company Secretary maintains a conflicts register, which is a record of actual and potential conflicts, together with any Board authorisation of the conflict. The authorisations are for an indefinite period but are reviewed annually by the Board Nominations Committee, which also considers the effectiveness of the process for authorising Directors’ conflicts of interest. The Board retains the power to vary or terminate the authorisation at any time.

Information provided to the Board

The Role Profile for the Chairman, as set out in our Charter of Expectations, confirms his responsibility for ensuring that members of the Board receive accurate, timely and high-quality information. In particular, we require information about Barclays’ performance to enable us to take sound decisions, monitor effectively and provide advice to promote the success of the Company. Working in collaboration with the Chairman, the Company Secretary is responsible for ensuring good governance and consults Directors to ensure that good information flows exist and that the Board receives the information it requires in order to be effective.

Throughout the year both the executive Directors and senior executives keep the Board informed of key developments in the business through regular reports and updates. These are in addition to the presentations that the Board and Board Committees receive as part of their formal meetings. Directors are able to seek independent and professional advice at Barclays’ expense, if required, to enable Directors to fulfil their obligations as members of the Board.

Accountability

Risk Management and Internal Control

The Directors are responsible for ensuring that management maintains an effective system of risk management and internal control and for assessing its effectiveness. Such a system is designed to identify, evaluate and manage, rather than eliminate, the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

Barclays is committed to operating within a strong system of internal control that enables business to be transacted and risk taken without exposing itself to unacceptable potential losses or reputational damage. Barclays has an overarching framework that sets out the Group’s approach to internal governance, The Barclays Guide, which establishes the mechanisms and processes by which management implements the strategy set by the Board to direct the organisation, through setting the tone and expectations from the top, delegating its authority and assessing compliance.

A key component of The Barclays Guide is the Enterprise Risk Management Framework (ERMF). The purpose of the ERMF is to identify and set minimum requirements in respect of the main risks to achieving the Group’s strategic objectives and to provide reasonable assurance that internal controls are effective. The key elements of the Group’s system of internal control, which is aligned to the recommendations of The Committee of Sponsoring Organizations of the Treadway Commission, Internal Control – Integrated Framework (2013 COSO), are set out in the risk control frameworks relating to each of the Group’s Principal Risks. As well as incorporating our internal requirements, these reflect material Group-wide legal and regulatory requirements relating to internal control and assurance.

Effectiveness of internal controls

Key controls are assessed on a regular basis for both design and operating effectiveness. Issues arising out of business risk and control assessments and other internal and external sources are examined to identify pervasive themes. Where appropriate, control issues are reported to the Board Audit Committee (BAC). In addition, the BAC receives regular reports from management, Barclays Internal Audit (BIA) and the Finance, Compliance and Legal functions covering, in particular, financial controls, compliance and other operational controls.

Risk management and internal control framework

The ERMF is the Group’s internal control framework, which is refreshed annually. There are eight Principal Risks under the ERMF: Credit risk, Market risk, Treasury and capital risk, Operational risk, Model risk, Reputation risk, Conduct risk and Legal risk.

The BAC formally reviews the system of internal control and risk management annually. Throughout the year ended 31 December 2017 and to date, the Group has operated a system of internal control that provides reasonable assurance of effective operations covering all controls, including financial and operational controls and compliance with laws and regulations. Processes are in place for identifying, evaluating and managing the Principal Risks facing the Group in accordance with the ‘Guidance on Risk Management, Internal Control and Related Financial and Business Reporting’ published by the Financial Reporting Council.

The review of the effectiveness of the system of risk management and internal control is achieved through a four-step approach which is centred on reviewing the effectiveness of The Barclays Guide and its component parts:

 

1. Control meetings of the Business and Functional Executive Committees monitor, review and challenge the effective operation of key risk management and control processes, including the results of audits and reviews undertaken by BIA (which include assessments of the Control Environment and Management Control Approach) and examinations and assessments undertaken by our primary regulators, on an ongoing basis as part of the system of risk management and internal control. The remediation of issues identified within the Control Environment is regularly monitored by management and the BAC.

 

2. Testing of the Control meetings, held by the Executive Committees, provides assurance that the committees are effectively overseeing the Control Environment and associated risk management and internal control processes.

 

3. The owners of the key governance processes which comprise The Barclays Guide undertake a review to confirm that processes have been implemented.

 

4. The annual review of the system of risk management and internal control brings together the results of the activities completed in steps 1 to 3 to ensure that each of the key processes has been effectively reviewed.
 

 

40    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

    

    

 

 

Regular reports are made to the Board covering risks of Group-level significance. The Board Risk Committee and the Board Reputation Committee examine reports covering the Principal Risks as well as reports on risk measurement methodologies and risk appetite. Further details of risk management procedures and potential risk factors are given in the Risk review and risk management sections on pages 75 to 162.

Controls over financial reporting

A framework of disclosure controls and procedures is in place to support the approval of the Group’s financial statements. Specific governance committees are responsible for examining the Groups’ financial reports and disclosures to ensure that they have been subject to adequate verification and comply with applicable standards and legislation. These committees report their conclusions to the BAC which debates its conclusions and provides further challenge. Finally, the Board scrutinises and approves results announcements and the Annual Report, and ensures that appropriate disclosures have been made. This governance process ensures that both management and the Board are given sufficient opportunity to debate and challenge the Groups’ financial statements and other significant disclosures before they are made public.

Management’s report on internal control over financial reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed under the supervision of the principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and issued by the International Accounting Standards Board (IASB). Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS and that receipts and expenditures are being made only in accordance with authorisations of management and the respective Directors; and provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of assets that could have a material effect on the financial statements.

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 of Barclays PLC Group’s and Barclays Bank PLC Group’s as of 31 December 2017. In making its assessment, management utilised the criteria set out in the 2013 COSO framework and concluded that, based on its assessment, the internal control over financial reporting was effective as of 31 December 2017. Our independent registered public accounting firm has issued a report on the Barclays PLC Group internal control over financial reporting, which is set out on page 186.

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 155 to 162.

Changes in internal control over financial reporting

There have been no changes in the Groups’ internal control over financial reporting that occurred during the period covered by this report which have materially affected or are reasonably likely to materially affect the Groups’ internal control over financial reporting.

Remuneration

The Board has delegated responsibility for the consideration and approval of the remuneration arrangements of the Chairman, executive Directors, other senior executives and certain Group employees to the Board Remuneration Committee. The Board as a whole, with the non-executive Directors abstaining, considers annually the fees paid to non-executive Directors. Information on the activities of the Board Remuneration Committee in 2017 can be found in the Remuneration report on pages 51 to 74, which forms part of the corporate governance statement.

 

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    41


      

Governance: Directors’ report

How we comply

    

    

 

 

 

 Stakeholder engagement

 

          

Investor Engagement

The Board is committed to promoting effective channels of communication with our shareholders and upholding good corporate governance as a means of building stronger and more engaged relationships with them. Our comprehensive Investor Relations engagement with the market helps us to understand investor views about Barclays, which are communicated regularly to the Board. Our shareholder communication guidelines, which underpin all investor engagement, are available on our website at home.barclays/investorrelations.

 

Institutional Investors

In 2017, our Investor Relations engagement with institutional investors took place throughout the year, both following our quarterly results as well as outside of the reporting cycle. This allowed the opportunity for existing and potential new investors to engage with Barclays regularly, promoting dialogue on longer-term strategic developments as well as on the recent financial performance of the Group.

 

The Directors, in conjunction with the senior executive team and Investor Relations, participated in varied forms of engagement, including investor meetings, seminars and conferences across many geographic locations, reflecting the diverse nature of our equity and debt institutional ownership. Divisional management also presented extensively to investors, promoting greater awareness and understanding of our operating businesses.

 

During 2017, discussions with investors were focused on the completion of our restructuring, including the sell down of our interest in Barclays Africa Group Limited to 14.9% and the closure of Non-Core in June, as well as our revised Group financial targets and our plans to achieve them within the specified timelines. Investors were also kept informed about progress on structural reform, in particular the set up of the UK ring-fenced bank, which we expect to take place in the second quarter of 2018.

 

Investor meetings focused on corporate governance also took place throughout the year, with the Chairman, Senior Independent Director, other Board representatives and the Company Secretary.

 

We held conference calls/webcasts for our quarterly results briefings and an in-person presentation for our 2016 full year results in March 2017, all hosted by the Group Chief Executive and Group Finance Director. In addition, the Group Finance Director held a

  

quarterly breakfast briefing for sellside analysts, with a transcript of the discussions uploaded to our website. For fixed income investors we held conference calls at our full year and half year results, hosted by our Group Finance Director and Group Treasurer.

 

The Investor Relations section of our website is an important communication channel that enables the effective distribution of information to the market in a clear and consistent manner. Executive management presentations, speeches and, where possible, webcast replays are uploaded to our website on a timely basis.

 

Private Shareholders

During 2017, we continued to communicate with our private shareholders through our shareholder mailings. Shareholders can also choose to sign up to Shareview so that they receive information about Barclays and their shareholding directly by email. On a practical level, over 60,000 shareholders did not cash their Shares Not Taken Up (SNTU) cheque following the Rights Issue in September 2013. In 2017, we continued the tracing process to reunite these shareholders with their SNTU monies and any unclaimed dividends and by the end of the year, we had returned approximately £200,000 to our shareholders, in addition to the £1.65m returned in 2016 and £2.2m in 2015. Each year we launch a Share Dealing Service aimed at shareholders with relatively small shareholdings for whom it might otherwise be uneconomical to deal. One option open to shareholders is to donate their sale proceeds to ShareGift. As a result of this initiative, more than £61,000 was donated in 2017, taking the total donated since 2015 to over £299,000.

 

Our AGM

The Board and the senior executive team continue to consider our AGM as a key date for shareholder engagement. The AGM provides us with our main opportunity to engage with shareholders, particularly our private shareholders, on the key issues facing the Group and any questions they may have. A number of Directors, including the Chairman, were available for informal discussion either before or after the meeting. All resolutions proposed at the 2017 AGM, which were considered on a poll, were passed with votes “For” ranging from 85.67% to 99.95% of the total votes cast.

 

The 2018 AGM will be held on Tuesday 1 May 2018 at the QEII Conference Centre in London. The Notice of AGM can be found in a separate document, which is sent out at least 20 working days before the AGM and also made available at

  

home.barclays/agm. Voting on the resolutions will again be by poll and the results will be announced via the Regulatory News Service and made available on our website on the same day. We encourage any shareholders who are unable to attend on the day to vote in advance of the meeting via home.barclays/ investorrelations/vote or through Shareview (www.shareview.co.uk).

 

2017 engagement timeline

 

LOGO

 

 

    

 

42    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

Governance: Directors’ report

Other statutory information

 

 

The Directors present their report together with the audited accounts for the year ended 31 December 2017.

Other information that is relevant to the Directors’ Report, and which is incorporated by reference into this report, can be located as follows:

      Page
Employee involvement    47
Policy concerning the employment of disabled persons    48
Financial instruments    212
Hedge accounting policy    200
Remuneration policy, including details of the remuneration of each Director and Directors’ interests in shares    51
Corporate governance report    1
Risk review    75
Disclosures required pursuant to Listing Rule 9.8.4R can be found on the following pages:
      Page
Long-term incentive schemes    81
Waiver of Director emoluments    70
Allotment for cash of equity securities    251
Waiver of dividends    43

 

Profit and dividends

Statutory loss after tax for 2017 was £894m (2016: profit £2,828m). The final dividend for 2017 of 2.0p per share will be paid on 5 April 2018 to shareholders whose names are on the Register of Members at the close of business on 2 March 2018. With the interim dividend totalling 1.0p per ordinary share, paid in September 2017, the total distribution for 2017 is 3.0p (2016: 3.0p) per ordinary share. The interim and final dividends for 2017 amounted to £509m (2016: £757m).

For 2018, Barclays anticipates resuming a total cash dividend of 6.5p, subject to regulatory approvals.

The nominee company of certain Barclays’ employee benefit trusts holding shares in Barclays in connection with the operation of the Company’s share plans has lodged evergreen dividend waivers on shares held by it that have not been allocated to employees. The total amount of dividends waived during the year ended 31 December 2017 was £0.68m (2016: £2.6m).

Barclays understands the importance of the ordinary dividend for our shareholders. Barclays is therefore committed to maintaining an appropriate balance between total cash returns to shareholders, investment in the business, and maintaining a strong capital position. Going forward, Barclays intends to pay an annual ordinary dividend that takes into account these objectives, and the medium-term earnings outlook of the Group. It is also the Board’s intention to supplement the ordinary dividends with additional returns to shareholders as and when appropriate.

The Board notes that in determining any proposed distributions to shareholders, the Board will consider the expectation of servicing more senior securities.

Board of Directors

The names of the current Directors of Barclays PLC, along with their biographical details, are set out on pages 5 and 6 and are incorporated into this report by reference. Changes to Directors during the year are set out in the table below.

Name    Role    Effective date of
appointment/
resignation
Sir Ian Cheshire    Non-executive Director   

Appointed

3 April 2017

Matthew Lester    Non-executive Director   

Appointed

1 September 2017

Mike Turner CBE    Non-executive Director   

Appointed

1 January 2018

Diane de Saint Victor    Non-executive Director   

Retired

10 May 2017

Stephen Thieke    Non-executive Director   

Retired

10 May 2017

Appointment and retirement of Directors

The appointment and retirement of Directors is governed by the Company’s Articles of Association (the Articles), the UK Corporate Governance Code (the Code), the Companies Act 2006 and related legislation.

The Articles may only be amended by a special resolution of the shareholders. The Board has the power to appoint additional Directors or to fill a casual vacancy among the Directors. Any such Director holds office only until the next AGM and may offer himself/herself for re-election. The Code recommends that all directors of FTSE 350 companies should be subject to annual re-election. All Directors will stand for election or re-election at the 2018 AGM.

Directors’ indemnities

Qualifying third party indemnity provisions (as defined by section 234 of the Companies Act

2006) were in force during the course of the financial year ended 31 December 2017 for the benefit of the then Directors and, at the date of this report, are in force for the benefit of the Directors in relation to certain losses and liabilities which they may incur (or have incurred) in connection with their duties, powers or office. In addition, the Company maintains Directors’ & Officers’ Liability Insurance which gives appropriate cover for legal action brought against its Directors.

Qualifying pension scheme indemnity provisions (as defined by section 235 of the Companies Act 2006) were in force during the course of the financial year ended 31 December 2017 for the benefit of the then Directors, and at the date of this report are in force for the benefit of directors of Barclays Pension Funds Trustees Limited as Trustee of the Barclays Bank UK Retirement Fund. The directors of the Trustee are indemnified against liability incurred in connection with the company’s activities as Trustee of the Barclays Bank UK Retirement Fund.

 

 

  Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F    43


      

Governance: Directors’ report

Other statutory information

    

    

 

 

Similarly, qualifying pension scheme indemnities were in force during 2017 for the benefit of directors of Barclays Executive Schemes Trustees Limited as Trustee of Barclays Bank International Limited Zambia Staff Pension Fund (1965), Barclays Capital International Pension Scheme (No.1), and Barclays PLC Funded Unapproved Retirement Benefits Scheme. The directors of the Trustee are indemnified against liability incurred in connection with the company’s activities as Trustee of the schemes above.

Political donations

The Group did not give any money for political purposes in the UK, the rest of the EU or outside of the EU, nor did it make any political donations to political parties or other political organisations, or to any independent election candidates, or incur any political expenditure during the year.

In accordance with the US Federal Election Campaign Act, Barclays provides administrative support to a federal Political Action Committee (PAC) in the US funded by the voluntary political contributions of eligible employees. The PAC is not controlled by Barclays and all decisions regarding the amounts and recipients of contributions are directed by a steering committee comprising employees eligible to contribute to the PAC. Contributions to political organisations reported by the PAC during the calendar year 2017 totalled $67,250 (2016: $12,500).

Environment

Barclays focuses on addressing environmental issues where we believe we have the greatest potential to make a difference. We focus on managing our own carbon footprint and reducing our absolute carbon emissions, developing products and services to help enable the transition to a low-carbon economy, and managing the risks of climate change to our operations, clients, customers and society at large.

We invest in improving the energy efficiency of our operations and offset the emissions remaining through the purchase of carbon credits, sourced from verified projects. We also have a long-standing commitment to managing the environmental and social risks associated with our lending practices, which is embedded into our Credit risk processes. A governance structure is in place to facilitate clear dialogue across the business and with suppliers around issues of potential environmental and social risk.

We have disclosed global greenhouse gas emissions (GHG) that we are responsible for as set out by the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013. We provide fuller disclosure on (i) financing solutions for the lower carbon economy, (ii) environmental risk management and (iii) management of our carbon and environmental footprint in the Barclays Environmental, Social and Governance (ESG) Report available on our website at home.barclays.com/citizenship. We have also provided initial disclosures aligned with the Task Force on Climate-Related Financial

Disclosures (TCFD) in the Strategic Report and ESG Report.

 

     Current 
Reporting 
Yeara
2017 
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Reporting
Year
2016
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reporting
Year
2015
 
Global Green House Gas (GHG) Emissionsb  
Total CO2e emissions (tonnes)     347,165       402,531       479,934  
Scope 1 CO2e emissions (tonnes)c     25,627       26,721       29,144  
Scope 2 CO2e emissions (tonnes)d     250,897       308,473       342,012  
Scope 3 CO2e emissions (tonnes)e     70,641       67,336       93,989  
Intensity Ratio  
Total Full Time Equivalent (Full Time Equivalent)     79,900       76,500       85,800  
Total CO2e emissions (tonnes) per FTEf     4.34       5.26       5.59  
Scope 2 CO2e market based emissions (tonnes)d     298,469       337,483          

Notes

a The carbon reporting year for our GHG emissions is 1 October to 30 September. The carbon reporting year is not fully aligned to the financial reporting year covered by the Directors’ report.
b The methodology used to calculate our GHG is the Greenhouse Gas Protocol (GHG): A Corporate Accounting and Reporting Standard Revised Edition, defined by the World Resources Institute/World Business Council for Sustainable Development (WRI/WBCSD). We have adopted the operational control approach on reporting boundaries to define our reporting boundary. Where properties are covered by Barclays’ consolidated financial statements but are leased to tenants, these emissions are not included in the Group GHG calculations. Where Barclays is responsible for the utility costs, these emissions are included.
   On 1 June 2017 we completed the sale of a 33.7% stake in Barclays Africa Group Limited (BAGL) resulting in a non-controlling position. In 2017 we have restated our GHG emissions through to the 2015 baseline to account for this and BAGL emissions are not reported from 2015 onwards in order to ensure accurate tracking against our 30% carbon reduction commitment. In addition, we have restated our Scope 3 emissions to remove erroneous air data which was identified as part of the 2017 reporting process.
c Scope 1 covers direct combustion of fuels and company owned vehicles (from UK only, which is the most material contributors). Fugitive emissions reported in Scope 1 cover emissions from UK, Americas, Asia Pacific and Europe.
d Scope 2 location and market emissions cover electricity and steam purchased for own use. Market based emissions have been reported for 2017 and 2016 only.
e Scope 3 covers indirect emissions from business travel (global flights and ground transport from the UK, USA and India. USA and India ground transport covers onwards car hire only which is provided directly by the supplier. Ground transportation data (excluding Scope 1 company cars) covers only countries where robust data is available directly from the supplier.
f Intensity ratio calculations have been calculated using location based emission factors only.

Research and development

In the ordinary course of business, the Group develops new products and services in each of its business divisions.

Share capital

Share capital structure

The Company has ordinary shares in issue. The Company’s Articles also allow for the issuance of sterling, US dollar, euro and yen preference shares (preference shares). No preference shares have been issued as at 19 February 2018 (the latest practicable date for inclusion in this report). Ordinary shares therefore represent 100% of the total issued share capital as at 31 December 2017 and as at 19 February 2018 (the latest practicable date for inclusion in this report). Details of the movement in ordinary share capital during the year can be found in Note 31 on page 251.

Voting

Every member who is present in person or represented at any general meeting of the Company, and who is entitled to vote, has one vote on a show of hands. Every proxy present has one vote. The proxy will have one vote for and one vote against a resolution if he/she has been instructed to vote for or against the resolution by different members or in one direction by a member while another member has permitted the proxy discretion as to how to vote.

On a poll, every member who is present or represented and who is entitled to vote has one vote for every share held. In the case of joint holders, only the vote of the senior holder (as determined by order in the share register) or his/her proxy may be counted. If any sum payable remains unpaid in relation to a member’s shareholding, that member is not entitled to vote that share or exercise any other right in relation to a meeting of the Company unless the Board otherwise determines.

If any member, or any other person appearing to be interested in any of the Company’s ordinary shares, is served with a notice under section 793 of the Companies Act 2006 and does not supply the Company with the information required in the notice, then the Board, in its absolute discretion, may direct that that member shall not be entitled to attend or vote at any meeting of the Company. The Board may further direct that if the shares of the defaulting member represent 0.25% or more of the issued shares of the relevant class, that dividends or other monies payable on those shares shall be retained by the Company until the direction ceases to have effect and that no transfer of those shares shall be registered (other than certain specified ‘excepted transfers’). A direction ceases to have effect seven days after the Company has received the information requested, or when the Company is notified that an excepted transfer of all of the relevant shares to a third party has occurred, or as the Board otherwise determines.

 

 

44    Barclays PLC and Barclays Bank PLC 2017 Annual Report on Form 20-F  


      

    

    

    

    

 

Transfers

Ordinary shares may be held in either certificated or uncertificated form. Certificated ordinary shares shall be transferred in writing in any usual or other form approved by the Company Secretary and executed by or on behalf of the transferor. Transfers of uncertificated ordinary shares shall be made in accordance with the Companies Act 2006 and CREST Regulations.

The Board is not bound to register a transfer of partly-paid ordinary shares or fully-paid shares in exceptional circumstances approved by the FCA. The Board may also decline to register an instrument of transfer of certificated ordinary shares unless it is (i) duly stamped, deposited at the prescribed place and accompanied by the share certificate(s) and such other evidence as reasonably required by the Board to evidence right to transfer, (ii) it is in respect of one class of shares only, and (iii) it is in favour of a single transferee or not more than four joint transferees (except in the case of executors or trustees of a member).

In accordance with the provisions of Section 84 of the Small Business, Enterprise and Employment Act 2015, preference shares may only be issued in registered form. Preference shares shall be transferred in writing in any usual or other form approved by the Company Secretary and executed by or on behalf of the transferor. The Company’s registrar shall register such transfers of preference shares by making the appropriate entries in the register of preference shares. Each preference share shall confer, in the event of a winding up or any return of capital by reduction of capital (other than, unless otherwise provided by their terms of issue, a redemption or purchase by the Company of any of its issued shares, or a reduction of share capital), the right to receive out of the surplus assets of the Company available for distribution among the members and in priority to the holders of the ordinary shares and any other shares in the Company ranking junior to the relevant series of preference shares and pari passu with any other class of preference shares (other than any class of shares then in issue ranking in priority to the relevant series of preference shares), repayment of the amount paid up or treated as paid up in respect of the nominal value of the preference share together with any premium which was paid or treated as paid when the preference share was issued in addition to an amount equal to accrued and unpaid dividends.

Variation of Rights

The rights attached to any class of shares may be varied either with the consent in writing of the holders of at least 75% in nominal value of the issued shares of that class, or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of that class. The rights of shares shall not (unless expressly provided by the rights attached to such shares) be deemed varied by the creation of further shares ranking equally with them or subsequent to them.

Limitations on foreign shareholders

There are no restrictions imposed by the Articles of Association or (subject to the effect of any economic sanctions that may be in force from time to time) by current UK laws which relate only to non-residents of the UK and which limit the rights of such non-residents to hold or (when entitled to do so) vote the ordinary shares.

Exercisability of rights under an employee share scheme

Employee Benefit Trusts (EBTs) operate in connection with certain of the Group’s Employee Share Plans (Plans). The trustees of the EBTs may exercise all rights attached to the shares in accordance with their fiduciary duties other than as specifically restricted in the relevant Plan governing documents. The trustees of the EBTs have informed the Company that their normal policy is to abstain from voting in respect of the Barclays shares held in trust. The trustees of the Global Sharepurchase EBT and UK Sharepurchase EBTs may vote in respect of Barclays shares held in the EBTs, but only as instructed by participants in those Plans in respect of their partnership shares and (when vested) matching and dividend shares. The trustees will not otherwise vote in respect of shares held in the Sharepurchase EBTs.

Special rights

There are no persons holding securities that carry special rights with regard to the control of the company.

Major shareholdersa

Major shareholders do not have different voting rights from those of other shareholders. Information provided to the Company by substantial shareholders pursuant to the FCA’s Disclosure Guidance and Transparency Rules are published via a Regulatory Information Service and is available on the Company’s website. As at 31 December 2017, the Company had been notified under Rule 5 of the Disclosure Guidance and Transparency Rules of the following holdings of voting rights in its shares.

 

Person interested   

Number of

Barclays Shares

     % of total 
voting 
rights 
attaching 
to issued 
share 
capitalb
 
The Capital Group      
Companies Incc      1,172,090,125        6.98   
Qatar Holding LLCd      1,017,455,690